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Democracy For The Southern Adirondack/Tricounty Area
Wednesday, November 11, 2009
Tricounty DFA Update: Storm Over Murphy Vote
Hello Everyone;

This is a special update for November 11, 2009:

Storm Over Murphy Vote

Rep. Scott Murphy was one of 39 Democrats who voted against the Healthcare Bill Saturday night.

I've been moderating this group since April, 2003 and I have never seen anything like the hurricane of emails and postings that vote provoked. What's more, the level of shock and outrage is unprecedented, too.

Part of this was because the vote was unexpected. Murphy spoke in favor of the Public Option and callers were told he supported it. At our meeting Wednesday we passed a resolution offering support for that and urging changes that you can see at

However, what really whipped up that hurricane was the statement Rep. Murphy issued. He made it clear the biggest factors in his decision were what he termed "taxes," specifically a "tax" on paper manufacturers and a 2.5% excise tax on medical device manufacturers, both of which are in the 20th CD.

To clarify the issue, let's take a look at what those actually are.

Fact Check: What, Exactly, Is The "Tax" & What Is Black Liquor?

I've been researching what, exactly, is the "tax" on paper mills in the Healthcare Bill that Scott Murphy objected to. The issue revolves around a substance known in the paper industry as "black liquor."

Black liquor is an alcohol like substance (also known as cellulosic methanol) that is an inherent by-product of the modern paper making process. Most paper mills produce it and have been for 70 or 80 years. It burns and has always been used to fuel the mills, producing about 2/3rds of the energy used to power paper mills nationwide. This is the first of several important points, so note it carefully: because they create it anyway, they would naturally use it for fuel rather than throw it away- it's free energy, and always has been.

In a 2007 Energy Bill amendment to the 2005 Transportation Bill, Congress created a program to give a tax break to any company that mixed a renewal source of energy with fossil fuel. Congress had a good goal: they wanted to promote green, renewable energy.

However, this was essentially a screw up by Congress. Since black liquor, obviously, comes from a renewable source-- trees-- paper mills qualified for this tax credit.

Second big point: The paper industry did not have to do anything new to create this particular renewable energy source, or make any investment in creating renewable energy, or take any action at all-- which was the point, creating new renewable energy. But Congress missed all this largely unheralded black liquor production. It clearly would have been excluded, since it was not new.

What resulted was a windfall for the paper industry, one they did nothing to earn. They got free money for doing nothing.

Third big point: The provision was originally not supposed to cost much, but since black liquor unexpectedly was eligible for this tax break, and since there was a lot of black liquor production, was going to be very expensive. The Treasury Department originally estimated that the incentive would cost tax payers $61 million a year, but with black liquor it would soar to about $4 billion a year

Well, this was pretty embarrassing, and Congress and the Obama administration was planning to close this loophole promptly, and end the windfall. That closure was inevitable. That's actually the forth big point. Inevitable. But then financing healthcare became an issue, so, since the loophole creating the windfall was going to be closed anyway, they applied the revenue gained by closing the loophole to financing healthcare reform.
That was just a basic accounting measure, there was no "tax" being created. Rather, the kind of infuriating loophole in the laws that clever people exploit and taxpayers hate was being closed. The paper industry was going to go right back where they were before Congress slipped-up.

So, when Scott Murphy voted down the healthcare bill by his own statement because of a "tax" on the paper industry, he was actually voting not to kill a tax but to preserve a windfall tax break to the paper industry that A.) was a mistake, B.) had existed for a very short period of time, C.) did not promote new renewable energy, jobs or anything else, D.) was inevitably going to be closed anyway, and D.) was just a gift of our money to the paper companies.

Now, I am not against the paper companies-- do not get me wrong. Most of them are good corporate citizens and we need them. But if they need help they should ask for it so it can be clearly discussed and understood on the merits This is not the way to help them and closing the loophole, ending the windfall, and applying the money-- our money-- to healthcare is as reasonable an idea as Congress has probably ever come up with.

So. What to think of Rep. Murphy's portraying the closing of this loophole as some kind of unfair, oppressive blow, a "tax" unfairly targeting the paper industry? There are two alternatives: A. He has not the single, smallest clue of what he is talking about or, B. it's a claim of breathtaking mendacity. He's a really smart guy, a Harvard man who was a successful businessman and venture capitalist, what used to be called a financier, and, so I am inclined to think it's a pretty safe bet he voted for businesses getting our money and not our people getting healthcare.

4. Taxing Medical Devices...

As for the medical device manufacturers, that is indeed a real tax, a 2.5% excise tax, a type of sales tax not unlike what we pay when we go to the mall. But the excise tax is actually about leveling the playing field. The White House early this year cut a deal with the pharmaceutical industry, hospitals and so forth, wherein they agreed to give up something to finance the bill. That left the medical device manufacturers out. But why should the device manufacturers be so privileged as to not be asked to make some sacrifice, too? In fact, how could they be left out? And why should they expect to be? Everyone else is expected to pitch in. Why not them?

That, understandably became an issue with the other companies, and thus the excise tax was created-- to level the playing field so all would do their part.

Further, since all the medical device manufacturers have to pay the same tax-- in what way does the excise tax put any one company at a competitive disadvantage to any other, when they all have to pay it?

Like any tax, the excise tax will just become part of the companies' overhead. That cost will ultimately be passed along to us as consumers. No economist can see how this can possibly hurt them. In fact, because tens of millions of people will be getting healthcare for the first time, they will make more money than ever.

There is wide agreement there are many problems with the healthcare bill, but these two simply cannot characterized as legitimate reasons to vote down the most important piece of domestic legislation in 45 years, a program Democrats have pushed for since the Truman administration.

Finally, if you want an overall sense of what people feel about this kind of hand out to businesses, I cannot recommend Maureen Dowd's column today more highly:

Maybe we should get rid of Congress and replace it with Saturday Night Live.

Thanks every one,


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