After Trump negotiated a tax break with Carrier to keep jobs in Indiana, Justin Amash came out swinging on Twitter. Amash called the deal “corporate welfare and cronyism,” and argued it benefited the politically connected at the expense of everyone else.
Later, justifying his argument, he tweeted out this:
Amash shows, through a hypothetical scenario, how a $10 general tax with a $1 subsidy just to you has the same end result as a $10 general tax with you only being taxed $9. $10-$1=$9. Therefore, a targeted tax break is equivalent to a subsidy, according to Amash, and those against subsidies should not be in favor of targeted tax breaks. It’s hypocrisy, he argues.
This argument, however, (#AmashMath, as I call it) can be applied to all sorts of other situations. Consider the following:
If everybody is taxed $10, it has the same end result as if they were taxed $11 and given $1 back. According to #AmashMath then, a general tax decrease is the same as a general subsidy. If libertarians are against the latter, then apparently they should also be against the former.
Here’s another example, even more absurd:
According to #AmashMath, libertarians should be against limited government too! It’s just the same thing as big government!
All of this, of course, is not true, and is just shown to demonstrate the absurdity of Amash’s claim. His argument isn’t just incorrect; it’s dangerously incorrect. Because the same argument used against targeted tax breaks can also used against tax breaks in general, it doesn’t just undermine the former; it undermines all of libertarianism.
The real reason libertarians are opposed to subsidies, targeted or general, isn’t because it’s cronyism. It’s because subsidies are generally redistributive. We can come up with ideal scenarios where an individual or company gets their money back from a subsidy, but that’s not how it works in the real world. Some individuals or businesses receiving subsidies become net tax consumers (those who receive more in taxes than they pay), and a bloated bureaucracy (also full of net tax consumers) is created. Tax breaks meanwhile truly let each individual or business keep their own money.
If Amash is concerned about the rule of law, and opposes singling out Carrier for that reason, that’s fine. But singling out a company or individual by name is different from selecting categories or characteristics. Targeted tax breaks can still happen under the latter without undermining the rule of law.
As for concerns about cronyism, they deal with equality, not liberty. Libertarians are in favor of the latter ideal. Being against tax breaks for the few is like being in favor of adding women to the draft just because men are there. It’s equal slavery.
“Crony capitalism” in the form of tax loopholes don’t distort the market either. Taxes distort the market. Lowered taxes, even for a few, bring the market closer to its undistorted version. As Ludwig von Mises once said, “capitalism breathes through those loopholes.” When Ron Paul was asked about the poor not paying income taxes, he didn’t call it crony capitalism. He said “We’re halfway there!”
Justin Amash, a true champion of liberty, has done great service during his six years in Congress. But by refusing to accept targeted tax breaks, he cripples his ability to bring freedom to America.
Follow Brett Chandrasekhar on Twitter.