Ronald Bailey, online at Reason.com, quotes a press release from a group of renewable energy outfits whining and moaning to keep their huge tax breaks. It’s all for the good of the country, they say.
But Bailey notes that when such tax credits go to businesses not favored by environmental activists and the New York Times, they get branded subsidies.
What is the difference?
A. Barton Hinkle, also working in the vineyards of Reason, clarified one such kerfuffle last year, showing that most of the allegedly shocking subsidies accruing to Big Oil were, in actual fact, general tax rules applicable to all sorts of companies. Hinkle readily concedes that maybe
these are dumb rules. Maybe they need changing. But in no sense can they be called subsidies—i.e., money taken from Smith and given to Jones. The failure to tax Exxon more does not increase your payment to the IRS by one red cent.
Hinkle concludes that if partisans, left or right, are going to treat tax breaks as subsidies, then they should do so across the board, without ideological cherry-picking.
And yes, there is an argument for calling all tax breaks “subsidies.” The lobbying for them looks about the same. They favor some businesses (or, more often, industries) over others. Politicians get the benefits from the special interests in the exact same way.
Perhaps we should define two broad categories of subsidy: Direct benefits and negated detriments. A tax sure is a detriment to the taxpayer. A tax credit or other break is a “negated detriment.” That is, an indirect benefit.
And those negative detriments sure can affect the bottom line.
This is Common Sense. I’m Paul Jacob.
3 replies on “Two Forms of Subsidy”
We get trapped so easily by the language. Subsidy implies that someone is giving money (etc.) to another. Failing to tax money away from someone is referred to as a subsidy. Should we then describe a unexecuted robbery as a subsidy?
The failure to tax Exxon more does not increase my payment to the IRS, but since spending is not similarly curtailed,the government happily continues to incur debt in my name which I pay for both in inflation and in decreased freedom. A dollar of debt out of every 2 dollars redistributed. If not a red cent increase, then perhaps a socialist one.
This gets into taxation, and how to pay for government. I submit, there is no “fair” tax, as any tax creates distortions in the marketplace.
Should we tax income (however defined), wealth, sales (perhaps or perhaps not on all sales such as real estate, voting, imports, exports, or a combination? Should every adult pay the same tax, or should some pay more? There is no right answer.
But there is a right approach. Given taxes are taken by force, then government should only protect our liberties: e.g., by prosecuting thieves (and others who harm people or their property by initiating force against them), as anything else government does is tainted by its taking of our resources to do it.