In a post back in January, “McArdle Waves the White Flag,” I questioned Megan McArdle’s view that it was a good idea for the Illinois government to raise income tax rates substantially. At the time, she saw the tax increases as necessary because people had “planned their lives around” the various state government spending programs that those tax revenues finance. But the Illinois government has been turning state tax revenue into subsidies and tax breaks for Illinois companies that threaten to move in response to the higher corporate income tax rates. See today’s Wall Street Journal editorial, “Illinois Tax Firesale,” for more details. So the net revenues, net, that is, of the subsidies and tax breaks, expected from the tax rate increases, will not be as large as she had expected.
Here’s what I wonder: does this use of tax funds to discriminate in favor of particular firms cause Megan to, in any way, question her previous endorsement of the tax increases?
READER COMMENTS
The Dude
Jun 9 2011 at 1:55pm
Megan is such a moderate when it comes to libertarianism, she’ll compromise her way into becoming a progressive. Her husband, Peter Suderman, is much better at standing his ground, though.
Doc Merlin
Jun 9 2011 at 2:34pm
Its almost as if the purpose of the taxes wasn’t increased revenue, but increased corruption possibilities. Now people can hold tax exemptions over the heads of business.
David R. Henderson
Jun 9 2011 at 7:13pm
@Doc Merlin,
Well put.
Doug H.
Jun 9 2011 at 9:43pm
I disagree with Doc Merlin in that it will be the political class that will hold tax exemptions over the heads of businesses in order to gain political favor.
I agree with Doc Merlin about the corruption possibilities. Raising tax revenues merely to ‘spend’ them on politically-favored businesses invites corruption within an already highly-corruptable class … our politicians.
Utimately, this is what any tax code has become; a way to move subsidies to those who can help our pols get re-elected.
A flat (or Fair) tax won’t solve all of our problems, but it does solve this one.
Seth
Jun 10 2011 at 1:43pm
‘Government is good at one thing: It knows how to break your legs, hand you a crutch, and say, “See, if it weren’t for the government, you wouldn’t be able to walk.”’ -Harry Browne
Tax rates are ‘breaking your legs’ and tax credits are ‘handing you the crutch.’
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