Draft AmashJustin Amash is Wrong: Tax Breaks Are NOT Subsidies Brett Chandrasekhar December 2, 2016 Economics of Liberty, Headline News 2951 Share282 +1 Tweet Pin Share StumbleShares 282By Brett Chandrasekhar 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. Related: Justin Amash and Other Privacy Advocates Slam New Expansion of FBI Hacking Powers 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. Share282 +1 Tweet Pin Share StumbleShares 282 Justin Amashlibertariansubsidiestargeted tax breaksTax BreaksWe’re halfway there!Third Party Candidate Files For Nevada Recount For $14,000Saudi Prince: Let Saudi Women DriveAbout The AuthorBrett ChandrasekharWriter Brett Chandrasekhar is a 25-year old marketer, entrepreneur, and vocal libertarian. He has a B.S. in Economics from the Georgia Institute of Technology, but has also studied many of the paradigmatic books in the Austrian literature. You can find more of him at his website IthePerson.com, where he covers news and issues from a libertarian perspective. Djschnei Targeted tax breaks (a.k.a. targeted subsidies) provide an incentive in corporatist negotiations. The incentive is that the government will artificially raise your comparative advantage over your peers (giving you a break and not your peers). A targeted subsidy is an act of force against everyone not receiving the subsidy. As with any policy position, the net “liberty gain” must be calculated by considering all parties involved, not just the obvious. A targeted tax break, like Carrier’s, is antithetical to liberty. By celebrating it, you are surrendering to government force. BiscuitKingofSouthDakota Amash’s illustration may not have been on point, but Carrier received a subsidy. They received a 1 million in training grants to support workforce development. In what world is a government grant not a subsidy, considering it is part of the definition of the word subsidy. As for Amash’s tweets… You appear to be arguing with him on terms he didn’t use. He specifically mentioned a targeted tax break (within minutes of his initial post), to which you later respond with a tax break targeting everyone? “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.” Cronyism does not respect equality of authority. When were libertarians for inequality of authority? Libertarians do debate among themselves as to what level of liberty from (or submission to) the state is acceptable though. “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.” You appear to be taking Mises out of context, even as per the link you provided. This isn’t the light of liberty shining through the opening in the clouds of socialism. This deal with Carrier applies to Carrier only. Mises was talking about loopholes written into IRS code, not political favors handed out as one offs by heads of government to friends or in order to win headlines. ‘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!”‘ Someone should ask Ron Paul what percentage it gets us to by exempting specific friends of heads of state from paying taxes. Maybe I’m wrong and he will cheer this deal as a victory. Libertarian Heretic The poor don’t pay taxes so we’re halway there. And this applies to targeted tax breaks? I remember Stossel took Bill Weld to task for being insufficiently libertarian over this very issue. Well imagine we had no corporate tax but to compensate a 40% tax on LLCs and sole proprietorships. Would that be halfway there? Trump has promised a mercantilist economic policy. Don’t applaud the 30% he gets right like it matters. I am on board with Bernie Sanders 50% of the time. On few issues is Trump more passionately statist than the economy. We should hold his feet to the fire rather than give thanks for the table scraps. Tax cuts are fine if they are done with a respect to shrinking government market distortions. If we are talking about a giveaway to a prized sector a politician feels is sacrosanct (manufacturing) that is something entirely different. Also any tax reduction done as an industry favor and without matching government spending cuts is just fiscally irresponsible. Your only voting for a tax increase later probably under a sober Democrat who takes the thankless job of mopping up the mess.