Here’s Why the Government Shouldn’t Play With Markets

Back in 2005, biofuels were all the rage, so some member of Congress came up with a great idea: give huge tax breaks to anyone who starts using a combination of Diesel and biofuels. That will help save petroleum and reduce greenhouse gases!

Eventually, paper manufacturers notice the law and so they begin mixing biofuels with Diesel fuels in making paper. Pretty soon they are collecting $8 billion in tax credits a year.

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I know what you are going to say: the law could have been written to specify tax break only for people or companies substituting biofuel for petroleum fuel. But it doesn’t matter; there are always unintended consequences and they usually, if not always, end up doing more harm than the intended good.