It keeps amazing me too. A state (or any other local government) shouldn't be allowed to subsidize individual businesses, nor whole industries. Allowing it just means businesses can play states out against each other and it becomes a race to the bottom. The EU solved it. The US could too.
Sometimes in the discussion about this I get counterarguments about how it’s a “win win” (company gets subsidy, area gets jobs) or how it’s a net gain for the area (without the subsidy you get nothing, and with the tax break you get the jobs so at least it’s something).
> “win win” (company gets subsidy, area gets jobs)
Anand Giridharadas recently gave an a great talk[1] (at Google!) in which he explains how "win win" is a charade used to set the framing of the conversation.
Framing a plan (like a subsidy) as something that benefits everyone has good optics, but it implicitly creates a framing that only considers that plan. (it's either this plan or "you get nothing"). Without the restricted framing, the choice isn't a binary "subsidies or nothing"; there are many ways that money could be spent. (e.g. maybe going without that business and investing in education or infrastructure would provide a greater benefit).
> A state (or any other local government) shouldn't be allowed to subsidize individual businesses, nor whole industries
Does this apply to green industries as well? How about industries that pollute? Should there just be one flat tax for every business regardless of revenue/income? How about valid business deductions? Should all capital equipment depreciate the same as well? Should payroll taxes be the same regardless of the number of workers and their incomes?
It's nice to say there should be no subsidies on businesses or industries and I agree with the sentiment, but in actuality there is a lot of complexity in the tax code and a "level playing field" would be a drastic change to what we have now.
For instance, you could think businesses should be taxed progressively on income. So now you have to define revenue and expenses, which can leave a lot of arbitrary distinctions and vast differences among businesses and industries.
> Allowing it just means businesses can play states out against each other and it becomes a race to the bottom
There's already competition among cities, states and countries and its generally a good thing. Some states offer differences in taxes (e.g. rates, income vs property, etc), regulations (e.g. zoning, employment), benefits (e.g. state sponsored insurance), infrastructure (e.g. roads & bridges). This is thought to be a great benefit as smaller political entities can experiment to lure people and businesses. Not to mention it makes. Having a top down approach doesn't really make sense. I don't think its a race to the bottom, it's competition and states and cities should have to compete to provide its residences and businesses the best deal.
The best form of charity is luggage. People escape poverty and leave places with poor governance to greener pastures.
Yeah I agree. This seems to be a corruption that's been with the US since our inception tbh. There's been this generalized idea that "government = bad, business = good" and to that end we've relied heavily in our development on companies to build the country. One can take railroads in their early days as a prominent example or frontier settlers who were literally paid to go build cities out west.
It seems part of the problem is we're in a new world where such subsidies are counter productive because too many people rely on them. In this case, it shouldn't even be legal to use taxes to subsidize any singular private businesses -- and those that require subsidy to function should be nationalized (they're not functioning on the market system).
The legality possibly derives from it not being directed to a specific company directly, but by offering a tax break to any company who satisfies the criteria that has been tailored to fit only one or a few companies.
Well, the government does need to hire contractors, to build buildings, develop public transit, etc., which don't make sense to have a permanent government business around.
But yes, anything more than the minimum required to perform public functions is inequitable.
Not sure what you mean. I'm all for a large government providing all kinds of services. What was discussed was subsidies (usually tax breaks) directed to individual businesses or industries. That's a terrible practice and we were saying how we were amazed how it is still allowed (unlike in e.g. the EU).
Governments obviously will always need to enter contracts with businesses to provide the services it wants to provide.
It's not fully outlawed in the EU, to simplify things, essentially it's just not Prüfkriterien to favour individual companies. But respecting certain conditions you can still have some local incentives. One idea there is to protect from companies playing regions against each other, although that still happens to some degree, the other is to assure fair competition between companies (eg as others here mention that not only big companies can benefit)
Sometimes in the discussion about this I get counterarguments about how it’s a “win win” (company gets subsidy, area gets jobs) or how it’s a net gain for the area (without the subsidy you get nothing, and with the tax break you get the jobs so at least it’s something).