Friday, July 28, 2017

The Injustice of Corporate Welfare

The Beacon Center has produced a nice video on cities using tax abatements to lure companies. The video focuses on the unfairness to competitors of them paying taxes that subsidize their competitors.

But it also causes an inefficiency in two ways. First, the taxes represent another wedge between consumer value and producer cost that could prevent moving an asset to a higher valued use (because producer cost + tax > consumer value > producer cost). Second, the subsidy could make profitable moving an asset to a lower valued use (if producer cost  > consumer value > producer cost - subsidy).

And so we continue our slow slide into becoming a banana republic.

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