Mercer Chooses Incomplete Math on Renewable Energy/Sales Tax Equation

Bob Mercer throws Senator Russell Olson (R-8/Madison) a lifeline to defend his vote against renewable energy and tax breaks. Mercer blogs about the "hidden costs" of Senate Bill 58:

Every kilowatt-hour produced by one of these small generators for personal or business consumption is a kilowatt-hour of electricity that isn’t purchased. And every kilowatt-hour of electricity not purchased is a kilowatt-hour on which no sales tax is collected. The purpose of the PUC’s exemption is to encourage small-renewable systems. The unintended effect however is a permanent erosion of sales tax revenues that could eventually grow to the millions of dollars annually [Bob Mercer, "Hidden Costs to State Treasury of PUC's Exemption Plan," Pure Pierre Politics, 2010.01.24].

Mercer carefully avoids saying this cost is a reason to vote the bill down... but his language makes pretty clear he doesn't think highly of SB 58 and the seemingly "inevitable" conversion to renewable energy.

Mercer's logic is short-sighted. All he's looking at is the electric meters of folks who will take advantage of the PUC's Small Renewable Energy Initiative to install wind and geothermal and hydrogen units to produce some of their own energy. His calculus doesn't include...

• increased sales of renewable energy equipment;
• increased purchasing power from employees of new renewable energy sales and service companies;
  
• savings to consumers and electric companies who don't have to build new peak-load facilities as quickly (meaning more purchasing power for other goods, and more sales tax revenue).
  

Mercer also declines to acknowledge the social and environmental benefits of small renewable energy. South Dakotans will make more of their own energy. We'll be less dependent on the grid. When snow and ice knock out power for 10,000 South Dakotans, more of those folks will have affordable back-up power. We'll reduce pollution from coal-burning power plants.

By Mercer's logic, my electric co-op, Sioux Valley, is doing the state wrong by shifting its focus from growth to energy efficiency. The same logic would discourage rummage sales and do-it-yourself carpentry (how much lumber and equipment do woodworkers buy?). The same logic would say our Department of Health shouldn't fight obesity: after all, how would we replace all the sales tax we get from fat people ordering seconds?

Mercer's argument indicates the foolishness of the sales tax. The state becomes wedded to ever-increasing consumption. When faced with a good bill like SB 58, short-sighted conservatives like Senator Olson can argue, "But people will buy less stuff!" A state taxing food and energy purchases has a motive to encourage gluttony and waste. A state taxing income has a motive to encourage industry and wealth.

SB 58 will indeed cause a reduction in sales tax revenue—or at least in the growth thereof—if all you look at is the electric meters. But if our legislators look at more than the back of Bob Mercer's envelope, they'll see an increase in jobs, purchasing power, and energy self-sufficiency.