The Grace Richardson Fund pioneers new free market policy solutions to critical issues stuck in partisan gridlock.
Current Initiative: Clean Tax Cuts
The Clean Tax Cuts concept (CTC) first surfaced publicly June 2016, introduced by The Grace Richardson Fund at the AREDAY Summit in Aspen, CO (click for video). Since then, working groups including some 250 university scholars, industry experts and policy institutes (informally the Clean Tax Cuts Working Group) have developed CTC using charrette process, a collaborative, expert-level design method, producing applications for state, federal and international implementation.
Core CTC Concept
Clean Tax Cuts aim to accelerate profitable solutions to any kind of waste or pollution, by applying the supply side principle “if you want more of something, tax it less.” In particular, CTCs cut tax rates investors pay on debt and equity in clean investments – these include simple rate cuts to income, dividend, interest, capital gains and other capital taxes, specifically for investments that reduce the most costly waste and inefficiency – the root cause of all major pollution and negative externalities.
By simply reducing investment tax rates, CTCs remove barriers to capital, which simultaneously increases supply and demand for clean solutions: this one policy both increases ROI and capital investment flows, and reduces cost of capital and cost of outputs. The result? Lots more good stuff, like cheaper clean energy or other waste-reducing solutions. Also, depending on scope of implementation, millions, perhaps billions, more people participating, investing, living sustainably and working profitably in the fast-growing clean capitalist marketplace and economy.
Described as “all carrot, no stick,” Clean Tax Cut mechanisms include only positive feedback loop rewards. Both technology and sector neutral, CTC picks metrics, not winners or losers. CTC does not punish, demonize or threaten, but demonstrates that every sector can be profitably transformed, and made ever cleaner, by consistently rewarding elimination of the most costly waste and inefficiency.
Clean Laissez-Faire Capitalism
The Clean Tax Cuts concept combines insights from Pigouvian, supply-side and neo-Keynesian economists. But at its core, Clean Tax Cuts stand apart as a unique, new laissez-faire solution to the challenge posed to the good name of laissez-faire capitalism by the waste, pollution, free-riders, negative externalities and massive damages and costs that capitalism sometimes creates.
The first classical economists, the 18th century French Physiocrats, argued that unjust feudal privileges, unfair, crushing taxation, and the granting of trade monopolies and protections to royal favorites created barriers to capital and public participation damaging the public good. The corrective was laissez-faire capitalism, the policy of protecting the peoples’ rights by reducing barriers to capital and public participation in the economy. This line of reasoning not only sparked the revolutions that formed modern democratic capitalism, but underpins classical economics, directly influencing the central ideas of Adam Smith, Bentham, Mill and others.
That laissez-faire corrective also applies very well to the 21st Century barriers to clean capital created by polluting free-rider businesses who compete at an unfairly low price. Theses free-riders, catering to everyone’s entrenched wasteful habits, multiplied by a 7.6 billion world population, cause massive public and private environmental damages and costs, but pay no more in taxes than the clean capitalists. By contrast, the clean capitalists are taxed too much, since they do not cause, and yet help solve, these expensive problems. Barrier-free clean capitalism is the correction most consistent with classical laissez-faire thought. Just get all barriers out of the way, and let the clean capitalists do more. Clean laissez-faire.
What CTC is NOT
As a result of these design principles, it is important to recognize what CTC is NOT. CTCs avoid creating barriers to capital of any kind. CTCs avoid creating new taxes, fees, regulations, government bonds, tax credits, tax equity, price support subsidies, carbon taxes or permits or offsets or carbon trading markets, or other such artificial market constructs, all of which incorporate barriers to capital in their design, intentionally or as an unintended consequence. While all such policies have pros and cons, and can be usefully combined in various intriguing ways to hedge their contrasting strengths and weaknesses, the CTC working groups believe it is important to first define and study the most promising CTC mechanisms separately, so that its effects can be understood distinctly. Thereafter, combinations can be more productively considered.
Principle CTC Mechanisms Proposed
By April 2017, CTC expert-level charrettes had designed CTC mechanisms for seven economic sectors (auto, power, clean tech, real estate, agriculture & forestry, green bonds, oil & gas) tailoring distinct mechanisms for the separate needs of debt vs equity capital markets. For example, the tax-exempt clean-asset-based green bond mechanism, emerging from a charrette hosted at Columbia University in March 2016, offers a possible multi-trillion dollar solution – a simple, uniform, technologically neutral means of accelerating a wide variety of clean infrastructure deployment, globally. The auto and power sector CTC proposals suggest tax cuts tied to sales of products with quantifiable impacts (low-emission vehicles, zero-emissions power). Both offer powerful, performance- and metrics-based mechanisms for driving these industries cleaner. Cleaner companies gain a competitive advantage, and everyone from employees to investors are motivated by higher profits on their stock packages.
In November 2017, a working group unified the best of those mechanisms into a simple framework for national implementation, dubbed Clean Tax Reform. Other groups in 2018 now propose to study implementation via interstate or international agreements to create borderless – regional, perhaps global – tax-free clean capital markets, designed to eliminate all barriers to clean capital – tax, tariff, territorial, bureaucratic or otherwise. This pushes the Clean Tax Cuts concept to another level, proposing, essentially, barrier-free clean capitalism.
Jigar Shah, SunEdison founder and co-founder of Carbon War Room and Generate Capital, recently wrote that “CTCs could quickly expand to double or triple [the] pace” of clean infrastructure deployment:
“Instead of punishing carbon usage, it rewards climate solutions with a tax-free investment coveted by the thousands of baby-boomers retiring every week. Moreover, this solution unites the political interests of parties on the left and the right: ‘climate solutions + tax cuts = clean capitalism.’”
To Learn More
To learn more about the Clean Tax Cuts concept, please read the Clean Tax Cuts White Paper, published on September 5, 2017. This GRF white paper gives an overview of the CTC concept and principles, the findings from the first year of CTC development, and the promising new CTC mechanisms that have emerged to date in 2017 from all sectors studied. And finally, it gives some hints as to what lies ahead.
The following documents may also be helpful:
Clean Tax Cuts: A Year of Policy Design: September 2017
CTC Policy Bullet Points: November 2016
CTC Charrette Report: Columbia University, September 2016
CTC White Paper: September 2016
Clean Capitalist Leadership Council
The Clean Capitalist Leadership Council (CCLC), a coalition of donors and thought leaders, oversees and supports the projects of the Clean Tax Cuts Working Group. Current Council Co-Chairs are Rod Richardson, President, Grace Richardson Fund; Andy Sabin, Chairman, Sabin Metal Corporation and Trammell Crow, Founder, EarthX. Please contact us if you are interested in finding out more. We invite you to work with us to help change the world.
Please let us know if you would be interested in learning more about the Clean Tax Cuts proposals, helping to develop these further, or participating in the Clean Capitalist Leadership Council.