I really don't want to spend too much more time on this but, having knocked out their other avenues of defense, Trump fanboys are resorting to a favorite pastime of the Left, closing their eyes to the full consequences of an economic situation.
I post this comment as evidence:
Although I hate arguing technical policy-wonk crap, here you have one deal with Carrier that actually preserves part of their tax base and prevents a larger tax-burden shift than would happen if the company left the country (and we all agree the government shouldn't be taxing anyone, but this is relative you the burden-shift argument you're making).This is just utter nonsense. First, if Carrier moved to Mexico air conditioners would be cheaper for everyone in the United States. Why isn't this considered as part of the full equation and not just the "tax base"? But secondly, the commenter makes the hidden implication that the Carrier workers wouldn't be able to find new jobs, thus shifting the tax burden from these workers. This is simply a denial of basic supply and demand economics? Markets clear, including labor markets. That Carrier would have a labor advantage by moving to Mexico implies that in the United States other firms are bidding higher for the Carrier workers so that Carrier can't lower wages because the workers would go elsewhere.
My main point here is that it really gets wacky arguing "technical policy-wonk crap." There are implications from many directions. The best route is to generally (there may be exceptions)not support new tax credits which are generally done for the benefit of some crony and distort the economy (although as I outline, technically, a tax credit could be a tax cut if it does not distort the economy, see my socks example). In the Carrier case, it was not a crony capitalist that wanted the tax credit but a Banana Republic style leader who wanted a photo/crowd op. It benefitted no one else. Carrier didn't want it and was pushed into the "deal." That is really an off the wall thing to support.
That said, I come to a second commenter Matt@Occidentalism who claims:
You have supported this before, so it is now Wenzel vs Wenzel.The commenter has a reading comprehension problem or purposely blurs the point I made about new tax credits versus those already in place. Indeed. I made the point that there are different ramifications for a multiple of different tax credits. Some distort the social fabric, like education tax credits which must be always demanded to be torn down. Others distort the economy but in the short-run would result in greater disruptions if the tax credit were removed. If we remove the tax credit in my alligator belt example, it is going to do little more than just shift workers from making alligator belts to making other types of belts. It's not a pure deal but there is little to gain from removing such a tax credit. In other words, it is not Wenzel vs. Wenzel but rather new tax credits and some existing kinds of tax credits versus other tax credits. In other words, it is much deeper than Matt@Occidentalism posts.
But government policy technocrats just love this kind of debate because they know the more complicated they make the transaction the more people they will confuse about what is really going down.
I can recall in the 1980s when Murray Rothbard and I were discussing Ronald Reagan's tax "cuts" which were also eliminating many real estate tax shelters. We both thought it was just a scam since the government take was going to be the same (if not go up some) because of the elimination of the tax shelters. Neither of us, I'm sure, were in favor of preferential tax deals for the real estate sector because there is something special about the real estate sector. But more than playing around in this orgy of tax technician minutia, we just wanted real tax cuts across the board from the current base. There is a difference between implementing a special tax credit and ripping one down once it has been absorbed into the economy, especially when it benefits a broad base.
Rothbard discussed what Reagan was up to in a 1987 private memo to Mises Institute members:
One of the few areas where Reaganomists claim success without embarrassment is taxation. Didn't the Reagan administration, after all, slash income taxes in 1981, and provide both tax cuts and "fairness" in its highly touted tax reform law of 1986? Hasn't Ronald Reagan, in the teeth of opposition, heroically held the line against all tax increases?
The answer, unfortunately, is no. In the first place, the famous "tax cut" of 1981 did not cut taxes at all. It's true that tax rates for higher-income brackets were cut; but for the average person, taxes rose, rather than declined...
Not only were taxes increased, but business costs were greatly raised by making business expense meals only 80% deductible, which means a great expenditure of business time and energy keeping and shuffling records. And not only were taxes raised by eliminating tax shelters in real estate, but the law's claims to "fairness" were made grotesque by the retroactive nature of many of the tax increases. Thus, the abolition of tax shelter deductibility was made retroactive, imposing huge penalties after the fact.Government tax credits, like government trade deals, are a trap designed by government technicians to confuse. Just like the Federal Reserve is designed to confuse about its fundamental purpose: printing money for the benefit of the government.
The focus should always be on tax cutting from the current base. We should always be suspicious of new tax credits because although they can be a general tax cut, they are most often just a crony deal for the benefit of insiders.
But once tax breaks of some sort are in place, such as interest rate deductions and accelerated depreciation, reversing these tax cuts will damage many in the economy (not just cronies) who based their decisions on this tax structure. Again, the solution is to cut and cut taxes from this structure so that the deductions become insignificant because of overall low taxes.
There are, however, a small set of tax credits, and the like, that must be vehemently objected to because of the manner in which they play a significant role in altering the nature of society--even if they are already established. Educational tax credits come to mind as an example. The last thing we should want is the government involved in picking and supporting some educational institutions over others.