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Black liquor and health care

January 14, 2011 - Jim Anderson
This is complicated, but I’ll try to keep it short and simple.

We got an e-mail today from John Kartch of Americans for Tax Reform, “a non-partisan coalition of taxpayers and taxpayer groups who oppose all tax increases.”

The title of the e-mail was “Comprehensive List of Tax Hikes in Obamacare.”

What caught my eye was this entry: — “Black liquor tax hike (Tax hike of $23.6 billion). This is a tax increase on a type of bio-fuel.”

The black liquor entry gave me pause because it indicates that Obamacare includes a tax hike for pulp mills.

As it turns out, that depends on your interpretation of “tax hike.”

Kraft pulp mills have been burning black liquor (a byproduct of the wood pulping process) to save energy for decades.

Back in 2008, pulp and paper mills began taking advantage of a fuel credit that was enacted as part of a 2005 highway bill. By adding a tiny amount of diesel fuel to the black liquor mix, they qualified for a 50-cents-per-gallon tax credit.

The IRS paid out some $7 billion in fuel tax credits to the pulp and paper industry in 2009 — a lifeline, many say, during the toughest months of the recession. That controversial credit, however, ended as 2010 arrived.

At about the same time, news came that the paper companies might benefit from a different loophole — a cellulosic producer bio-fuel credit. The paper industry could qualify, the IRS said, even though the Environmental Protection Agency disagreed.

In the debate over health care, black liquor entered the conversation because Congress was looking for ways to offset the costs of Obamacare.

The new health care law closed the paper industry’s potential bio-fuel loophole. The “savings” was pegged at $23.6 billion.

So it went like this:

— The paper industry collected a tax credit through a loophole.

— That loophole ended.

— Meanwhile, the health care reform bill erased a loophole for a paper industry credit that had never been collected (and may never have existed).

— By closing the possible loophole, Congress claimed a savings of $23.6 billion to help “offset” the cost of health care reform.

— Americans for Tax Reform now claims the health care bill included a $23.6 billion “tax hike” on black liquor.

Ah, Washington.



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