Renewable Energy Closing In On Natural Gas As Second-Largest Source Of Electricity Worldwide

Renewable energy will soon beat out natural gas as the second-largest source of electricity worldwide, according to projections from the International Energy Agency.

Electricity from solar, wind, hydropower and other renewable sources will increase by 40 percent in the next five years, making up about 25 percent of the world’s energy sources by 2018. Renewables will provide the second-largest amount of global electricity by 2016, topped only by coal, the number one supplier of electricity around the world. Today, hydropower dominates the renewable energy mix, supplying 80 percent of the world’s renewable electricity, but IEA projects non-hydro sources of renewable energy will double over the next five years, comprising about 8 percent of the world’s energy sources by 2018.

Lower costs are a major contributor to the spike in renewable energy — in many developing countries in Africa and Asia (and some developed ones, like Australia) renewables like wind are actually cheaper than coal. These costs are helping drive higher levels of investment in renewable energy from developing countries looking to meet rising energy demands. Reports published earlier this month found developing countries invested a total of $112 billion in renewable energy in 2012, an increase of 19 percent from the year before. China led the way in this area, upping its investment to $67 billion — an increase of nearly a quarter compared to 2011. The total invested by countries in the Middle East and Africa was much smaller — about $12 billion — but compared to 2011, their investment surged upward by 228 percent.

But renewable energy investment isn’t growing everywhere — it’s actually dropping off in developed nations. The IEA notes that despite the renewable sector’s rapid growth, worldwide subsidies for fossil fuels are still six times higher than subsidies for renewables (the U.S.’s spending reflects the world’s average — in 2011, U.S. fossil fuel subsidies were $523 billion, about six times higher than the $88 billion spent on renewable energy). President Obama pledged in his climate speech Tuesday to double the country’s wind and solar energy and to allow enough private renewable energy development on public lands to powqer 6 million homes by 2020. But governments in Europe, meanwhile, are cutting renewable energy subsidies as austerity measures take hold

Obama also addressed coal’s role in the U.S. energy mix on Tuesday, announcing he would be imposing limits on carbon emissions from existing coal-fired power plants in the U.S., as well as stopping government financing of coal plants overseas. Despite new investments in renewables, coal still dominates the energy market in developing countries like China and India. But its hold on the market may slowly be slipping. In a draft energy strategy statement, the World Bank revealed Thursday that it would be cutting back on the number of coal plants it finances, limiting its support to “rare circumstances where there are no feasible alternatives available to meet basic energy needs and other sources of financing are absent.”

The five most important names in renewable energy that you’ve never heard of

By Bill White

wind transmission lines

abu-dhabi-solarFive people will make a decision soon that will have an outsized impact on the future of renewable energy in America. I’m not talking about big shots like Obama, Koch, Boehner, Bloomberg, or Steyer. I’m talking about names many have never heard of:  Moeller, Norris, LaFleur, Clark, and Binz (if he is confirmed). These are the chief electricity officers of the United States of America — they are the commissioners of the Federal Energy Regulatory Commission (FERC).

You’ve probably heard this before: “Scientists agree that in order to avoid the worst consequences of climate change, we must generate 80 percent of our energy from renewable sources by 2050.”  No single entity will play as crucial a role as FERC in ensuring that the infrastructure exists to handle new renewable energy generation.

President Obama’s climate plan is a courageous step forward and deserves the widespread media coverage it has received. But only the acceleration of utility-scale renewable energy projects can take us where we need to go.

Modernizing our nation’s power system is a daunting task, but there are good reasons to be optimistic. America has enough wind and solar to power the entire country more than a dozen times over. And with the cost of wind and solar going down every day, rapid development of large-scale generation projects appears inevitable.

But if you place the map of regions with the best wind and solar energy on top of a map of our current transmission system, you won’t find too much overlap. Transmission is the key to unlocking America’s virtually unlimited renewable resources and delivering their energy to users.

Unlike our interstate highway system, which is funded by taxpayers, high-voltage transmission lines are built with private capital. Investors will put money into transmission projects as long as they generate returns that are attractive relative to similar types of investments. This is where FERC steps in. They set the return on equity (ROE) for transmission projects across the nation.

As you might imagine, the higher the ROE, the more incentive there is to build transmission. A company would never invest in our grid if the maximum ROE was 1 percent — meaning it would take 100 years to recoup the costs of a project. And if it was 100 percent, we would end up building much more transmission than we need and sticking consumers with the bill.

Recent history also tells us that the cost of inadequate transmission is steep. Electric customers are still paying billions of dollars per year for congestion, poor reliability, and overpriced power from dirty, outdated, and inefficient power plants — all of which are the direct result of three decades of underinvestment in transmission. Renewable energy was locked out of a strained and inadequate grid. In the mid-2000s, FERC recognized the chronic neglect of transmission investments as a major burden on ratepayers and a barrier to modernizing our electric system, and stepped in to raise transmission ROEs.

That decision helped spur a wave of new transmission investments that are reducing costs to consumers and expanding access to renewable energy. For example, the Midwest ISO has begun a new set of transmission lines called the MVP projects. The average consumer is seeing $23 in savings for every $11 spent these new lines.

Why is transmission such a great deal for electric customers? It’s the smallest part of an electric bill — 11 percent on average — compared with 58 percent for generation and 31 percent for distribution. Transmission pays for itself quickly by relieving costly congestion, moving cheap and clean renewable power to customers, making the grid more reliable and secure, and putting old and inefficient power plants out of business. Simply put, transmission is essential infrastructure for competition, consumer choice, economic efficiency, and environmental protection.

Despite the well-documented value that transmission investments deliver to ratepayers and the environment, FERC has been hearing complaints recently that ROEs for transmission projects are too high, and that ratepayers need relief. These complaints are misguided, and their timing could not be worse. Never in our history has so much depended on expanding and modernizing our electric transmission system.

Our chief electricity officers may never get the ROE for transmission “just right”; the uncertainty of markets, interest rates, and the economy probably make that lofty goal impossible to achieve. But they can — and they must — ensure that ROEs remain at levels that ensure a steady and stable flow of private capital into urgently needed transmission investments. Failing to do so would stall renewable energy development and with it progress on reducing emissions, and would increase the cost of electricity for everyone.

The president’s climate plan is moving forward. State renewable energy standards are helping expedite that progress. The falling costs of wind and solar are driving growth. But none of that will matter if the infrastructure to deliver renewable energy to customers is not built.

Five FERC commissioners will make a little-noticed decision in the near future, one that will either keep us on the right track, or throw a major obstacle — one that we can ill-afford — on the road to achieving our nation’s renewable energy future and stabilizing our world’s climate.

Bill White manages the National Clean Energy Transmission Initiative for the Energy Future Coalition. During the Clinton administration, he served as senior advisor to EPA Administrator Carol Browner.

2013 Perspective on “War on Cancer” on from December 23, 1971 to ‘Where Are We Now’?



SciSource_9M9229-580.jpg201306047919620Richard Nixon launched the so-called War on Cancer on December 23, 1971, in what was supposed to be a “moonshot” effort to cure the disease. Two years later, a Time magazine cover read, “Toward Control of Cancer.” Two decades after that, it announced, in bold red letters, “Hope in the War Against Cancer,” surmising that “a turning point” may have been reached. In 2001, its cover asked if the blood cancer drug Gleevec “is the breakthrough we’ve been waiting for.” And this past April, the newsweekly pronounced “How to Cure Cancer.” Yet roughly one hundred and forty thousand Americans have died from the disease in the last three months.

Outrage over our paltry victories against cancer informs the forthcoming book, “The Truth in Small Doses: Why We’re Losing the War on Cancer—and How to Win It,” by Clifton Leaf, who wrote a much-discussed essay on the same topic for Fortune in 2004. The title comes from a 1959 pamphlet that tells doctors to trickle out information to cancer-stricken patients, since most of them “couldn’t stand” to know the truth: the disease would kill them and there was little that could be done about it. Today, draped in ribbons of every hue, blinded by the promises of targeted therapies and antioxidants, we have, according to Leaf, neglected a basic truth: “‘the cancer problem’ is, in reality, as formidable a challenge as ever.” (Jerome Groopman discussed the progress in cancer cures, particularly immune therapy, in the magazine last year.)

Leaf is not an oncologist, but he became acquainted with the profession at an early age; he was diagnosed with Hodgkin’s disease at fifteen years old. In the book’s most poignant moment, Leaf orders his father into the corner of his hospital room to atone for having dozed off while sitting bedside. When Leaf woke up the next morning, “the biggest man I had ever known” was still standing in the corner.

As an editor at Fortune, Leaf became enthralled by the promise of Gleevec, an enzyme inhibitor that, since its release in 2001, has proven highly effective at battling chronic myeloid leukemia. Many thought a new age was coming, in which the chaotic spread of cancer would be hindered by drugs that would be precision-targeted to block the replication of rogue cells. It seemed far better than indiscriminately killing both cancerous and healthy cells, as chemotherapy had been doing for the past half-century.

But Gleevec is the exception, not the rule—and C.M.L. is a relatively simple cancer compared to solid-state tumors of the lung, colon, pancreas, or breast. Once they metastasize, most cannot be cured. Those, like Leaf, who have faced cancer have good reason for their impatience: it takes an average of thirteen years to bring a new cancer drug to market. Many of these drugs are pellets fired into cancer’s flank. A recent article in the New York Times titled “Promising New Cancer Drugs Empower the Body’s Own Defense” hailed a new melanoma drug whose median survival rate was 16.8 months. An editorial this winter in The Lancet, the august British medical journal, put the matter even more bluntly: “Has cancer medicine failed patients? In the words of cancer experts, the answer is yes.”

Watch this video from “Nanobiotix” on the use of nanotechnology for treating Cancer using established treatment methods here:



Leaf argues we should be closer to an all-out cure, considering our investment in the effort. The National Cancer Institute receives roughly five billion dollars per year from the federal government. If both public and private investments are to be accounted for, then Leaf estimates the United States spends about sixteen billion dollars a year on cancer research. Nor is there a lack of political will to eradicate cancer, as there is to, say, reducing carbon emissions. Leaf calls it a “bipartisan disease” that a Republican from Alabama would want defeated as much as a Democrat from Illinois. President Barack Obama said in 2009 that he would “launch a new effort to conquer a disease that has touched the life of nearly every American, including me, by seeking a cure for cancer in our time.”

In Leaf’s telling, oncology is a hidebound field averse to risk, a culture that “has grown progressively less hospitable to new voices and ideas over the past four decades.” He yearns for the likes of Sidney Farber, the unorthodox pathologist who invented chemotherapy in the late nineteen forties at Boston Children’s Hospital by injecting children stricken with acute lymphoblastic leukemia with aminopterin, which prevents cancer cells from replicating. A hero in Siddhartha Mukherjee’s “The Emperor of All Maladies,” Farber is largely responsible for the fact that childhood A.L.L. is a manageable disease today. But his methods had a high cost: he disobeyed superiors, conducted his own trial-and-error studies, and foisted unproven drugs on sick, vulnerable children.

What made Farber an iconoclast is that he wanted to cure cancer even more than he wanted to understand it. As he would come to argue, “The three hundred and twenty-five thousand patients with cancer who are going to die this year cannot wait; nor is it necessary, in order to make great progress in the cure for cancer, for us to have the full solution of all the problems of basic research…the history of Medicine is replete with examples of cures obtained years, decades, and even centuries before the mechanism of action was understood for these cures.”

Few new bold projects are being funded now, writes Leaf, noting that in 2010, the N.C.I. used the bulk of its two billion dollars in research grants on existing projects. He is as incensed that the same institutions get most of the money, writing that “in 2011, the top 43 research centers got more funding ($12 billion) than did the bottom 2,574 institutions receiving any kind of NIH support.” To some, this is the price of science that is both sound and safe. To others, it is a culture of scientific inefficiency, an I.B.M. mindset in a field that desperately yearns for Apple.

Oncologists in the field with whom I spoke agreed with this overall assessment of the War on Cancer. Andrea Hayes-Jordan, a pediatric surgical oncologist at the M. D. Anderson Cancer Center in Houston, told me that “Our strategic attacks are improving, and we are winning some battles, but not the war yet.” Silvia Formenti, who chairs the radiation oncology department at New York University’s Langone Medical Center, was even more negative in her assessment of the War on Cancer. She wrote to me in an e-mail, “We have managed to make cancer a huge business, and a national ‘terror,’ but the progress in reducing mortality is quite questionable.”

The book suggests some remedies, foremost among them preventing cancer before it strikes. At Stage 0, a cancerous growth can be detected and removed before it has diversified and spread. By the time a tumor is the size of a grape, it has as many as a billion cells. Those cells become increasingly heterogeneous, and once they break through the basement membrane that acts as a final barrier between organs and tissues, they are free to metastasize throughout the body via the bloodstream or the lymphatic system.

The book finds great promise in the chemoprevention pioneered by Dartmouth researcher Michael Sporn, who wants to treat pre-invasive lesions as seriously as full-blown cancers. This seems to fly in the face of the cautious watch-and-wait philosophy popular with many oncologists, who have become convinced (not without reason) that the cure—toxic chemotherapy, high doses of radiation—could be worse than the disease.

However, other than the breast cancer drug tamoxifen and the H.P.V. vaccine—both of which can reduce the risk of getting cancer, not cure the disease—the promise of chemoprevention remains largely unrealized. A recent paper by two preventative oncologists concluded, “There have been numerous chemoprevention trials in the past 10 years, but the number of approved chemoprevention drugs is still quite small.” Another recent study on older men with prostate cancer suggested that “watchful waiting” was often the best route, noting that many patients opted for expensive treatments they didn’t need, thus leading to impotence and incontinence. And a federal task force ruled four years ago that women should delay getting mammograms until age fifty (ten years later than the previous recommendation) because of the procedure’s own potential dangers.

Leaf acknowledges these dangers, and also points out an even more serious problem with chemoprevention: biomarkers that would signal carcinogenesis in its earliest stages have not been found. So while he is correct to highlight the potential promise of a prophylactic approach, Leaf’s own description of “the failed biomarker hunt” is, indirectly, a defense of why oncologists today are left with no choice but to wait until the disease develops.

The desire for an accelerated approach to cancer has antecedents in the AIDS activism of the nineteen-eighties. As Mukherjee describes in his book, organizations like ACT UP “made the FDA out to be a woolly bureaucratic grandfather—exacting but maddeningly slow.” That had repercussions in cancer medicine, where patients also demanded quicker access to potentially life-saving therapies. Especially en vogue by the early nineties was “megadose chemotherapy” for breast cancer, complemented by a bone marrow transplant. (The original marrow would have been destroyed by the high toxicity of the purported cure.) Yet as Mukherjee notes, by early 2000, the procedure was discovered to have been supported by fictional studies. One of its main proponents, a South African oncologist named Werner Bezwoda, had charmed his fellow practitioners with astounding results that masked the true, fatal dangers of this excessive approach. Mukherjee calls Bezwoda’s influential drug trials “a fraud, an invention, a sham,” yet he was hardly the lone cheerleader for megadose chemotherapy. Any urge to hasten the War on Cancer—however justified that urge may be—must grapple with the risk of promising anecdotes curdling into hideous truths.

Of course, some approaches are neither terribly controversial nor difficult, at least from a medical standpoint: Debu Tripathy of the University of Southern California’s Norris Cancer Center told me that he believes that ninety per cent of all lung cancers could be eliminated through the cessation of cigarette smoking. Studies have shown a link between red meat consumption and an elevated risk of cancer. Here, then, may be cancer prevention in its simplest form.

On the whole, Leaf is much less optimistic than Mukherjee. Surveying the state of cancer medicine as it was in 2005, Mukherjee concludes, “The empire of cancer was still indubitably vast…but it was losing power, fraying at its borders.” Surveying some three thousand years of humanity’s battle with cancer, Mukherjee’s is the more meditative work. Leaf’s book is more urgent, more insistent—the voice of a frightened patient who yearns for a cure, rather than of the sober oncologist concerned with getting the science right. “Emperor” is a story; “Truth” is an argument.

Earlier in June, researchers discovered a tumor of the rib bone of a Neanderthal believed to be a hundred and twenty thousand years old. What plagued him then still plagues us today, much as it plagued Atossa, the ancient Persian queen who is believed to have suffered from breast cancer, as well as the London chimney sweeps stricken with scrotal malignancies. This war has been a long one.

Alexander Nazaryan is a writer living in Brooklyn.

Photograph by Biophoto Associates/Science Source.


Physicists at CU (Boulder, CO) create ‘recipe book’ for building new materials

(Nanowerk News) By showing that tiny particles injected  into a liquid crystal medium adhere to existing mathematical theorems,  physicists at the University of Colorado Boulder have opened the door for the  creation of a host of new materials with properties that do not exist in nature.
The findings show that researchers can create a “recipe book” to  build new materials of sorts using topology, a major mathematical field that  describes the properties that do not change when an object is stretched, bent or  otherwise “continuously deformed.” Published online Dec. 23 in the journal Nature (“Topological colloids”, the study also is the  first to experimentally show that some of the most important topological  theorems hold up in the real material world, said CU-Boulder physics department  Assistant Professor Ivan Smalyukh, a study senior author.
This  image shows polarized light interacting with a particle injected into a liquid  crystal medium. (Image: Bohdan Senyuk and Ivan Smalyukh, Colorado University)
The research could lead to upgrades in liquid crystal displays,  like those used in laptops and television screens, to allow them to interact  with light in new and different ways. One possibility is to create liquid  crystal displays that are even more energy efficient, Smalyukh said, extending  the battery life for the devices they’re attached to.
The research was funded in part by Smalyukh’s Presidential Early  Career Award for Scientists and Engineers, which he received from President  Barack Obama in 2010. And the research supports the goals laid out by the White  House’s Materials Genome Initiative, Smalyukh said, which seeks to deploy “new  advanced materials at least twice as fast as possible today, at a fraction of  the cost.”
Smalyukh, postdoctoral researcher Bohdan Senyuk, and doctoral  student Qingkun Liu set up the experiment by creating colloids — solutions in  which tiny particles are dispersed, but not dissolved, throughout a host medium.  Colloids are common in everyday life and include substances such as milk, jelly,  paint, smoke, fog and shaving cream.
For this study, the physicists created a colloid by injecting  tiny particles into a liquid crystal — a substance that behaves somewhat like a  liquid and somewhat like a solid. The researchers injected differently shaped  particles that represent fundamental building-block shapes in topology. That  means each of the particles is distinct from the others and one cannot be turned  into the other without cutting or gluing. Objects that look differently can  still be considered the same in topology if one can be turned into the other by  stretching or bending – types of “continuous deformations.”
In the field of topology, for example, an object shaped like a  donut and an object shaped like a coffee cup are treated the same. That’s  because a donut shape can be “continuously deformed” into a coffee cup by  indenting one side of the donut. But a donut-shaped object cannot be turned into  a sphere or a cylinder because the hole in the donut would have to be eliminated  by “gluing” the sides of the donut back together or by “cutting” the side of the  donut.
Once injected into a liquid crystal, the particles behaved as  predicted by topology. “Our study shows that interaction between particles and  molecular alignment in liquid crystals follows the predictions of topological  theorems, making it possible to use these theorems in designing new composite  materials with unique properties that cannot be encountered in nature or  synthesized by chemists,” Smalyukh said. “These findings lay the groundwork for  new applications in experimental studies of low-dimensional topology, with  important potential ramifications for many branches of science and technology.”
Source: University of Colorado  Boulder

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Sesame Street to Obama: Big Bird ad doesn’t fly

*** And this .. THIS .. is what the leader of the FREE WORLD thinks passes for “leadership”? With the Middle East  a Powder Keg, 23 MILLION Americans unemployed, 49 MILLION Americans on FOOD STAMPS, 16 TRILLION DOLLAR DEBT, a Health Care Reform that NOBODY wanted or wants …

… And we are supposed to take this “Big Bird” seriously? C’mon man!

COLUMBUS, OH — Feathers were ruffled on Sesame Street on Tuesday when the Obama campaign launched a campaign ad starring Big Bird.

The new spot, which airs on cable networks, mocks Mitt Romney for saying during last week’s debate that he would cut public funding to the Public Broadcasting Service – even though he likes Big Bird.

But Sesame Workshop – the nonpartisan nonprofit behind Sesame Street – wasn’t pleased. In a statement, Sesame Workshop objected to the ad: “We have approved no campaign ads, and, as is our general practice, have requested that both campaigns remove Sesame Street characters and trademarks from their campaign materials.”

The ad begins with an ominous voiceover listing the names of Wall Street criminals, including Bernie Madoff and Kenneth Lay. The deep, dramatic voice then says, “It’s not Wall Street you have to worry about; it’s Sesame Street.”

The camera then cuts to a shot of Big Bird sleeping.

President Barack Obama has seized on Romney’s Big Bird comment to argue that his Republican challenger would crack down on beloved American institutions such as Sesame Street but would allow Wall Street to run wild.

Speaking to a crowd of 15,000 in Columbus, OH the President said, “Today (Romney) decided we’re going after Big Bird. Elmo’s making a run for the border and Oscar is hiding out in a trash can.”

Emphasizing the Sesame Street theme, recording artist will-i-am kicked off his performance at the Ohio event by playing the Sesame Street theme song.

The Obama campaign has also dispatched Big Bird mascots to stand outside Romney campaign events and even Michelle has entered the fray. On Tuesday, the first lady told supporters in Loudon, Va.: “We all know good and well that cutting Sesame Street is no way to balance a budget.”

Related: ‘Sesame Street’ wants Obama campaign to yank ad mentioning Big Bird

Speaking in Van Meter, Iowa, Romney fired back: “These are tough times with real serious issues. You have to scratch your head when the president spends the last week talking about saving Big Bird.”

The Romney campaign noted that Obama has in recent days made more public references to Big Bird than Libya – where the U.S. consulate was recently attacked and the ambassador killed.

But the Obama campaign stands by its strategy.

“The point we’re making here is that when Mitt Romney was given the opportunity to lay out how he would address the deficit … his first offering was to cut funding to Big Bird and that is absurd and hard to take seriously,” Obama campaign spokeswoman Jen Psaki told reporters.

With polls showing Romney improving since the debate, it remains to be seen whether the president’s “Big Bird Offensive” will sway undecided voters.

But one thing is clear – Big Bird says the campaign ad doesn’t fly.


Campaign Watch 2012: Comparing the Candidates on Taxes


As you undoubtedly have heard, “Taxmageddon” is quickly approaching – a convergence at year end of the expirations of the Bush tax cuts, various economic stimulus provisions and the payroll tax holiday as well as the imposition of new Medicare taxes as part of healthcare reform and another battle over the debt ceiling. All of this is coming during a stubbornly sluggish economy with massive mandatory spending cuts also looming on the horizon. With many predicting that Congress will temporarily extend many of the tax cuts to stave off disaster for another year, the tax policies of the next President may dictate how these issues are eventually resolved. Let’s compare the platforms of the two Presidential candidates, both with respect to the expiring tax provisions and long-term tax reform.

Expiring Bush Tax Cuts

Several tax cuts passed under the Bush administration in 2001 and 2003 (“Bush tax cuts”) originally were to expire at the end of 2010, the results of which would have sent tax rates higher and eliminated a host of favorable tax provisions in the middle of a recession. Fearing that a tax increase would damage an already fragile economy, Congress and President Obama temporarily extended the Bush tax cuts through 2012.

Some of the major tax provisions included in the Bush tax cuts include (not an exhaustive list):

  • Lower individual tax rates,
  • 15% capital gains and qualified dividends tax rates,
  • Phase-outs of itemized deductions and personal exemptions for upper-income taxpayers, and
  • Marriage penalty relief.

The fate of the Bush tax cuts are once again on the line – this time in the middle of the Presidential election season. It is all but certain that the future of the Bush tax cuts will not be resolved before the election and some have suggested that these tax cuts may not be addressed until after the new Congress takes office in January. These delays serve to increase the influence that the Presidential candidates’ positions on the Bush tax cuts have on their ultimate fate.

Governor Romney generally desires to extend all of the Bush tax cuts permanently.

President Obama wishes to extend most of this tax relief as well, but only for taxpayers below certain income levels. For higher-income taxpayers, whom he defines as couples with annual income over $250,000 ($200,000 for single filers), President Obama would allow these tax provisions to sunset as scheduled. Notably:

  • The highest income tax brackets would increase from 33% and 35% to 36% and 39.6%;
  • The long-term capital gains tax rate would increase to 20% on most assets; and
  • All dividends would be taxed at the individual’s marginal tax rate (as high as 39.6%).

While not part of the original Bush tax cuts, another temporary tax cut that will expire at the end of 2012 is the 2% payroll tax holiday. As of January 1, 2012, the employee’s share of the FICA payroll tax liability will increase from 4.2% to 6.2%. Despite the fact that letting the payroll tax holiday expire will result in a tax increase for all U.S. workers, even lower and middle income taxpayers, neither candidate has addressed whether the payroll tax holiday should be extended in 2013, though Governor Romney has indicated some support for a “lower payroll tax.” Without an extension, a worker earning $50,000 will realize a $1,000 tax increase while taxpayers who earn in excess of the FICA wage base limit ($110,100 in 2012) will experience a tax increase of over $2,200.

Estate and Gift Taxes

Few areas of the tax law have been fraught with more uncertainty and complexity over the last few years than the estate and gift tax area. Estate and gift tax provisions gradually became more generous from 2001 to 2009, followed by a complete repeal of the estate tax for 2010, then retroactive reinstatement of the estate tax with even more generous provisions, only to now face a sunset that will revert the estate and gift tax provisions to their 2001 levels.

President Obama has proposed returning the estate and gift tax provisions to their 2009 levels. Specifically:

  • The estate exemption will decrease from $5.12 million to $3.5 million;
  • The gift exemption will once again decouple from the estate exemption and revert to $1 million; and
  • The highest estate and gift tax rate will increase from 35% to 45%.

While less generous than the 2012 provisions, this proposal is still more taxpayer friendly than the 2001 levels to which the estate and gift tax provisions are scheduled to sunset – i.e., a unified gift and estate exemption of only $1 million and a maximum tax rate of 55%.

Governor Romney has proposed repealing the entire gift and estate tax regime.

Alternative Minimum Tax (AMT)

Before Congress passed the “AMT patch” that increased the AMT exemption and allowed nonrefundable personal credits against the AMT, more and more taxpayers were being ensnared by the AMT each year. The most recent AMT patch expired at the end of 2011. Without Congressional action, an estimated 20 million additional taxpayers will be subject to the AMT in 2012.

President Obama has proposed extending the AMT patch through 2013, but eventually replacing the AMT system with the “Buffett Rule“. Under the Buffett Rule, the tax system would be structured in such a way to ensure that taxpayers with over $1 million of income pay an effective Federal income tax rate of at least 30 percent.

Governor Romney has proposed repealing the AMT completely.

Expiring (or Expired) Business Provisions

Whether part of the Bush tax cuts or subsequent economic stimulus acts, several business tax provisions expired in 2011 or are due to expire at the end of 2012, including (not an exhaustive list):

  • The research and experimentation tax credit (expired in 2011);
  • Bonus depreciation (100% bonus expired in 2011; 50% bonus expires in 2012);
  • Enhanced Section 179 expensing election (dropped from $500,000 in 2011 to $139,000 in 2012 and scheduled to revert to $25,000 in 2013); and
  • 15-year recovery period for qualified leasehold, restaurant and retail improvement property (expired in 2011).

Both of the candidates have been relatively quiet on these and other expiring business tax provisions, focusing more on long-term corporate tax reform (discussed below). Both candidates agree, however, that the research and experimentation credit should be permanently extended. Both candidates have also expressed some support for extending bonus depreciation, though at what percentage and for how long are unclear.

Long-term Tax Reform for Individuals

While the most immediate need is to deal with the fate of the Bush tax cuts, both candidates have plans for broader individual tax reform. Both candidates wish to simplify the tax system and lower tax rates while keeping the reform revenue neutral, though predictably, they approach the reform in different ways.

Governor Romney has proposed an across-the-board 20 percent reduction in individual tax rates (e.g., the top 35% rate would be reduced to 28%). Ultimately, Romney has stated, his plan would not reduce the share of the overall tax burden paid by higher income taxpayers. Romney has not provided specifics on how the rate reductions would be kept revenue neutral but has indicated that he would broaden the tax base and cap deductions as well as eliminate certain loopholes and tax expenditures. Originally, Romney stated that deductions would be capped at $17,000 but has since backed off of a specific figure.

Romney also wishes to make it easier for middle class taxpayers to save for retirement by completing eliminating taxation on interest, dividends and capital gains for taxpayers with an adjusted gross income of under $200,000.

President Obama does not have a specific platform concerning individual tax reform beyond his plan for the Bush tax cuts and the Buffett Rule (discussed above). In addition to those tax increases on higher-income taxpayers, Obama has also proposed limiting the tax benefit from certain itemized deductions to 28%.

Long-term Tax Reform for Businesses

Our two major political parties do not agree on much these days, but there is a general consensus that corporate tax reform is necessary to keep American businesses competitive in the global economy.

Corporate tax rates

President Obama‘s corporate tax reform plan starts with a reduction in the top corporate tax rate from 35% to 28%. He also would increase the Domestic Production Activities Deduction to further decrease the tax rate on manufacturing income to 25% and an even lower rate for “advanced manufacturing.”

To offset the tax rate reductions, President Obama would eliminate several business tax “loopholes” and tax expenditures, including:

  • LIFO inventory accounting,
  • Oil and gas tax preferences,
  • Interest deductions on corporate life insurance policies,
  • Special depreciation on corporate aircraft, and
  • The taxing of carried interests at capital gains rates.

President Obama would also consider reforming several other areas of the tax code that cause purported distortions in the tax base, including:

  • Accelerated depreciation,
  • Reducing the bias towards debt financing by limiting interest expense deductions, and
  • Establishing greater parity between corporate and pass-through entities by taxing large pass-through entities as corporations.

Governor Romney also wishes to lower the corporate tax rate, but to 25% for all corporations, and would also repeal the corporate AMT. Romney has indicated that he would explore further rate reductions in conjunction with broadening the income base and simplifying the tax code. Governor Romney has not indicated what, if any, tax expenditures he would eliminate to offset the cost of the reduction in corporate tax rates.

International tax reform

While there may be some agreement between the two candidates on the need to lower corporate tax rates, they have very different views as it pertains to international tax reform.

Governor Romney‘s primary concern is to ensure that U.S. companies are competitive with their foreign counterparts. He believes that our worldwide tax system, which taxes foreign income at U.S. rates regardless of where it is earned, causes U.S. businesses to pay higher taxes than foreign companies doing business in low tax jurisdictions, especially given our comparatively high corporate tax rates. Romney also believes that U.S. businesses are discouraged from repatriating foreign profits to the U.S. and investing those profits domestically since foreign earnings are not taxed in the U.S. until they are brought home.

Therefore, Governor Romney proposes moving towards a territorial tax system in which income is only taxed in the country in which it is earned. He believes that this change, when combined with a lowering of corporate tax rates, will greatly significantly increase corporate investment in the U.S. Romney also acknowledges that the new regime will need to be structured in such a way that does not encourage corporations to “game the system” and export jobs or move their headquarters abroad.

President Obama‘s concern over shifting jobs and profits out of the United States is why he suggests a different approach. President Obama believes that we should maintain our worldwide tax system and, in addition, impose a minimum tax on foreign profits to discourage U.S. companies from parking profits offshore in low-tax jurisdictions.

President Obama has made some other proposals intended to protect U.S. jobs, including:

  • Eliminating tax deductions for moving business operations abroad,
  • Creating a 20% tax credit for expenses of moving operations back into the U.S.,
  • Currently taxing excess profits associated with shifting intangibles to low tax jurisdictions, and
  • Delaying the deduction for interest paid on overseas investments until the related income is taxed in the U.S.

Only Part of the Story

While the Presidential candidates’ positions on expiring tax provisions and long-term tax reform garner most of the attention, ultimately Congress is responsible for passing any legislative changes. Already in recess for the fall campaign season, Congress will not address any of the expiring tax provisions until after the November election. While many are predicting that some of the expiring provisions, including the Bush tax cuts, will be extended for another year, which provisions will be extended and for which taxpayers remain to be seen. Who wins the White House and who controls each chamber in Congress (and by how much) may dictate what gets extended and whether those provisions are extended for all taxpayers or only those below certain income levels.

Post-Election Special Edition: Eye On Washington Webinar
Be sure to tune in to our related webinar on November 7  as we shed some light on how the outcome of the election will influence what happens during the lame duck session in the balance of 2012 and what the new Congress will do in 2013. More details and registration»



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Chinese firm positioned to acquire U.S.-funded battery maker A123 Systems

A123 President and CEO David Vieau, left, Rep. John Dingell, D-Mich., Energy Secretary Steven Chu and A123 Vice President Jason Forcier, right, tour the Romulus plant.

A123 President and CEO David Vieau, left, Rep. John Dingell, D-Mich., Energy Secretary Steven Chu and A123 Vice President Jason Forcier, right, tour the Romulus plant. / July 2011 photo by Carlos Osorio/ASSOCIATED PRESS

The future of A123 Systems, which received a $249.1-million grant in 2009 from the Obama administration and more than $125 million in State of Michigan tax credits and aid, is now up to a Chinese auto supplier.

Wanxiang Group agreed in August to invest up to $450 million to acquire as much as 80% of the Waltham, Mass.-based battery maker.

But shares in the company, which employs about 700 people in Romulus, Livonia and Ann Arbor, are now trading for 27 cents, down from a 52-week high of $4.44 about a year ago. It has lost $857 million since its inception, and $208 million of that in the first half of this year. Clean-tech companies backed by the U.S. government have been a target of Republican presidential candidate Mitt Romney, who accuses President Barack Obama of “picking winners and losers” with grants and loans like those to A123.

Now, the Wanxiang investment has made the administration’s support of A123 even more sensitive.

The deal gave A123 much-needed cash to continue operating, but experts said the future of the company’s manufacturing operations in Michigan is in doubt.

“The issue of having the Chinese come in after the U.S. has supported the company with loans is a challenge for them,” University of Michigan Transportation Research Institute analyst Bruce Belzowski said. “Do they end up moving the plant to China? As owners they would have that right to do that.”

Critics have suggested that Wanxiang identified an opportunity to pounce on a company with valuable intellectual property at a cheap price. Pin Ni, president of Elgin, Ill.-based Wanxiang America, referred questions to A123, which declined to comment for this report.

A123 CEO David Vieau told investors in August that the deal would “remove the uncertainty regarding A123’s financial situation” and allow the company to “leverage Wanxiang’s global supply chain and automotive manufacturing efficiencies to reduce our costs.”

Wanxiang, owned by Chinese billionaire Guanqiu Lu, told the Securities and Exchange Commission that its investment would help A123 gain “access to the vehicle electrification and grid-scale energy storage markets in China.”

Pike Research analyst John Gartner said that for A123 to expand sales in China, it would make sense to manufacture batteries there.

“Because of the weight of the batteries, it’s much more cost effective to manufacture where they’re going to be used in the vehicles,” Gartner said.

A123’s stock closed Friday at 27 cents, down 98% from its September 2009 initial public offering price of $13.50. Several executives have sold thousands of shares in recent weeks, according to SEC filings.

“It’s not clear what the Chinese are going to get out of this,” said Theodore O’Neill, founder of Connecticut-based Litchfield Hills Research and a former securities analyst who tracked A123. “There isn’t any value here. There really isn’t enough need for the product, and the product isn’t profitable.”

Battery companies have struggled to achieve breakthroughs and lower costs, which is necessary to make electric vehicles more affordable. Most consumers are still buying conventional vehicles that run on gasoline or first-generation gasoline-electric hybrids that don’t require recharging.

Gartner said lithium-ion battery packs cost about $700 per kilowatt hour, but that needs to come down to about $350 to become competitive with internal combustion engines.

“It’s really going to take the next generation of battery technology to get there,” he said.

Costly errors

A123 is spending more than $66 million to complete a recall of battery packs it supplied to Fisker Automotive. At issue is a faulty welding machine at its Livonia plant.

After the discovery, A123 hired materials handler MPS Group to conduct the Fisker battery-pack recall, according to company documents obtained by the Free Press.The recall is not expected to be finished until mid-2013, and Fisker, which represented 26% of A123’s revenue in 2011, may switch battery suppliers, Fisker CEO Tony Posawatz said Monday in Detroit.

Others are sticking by A123. General Motors, which selected A123 as the supplier for the forthcoming electric version of the Chevrolet Spark minicar, said it has no plans to switch suppliers.

But A123 has warned the SEC that there is “substantial doubt” about its ability to continue operating as an independent company.

A bankruptcy filing or Wanxiang taking control of A123 would stir further questions about the government’s role in funding private enterprise, especially if it expanded production in China.

“The venture capital community has been burned just as badly as the taxpayer,” O’Neill said. “This is a segment of industry that nobody’s making any money in.”

Contact Nathan Bomey: 313-223-4743