Florida Tax laws and Bio-diesel

Students at the University of Central Florida are using their own small experimental bio-diesel reactor to avoid the growing costs of gasoline.  This fuel, made from fryer grease and chemicals, costs about 1/5 of the price of regular gas, and burns cleaner than petroleum-based diesel and produces less CO2 than diesel or gas (anyone know how to put subscripts into WordPress?).  They are also donating some of their fuel to their school. earning a tax break from the donation.

What was most interesting to me about the article however, was not the non-disclosure of the bio-diesel recipe or equipment.  It was not the implications of possible widespread use of this fuel.  It was not even the potential benefit to the environment through better, cleaner fuels.  It was the tax implications for the production of such a fuel.  Florida state, like many other US states, has a substantial excise tax fuel.  Excise tax is a tax for the production of goods – you make it, you pay it.  I would guess that in a typical situation, this sort of tax would not affect individuals.  Excise tax is only commonly imposed on certain goods like tobacco and alcohol.  So if you ferment your own cider, you might owe something to your state government.

However, I would think it’s likely that most small producers who don’t sell the goods wouldn’t suffer for not paying the tax.  Such small production has a minuscule impact on the local economy and tax revenue – usually.  However, with the shortage of gas and rising prices, this could mean big money that local governments aren’t getting, especially as more and more people turn to homemade bio fuels.  It may mean more money and certainly more annoyance for the consumers/producers.  The question is how much it will hamper local efforts for the production of a cleaner fuel, despite savings even with the tax paid out of pocket.

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Free money?

With recent announcements of an early release of economic stimulus checks, I’ve been considering how to ‘spend’ mine.  There were early rumors that these payments are only temporary (i.e., you have to give the money back next year), but I have not been able to find anything to that effect on the IRS website.  In fact, their FAQ mentions that no income tax will be owed on these payments next year.  In addition, for those who were not eligible for the full amount due to their 2007 tax return, there may be an additional payment made after the 2008 return is filed.  So to teh best of my knowledge, this is free money.

And I should spend it, right?  The whole idea is to stimulate economic growth, to give a little boost to the general stream of the economy.  Like Dolly Levi says, “Money, pardon the expression, is like manure. It’s not worth a thing unless it’s spread around, encouraging young things to grow.”  And I do believe that.  But getting an economic stimulus check is kinda like winning the lottery.  Ok, it’s a pretty small amount to win, but if you just spend it, are you realizing its value?  Shouldn’t you be investing that little nugget o’ cash alongside other nuggets, so they can be fruitful and multiply?  And doesn’t that investment also boost the economy, probably right where it need the influx of cash most – in the financial industry?

Finally, is this whole economic stimulus plan really well-considered?  Geoff Colvin thinks it’s a case of too little, too late.  The economy will keep sinking, rather than waiting for the federal government to play catch-up.  He also comments that all this tax talk doesn’t address another issue underlying our current economic pressures – the lack of Robin Hood.  The richer are getting richer; the poor, poorer, and there’s no one with a bow around to redistribute the wealth.  How do we deal with that?  A little economic boost to a certain sector of the economy isn’t really going to help.  Others consider the financial crisis to be far from over.  Are little federal boosts like this really helping, or just delaying the final bottoming-out of markets that has to occur before we can start working our way up again?