Solar tax credit [RE-wrenches]

[Antony Tersol]

In California, the sales tax applies to the entire sale less labor, and
is paid to the state one month after the end of each quarter.  The state
receives 6% of the taxable portion, with a small percentage (1 to 2% or
so) going to local government.

The 15% tax credit applies to the after rebate cost, and so is much less
than 15% of the entire sale.  It is credited next year when the taxes
are due.

Every sale that is delayed or cancelled because of the suspended tax
credit takes money out of the economy AND out of state coffers NOW, in
exchange for increased state revenues later.

My letter to the Governor:


Dear Governor Davis,

I think you should reconsider the planned suspension of the solar tax
credit.  Apart from the dubious merit of penalizing the renewable energy
industry because of a budget shortfall caused in part by the actions of
the consumable energy sector and by an ill-conceived deregulation of the
utilities, it is questionable whether it makes economic sense.

Consider a typical 2 kw solar photovoltaic system:

Hardware: $14,000
Services: $ 4,000 (labor)
Sales Tax:$ 1,015 (the majority going to the state)
Total:	  $19,015

CEC Rebate: $7,311-

Net Cost to consumer:  $11,704  

California State Income Tax Credit: $1755.60-

In many cases this credit will be spread over a number of years, yet the
state revenues associated with the sale will be generated immediately. 
The state will directly gain from sales tax (applied to the entire
pre-rebate taxable portion of the sale) as well as from taxes on payroll
and profit of the systems seller.  Additionally, the state will gain
from taxes on all the other economic activity associated with, and
generated by this sale.

If sale is cancelled because of suspended credit, the state will next
year not lose the portion of the tax credit that might have been taken,
but much sooner, at the end of the quarter in which the sales takes
place, loses sales tax revenue, and payroll taxes on the labor, and
later loses income taxes on hardware profit.

Not only does a solar systems integrator lose a sale, in all likelihood
a California wholesale distributor loses a sale, and therefore the state
loses the payroll and income taxes on their portion of the hardware
costs.

Many of the modules are produced in California, so the state also loses
the payroll and income taxes on the manufacturer's portion of the
hardware costs, plus any taxes that would have been gained from the
manufacturer's vendors.  Among those affected: makers of wiring, glass,
silicon, screws, washers, packaging supplies, machine tools.

The state also loses any tax revenues attributable to the ancillary
activities associated with the system installation, such as freight, and
loses the tax revenues that would have arisen from the economic
activities generated by the owners and employees spending earnings.

Additionally, each PV system not installed because of the increased cost
due to suspension of the credit, will NOT be producing energy during
peak demand times, thus NOT reducing demand; the grid will be more
susceptible to disruptions from energy shortages, both from lack of
generating capacity and from insufficient transmission infrastructure. 
These disruptions will lead to further business interruptions, again
causing economic losses for both business owners and their employees,
and further decreases in state revenues.

Since it is questionable whether suspending the solar tax credit will
actually increase or decrease state revenues, is the suspension of the
solar tax credit merely a symbolic act?

Is it only meant to deliver the message that the state does not want to
encourage people to empower themselves?

Instead of an economic stimulus package, suspending the state solar
income tax credit is an economic retardation package.  It is a strange
reaffirmation of trickle-down economics, but applied in reverse.  Take
lots of small incentives away from the people, and trickle-up the
proceeds to pay for massive corporate theft. 

Is that the message you wish to send to the people of California? 
Please remove the solar income tax credit from threat of suspension.

Sincerely,

Antony Tersol

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