Published: December 03, 2007 09:40 am            

New taxes, new problems for Kentucky

Guest View

By JACK KEENEY

Director, Chamber of Commerce

Who will be left out in the cold this winter? It is a question worth examining now that the chill of late autumn is here and heating-oil prices are at $3 a gallon in some places. This may sound like a seasonal concern - demanding our attention now because families are filling their tanks for winter - but it is really a systemic problem and one that could soon get a whole lot worse.

Oil and gas prices are not set by the delivery truck driver or by his boss back at the office. Oil, like soybeans and timber, is a commodity and its price is set on the open market. Supply and demand plays a huge part in determining how the market prices oil today, tomorrow and next month.

The issues of supply and demand may be best understood in South Central Kentucky, where the lowering of Lake Cumberland to 680 feet has negatively affected both the local and regional economy. Cooper Power Plant, a coal-fired electricity generating facility near Somerset, is no longer able to furnish East Kentucky Power with proper electricity levels due to the level of the lake, and to compensate for this loss of power, East Kentucky Power must purchase electricity off the grid at a much higher rate than they would pay for electricity produced by Cooper Power. These higher costs for energy are passed on to consumers, who are powerless to control the decisions that produce these higher costs. In the midst of all this, Cooper Power Plant must build a $4.5 million cooling tower, the costs of which will eventually be passed on to the consumer.

Meanwhile, on a national level, domestic energy companies invest billions of dollars in renewable energy development and advanced energy technologies - in addition to paying sky-high tax rates. Now, some in Congress want to push that tax rate even higher. The problem with imposing higher taxes on domestic energy companies is that costs ultimately get passed along to the consumer. More taxes on energy will mean less money available for these companies to invest in research and development of new fuel sources, which will cause our domestic energy production to drop, imports to increase, and prices to go up.

Adding new taxes to the equation will not cause prices to drop. In fact it is likely that costs for all kinds of consumer goods - food, clothing, medicine, home supplies - will increase if new taxes drive up the cost of heating oil and gasoline. There is a definite domino effect connected to the cost of energy.

Instead of taking money out of the economy through new taxes, the Congress should create incentives to boost capital investment in exploration, production and infrastructure repair. Once we have a richer, more stable supply of domestic energy we will be better insulated from the geopolitical issues that force energy prices through the roof. And, if the government took steps to strengthen the economy through investment instead of stripping it through higher corporate taxes, the benefits would trickle down to local communities. Economic strength leads to job creation which enables people to pay the rent, keep the heat on and be sure there is enough left over to put healthy meals on the table.

Congress is determined to create a new energy policy which can address imports, carbon emissions and corporate taxation. It will be one of the most important pieces of legislation we've had in years. This is the time to be sure our elected leaders recognize the dangers of imposing higher taxes on an industry which is so critical to our everyday lives. We need a plan that will accommodate our needs, which will ensure a reliable and affordable supply of energy for years to come.

Energy costs affect consumers on national and regional levels. The lowering of Lake Cumberland has certainly affected the economy of South Central Kentucky, an economy which needs a boost to offset the loss of the past lake season as well as the dread brought on by the coming season. They certainly do not need to have their burdens and spirits drowned even further by the higher cost of oil and gas prices.

        

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