It may be time to buy those solar panels
Like the recent $.61 increase in the federal cigarette tax, designed to decrease our smoking habits, the economic stimulus plan includes tax breaks to compel Americans to choose home improvements that increase both energy efficiency and financial security.
Both the House-passed stimulus package and the Senate version include $4.3 billion in tax breaks for residential energy-efficiency improvements including the purchase of more-efficient furnaces, heat pumps and air conditioners as well as for energy-tight windows and more insulation.This is one tax credit too good to waste. Not only will buying energy efficient products help curb greenhouse gas emissions, and decrease the need to mine or drill for fuel or ship it from overseas, the energy savings will give homeowners a budget savings as well.
There's another $300 million to go to states as matching grants to promote utility-sponsored rebates for the purchase of more energy-efficient appliances, and tax breaks for people wanting to install solar panels to power water heaters.
Smart tax policy rewards behavior that positively affects the individual and the community. When all possible, policy should be crafted that has beneficial effects that reach beyond the immediate and obvious financial effect. Policy can't be created in a vacuum. It is too powerful for that.
Comments:
New tax credits is only one side of the equation. As of now, for larger sized projects (commercial or utility scale), only corporate tax equity partners can take the ITC and use the MACRS accelerated depreciation. If Congress change the laws so that individual investors can also use these tax preferences, then suddenly BILLIONS will be made available for solar and other renewable energy projects. Right now banks are paying only 3-4% on deposits. A typical corporate tax equity partner expects an 8% or higher return on buying the tax credits. What individuals would not want 8%? Even at 6%, just the added allure of funding renewable energy would attract a lot of individual investors. Unlike the corporate investors, high income individual still have taxes due and can use the ITC, etc.
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