5 ms·

Honestly, I think it should be illegal for a city or state to negotiate a tax break with a specific company. Sure, they can cut taxes across the board if they

Honestly, I think it should be illegal for a city or state to negotiate a tax break with a specific company. Sure, they can cut taxes across the board if they want, but everyone should get the same deal. I'm even for banning "backdoor" tax breaks that effectively only benefit one or two companies and were clearly targeted at them (I'm thinking of the Delta aviation fuel tax break, as an example), or sweetheart deals to use infrastructure (like stadiums). I think the most immediate benefit will be that the NFL will have to pay for its own damn stadiums in the future.

maxxxxx 9y ago
I agree. There is a good chance if they distributed these tax breaks over all their small businesses the overall benefit may be higher than giving them one big player. This kind of deal distorts the economy to the benefit of a few big players.
simonebrunozzi 9y ago
I was going to make the same comment.
Helmet 9y ago
Are we could allow local communities to govern themselves and decide what should and shouldn’t be legal when it comes to this stuff? Federalism and all that. There are good arguments from each side, so a top down one size fits all approach doesn't seem like the proper way to go about it.
AnthonyMouse 9y ago
If you can't get the state to stop engaging in this, how are you going to get them to pass a law against it? Or not repeal the law the minute they want to do it again? The incentive for states to do this is a direct consequence of progressive taxation. If a company paid $1000 in taxes and got back >=$1000 in police protection (or whatever), and the government's relationship with every other taxpayer was of the same nature, companies couldn't do this. The government actually can provide >$1000 in value for $1000 in tax revenue because government services can produce consumer surplus like anything else. And if every taxpayer had that relationship with government then there would be no room for arbitrage. If someone wanted lower taxes, the cuts would have to come out of some services, but all the services provide as much taxpayer value as they cost. You can't attract high income taxpayers by cutting services that produce a net positive benefit to high income taxpayers. The problem comes when one state wants to take from the rich and give to the poor and the next state doesn't, because then the richest people all move to the states that don't take more from them than they give back, and getting poorer people to move in instead is not what any state wants. Then the states that were trying to redistribute income realize they've failed, but they don't repeal the programs because they're very popular with the recipients, so instead they give the rich tax breaks to get them to come back. Because $1000 in tax revenue is more than zero, even if they were originally supposed to pay $10,000. And so the programs that are supposed to redistribute income end up distributing it from the middle to the bottom instead of the top to the bottom and end up destroying the middle class. The solution to this, at least between US states, is to have a UBI at the federal level and no other redistributive programs at all. Then the UBI serves the goal of redistribution and progressive taxes aren't required on top of that, so there is nothing for companies to arbitrage.
- Slansitartop 9y ago
  > If you can't get the state to stop engaging in this, how are you going to get them to pass a law against it? Or not repeal the law the minute they want to do it again? This stuff usually happens at the state or local level, so a federal law (not sure about the constitutionality of that) or constitutional law (or judicial interpretation) seems like the right place for it. Tax arbitrage is a problem, IMHO, and I do wish there were better ways to mitigate it. It does seem we're moving more towards a system with local taxes occur where the sales are made, and perhaps the same could be done with local income and business taxes. It would make things more complicated, but we have software and tax codes could also use some compensating simplification. IMHO, tax policy is part of the political system, and in the interests of democracy, the political systems shouldn't be made to compete with each other in exploitable ways.
  - AnthonyMouse 9y ago
    > It does seem we're moving more towards a system with local taxes occur where the sales are made, and perhaps the same could be done with local income and business taxes. "Income tax where the sale is made" is VAT. And "business taxes" (meaning incorporation fees and the like) are stupid garbage that disproportionately impact small businesses, don't even generate that much revenue, and should just be eliminated entirely. But yes, VAT would work really well for this. Especially if there was a standardized way for internet retailers to remit it without having to register with every individual state and locality that each uses their own filing system. > IMHO, tax policy is part of the political system, and in the interests of democracy, the political systems shouldn't be made to compete with each other in exploitable ways. It's impossible to prevent this and still maintain any semblance of different states or countries. If states couldn't have different taxes then they would attract businesses by not spending the money on social programs and instead using it for infrastructure projects businesses like. If they weren't allowed to do that then they would still attract businesses with less stringent regulations. The only way states don't compete with each other is if they're all exactly the same. And they would never actually be on equal footing regardless. If everyone had to abide the same taxes, minimum wage laws and regulations there are in California then no one would ever set up shop in Arizona, much less Mexico or South Africa.

maxxxxx 9y ago

I agree. There is a good chance if they distributed these tax breaks over all their small businesses the overall benefit may be higher than giving them one big player. This kind of deal distorts the economy to the benefit of a few big players.

simonebrunozzi 9y ago

I was going to make the same comment.

Helmet 9y ago

Are we could allow local communities to govern themselves and decide what should and shouldn’t be legal when it comes to this stuff? Federalism and all that. There are good arguments from each side, so a top down one size fits all approach doesn't seem like the proper way to go about it.

AnthonyMouse 9y ago

If you can't get the state to stop engaging in this, how are you going to get them to pass a law against it? Or not repeal the law the minute they want to do it again? The incentive for states to do this is a direct consequence of progressive taxation. If a company paid $1000 in taxes and got back >=$1000 in police protection (or whatever), and the government's relationship with every other taxpayer was of the same nature, companies couldn't do this. The government actually can provide >$1000 in value for $1000 in tax revenue because government services can produce consumer surplus like anything else. And if every taxpayer had that relationship with government then there would be no room for arbitrage. If someone wanted lower taxes, the cuts would have to come out of some services, but all the services provide as much taxpayer value as they cost. You can't attract high income taxpayers by cutting services that produce a net positive benefit to high income taxpayers. The problem comes when one state wants to take from the rich and give to the poor and the next state doesn't, because then the richest people all move to the states that don't take more from them than they give back, and getting poorer people to move in instead is not what any state wants. Then the states that were trying to redistribute income realize they've failed, but they don't repeal the programs because they're very popular with the recipients, so instead they give the rich tax breaks to get them to come back. Because $1000 in tax revenue is more than zero, even if they were originally supposed to pay $10,000. And so the programs that are supposed to redistribute income end up distributing it from the middle to the bottom instead of the top to the bottom and end up destroying the middle class. The solution to this, at least between US states, is to have a UBI at the federal level and no other redistributive programs at all. Then the UBI serves the goal of redistribution and progressive taxes aren't required on top of that, so there is nothing for companies to arbitrage.

Slansitartop 9y ago
> If you can't get the state to stop engaging in this, how are you going to get them to pass a law against it? Or not repeal the law the minute they want to do it again? This stuff usually happens at the state or local level, so a federal law (not sure about the constitutionality of that) or constitutional law (or judicial interpretation) seems like the right place for it. Tax arbitrage is a problem, IMHO, and I do wish there were better ways to mitigate it. It does seem we're moving more towards a system with local taxes occur where the sales are made, and perhaps the same could be done with local income and business taxes. It would make things more complicated, but we have software and tax codes could also use some compensating simplification. IMHO, tax policy is part of the political system, and in the interests of democracy, the political systems shouldn't be made to compete with each other in exploitable ways.
- AnthonyMouse 9y ago
  > It does seem we're moving more towards a system with local taxes occur where the sales are made, and perhaps the same could be done with local income and business taxes. "Income tax where the sale is made" is VAT. And "business taxes" (meaning incorporation fees and the like) are stupid garbage that disproportionately impact small businesses, don't even generate that much revenue, and should just be eliminated entirely. But yes, VAT would work really well for this. Especially if there was a standardized way for internet retailers to remit it without having to register with every individual state and locality that each uses their own filing system. > IMHO, tax policy is part of the political system, and in the interests of democracy, the political systems shouldn't be made to compete with each other in exploitable ways. It's impossible to prevent this and still maintain any semblance of different states or countries. If states couldn't have different taxes then they would attract businesses by not spending the money on social programs and instead using it for infrastructure projects businesses like. If they weren't allowed to do that then they would still attract businesses with less stringent regulations. The only way states don't compete with each other is if they're all exactly the same. And they would never actually be on equal footing regardless. If everyone had to abide the same taxes, minimum wage laws and regulations there are in California then no one would ever set up shop in Arizona, much less Mexico or South Africa.