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Unintended Consequence

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From today's New York Times [2]:

For decades, pulp companies have burned a wood byproduct called black
liquor to fuel their plants. Four years ago, Congress passed a tax
credit meant to encourage companies to blend some biofuels into fossil
fuels like diesel. The paper companies realized they might be able to
claim the tax credit by going the other way, blending a little diesel
into their black liquor.

Members of Congress are upset.  The report suggests (although it's not entirely clear) that the problem isn't so much that this tax credit results in paper mills burning more fossil fuels.  Rather, the problem is that paper mills are getting a tax credit for doing something that they've been doing for quite some time — namely, relying significantly on biofuels.  From the perspective of some of the members of Congress quoted in the report, paper mills are "cheating" on their taxes; paper mills are now able to pay fewer taxes without having changed their behavior in ways that (ostensibly) help society.

There are lots of lessons to draw from this little tempest.  One is that the world is invariably more complex than politicians typically assume it to be.  There's no reason to doubt that the likes of Senators Jeff Bingaman and John Kerry really are surprised and annoyed to learn that a tax credit intended to promote X sometimes does not promote X at all but, rather, has consequences that these geniuses regard as negative and that they didn't foresee.

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