At an event recently a Democrat in the area said that the economy is driven not by business but by the coin people have jingling in their pockets. It’s an attractive narrative that avoids recognizing that the coin in someone’s pockets gets there from having a job. We must have businesses to organize the production of things our modern society wants, and we need to recognize every cost placed on businesses is borne by the consumer. Therefore, I am not in favor of high business taxes.
However, I find distasteful that businesses engage in a lot of “gaming” of the tax system and also lobby extensively for the government to promote winners and losers through incentives in the tax code. Any time one industry is singled out for a tax break, that’s corporate welfare. Any time one particular economic activity is promoted for a deduction, that’s corporate welfare. And any time government is involved in increasing the profitability of an enterprise, it’s a worse long-term outcome because it promotes energy and attention spent on things other than pursuing better products more efficiently built.
People do go overboard when defining “corporate welfare”. Corporate welfare is not when a company is able to expense things used to purchase materials or equipment (taxes are for profits, not for gross income). We have a general/standard ability to expense property and durable equipment over the long term. That’s not corporate welfare, that’s allowing the tax system to not create strange approaches for businesses to do the long-term investments a business must do. For instance, there are huge numbers bandied about related to “subsidies” for the oil and gas industry…those “subsidies” are generally the standard capital expense deductions and amortization that all businesses get. There’s no reason to use the tax code to “penalize” a particular industry either.
Finally, I also am very uncomfortable when an incentive to a business specifically comes from an area that has fiscal challenges. The knee-jerk argument is that if one doesn’t incentives a company to locate/expand somewhere than the jobs/business/taxes are lost. Well, it is not helpful to the tax code for areas to compete against each other. While I would feel the need to work to offer “equal” incentives compared to other areas, I would intentionally avoid using money for, let’s say, schools to increase the profits for a business. If I could, I would like to see that all state and local governments would stop trying to create incentives to steal business from another place…the business needs to go somewhere, lets just work to have as equitable a code as possible and avoid “special” things as much as possible.
Why else do candidates get millions to run for offices that only pay thousands…because there’s a lot of corporate welfare money at stake. Everyone needs to ask their representatives to get away from incentives for specific situations.