The following was written by Omar Benmegdoul.
Donald Trump has already made good on one campaign promise: getting Carrier to keep in Indiana roughly a third of the 2,100 jobs it was going to ship to Mexico. Chief executive of United Technologies Corp. Greg Hayes walked out of his meeting with Mike Pence on Monday with $7 million in tax breaks over ten years in exchange for this.
Hey, I didn’t say it was a good campaign promise. Sounds like standard crony capitalism, right? Well, mises.org writer Tho Bishop disagrees. To explain why, he enlists the help of Matthew McCaffrey, who argued the same point regarding tax breaks for video game companies in a previous mises.org article:
Simply put, being permitted to keep your income is not the same as taking it from competitors. Exemptions and loopholes do not forcibly redistribute wealth; taxes and subsidies do, thereby benefiting some producers at the expense of others.
Yes, entrepreneurs who take advantage of tax breaks will incur fewer costs than entrepreneurs who don’t. But this doesn’t show that exemptions or loopholes provide unfair advantages; in fact, just the opposite — it shows that taxes penalize entrepreneurs unlucky enough to be left holding the bill.
Tax breaks are beneficial to those who claim them, but they are not subsidies. Rather, exemptions and loopholes are life jackets in a sea of wealth redistribution. Mises said it perfectly: “capitalism breathes through those loopholes.”