An obscure provision in the 2005 Transportation Bill passed by Congress and signed by George W. Bush has allowed the paper industry to reap millions of dollars in tax subsidies for adding diesel fuel to processes that do not require it for the production of paper.
The Nation's Christopher Hayes reports:
Thanks to an obscure tax provision, the United States government stands to pay out as much as $8 billion this year to the ten largest paper companies. And get this: even though the money comes from a transportation bill whose manifest intent was to reduce dependence on fossil fuel, paper mills are adding diesel fuel to a process that requires none in order to qualify for the tax credit. In other words, we are paying the industry--handsomely--to use more fossil fuel.
Beware the scourge of the unintended consequence? With public scrutiny over TARP funds at a fever pitch, how long will such contrived practices last? Of course, Hayes does point out another unintended consequence that could benefit printers: paper mills will likely be over-producing to take maximum advantage of the tax credit and this will likely drive down paper prices. Given the circumstance, it'd be hard to argue for such a thing.