It’s Fix The Tax Code Friday!
Earlier this week, air conditioning and furnace giant Carrier Corporation, a brand of United Technologies Corporation Building & Industrial Systems, agreed to not to ship out 800 jobs that it had previously planned to move out of one of its Indiana plants to a facility in Mexico (about 600 jobs from that plant will still be moved to Mexico together with jobs from a second plant that is closing). The announcement that some jobs would remain in the Hoosier state was met with a mix of euphoria and skepticism.
While the decision by Carrier to stay in-state was initially characterized as the result of a cordial phone call from President-elect Donald Trump, it turns out that it was a bit more than that. In exchange for keeping jobs and promising future investment in the state, the company will receive about $7 million in state tax incentives. Those incentives up to $6 million in tax credits as well as $1 million in training grants to support workforce development. The tax incentives were described as a “standard package” of tax credits, and one that Vice President-elect Mike Pence says was not much different from what had been offered to the company before.
Tax incentives for companies have long been controversial. While providing companies with financial and tax assistance can result in retained jobs (as here) or growth in areas which might not otherwise attract industry, some view such breaks as government interference in the free market. The latter appears to include Sarah Palin who wrote in an opinion piece for the Young Conservatives website that “[w]hen government steps in arbitrarily with individual subsidies, favoring one business over others, it sets inconsistent, unfair, illogical precedent.” She went on to write that “fundamentally, political intrusion using a stick or carrot to bribe or force one individual business to do what politicians insist… isn’t the answer. (You can read the entire piece here.)
Trump, however, has indicated that the free market won’t actually make much progress without a hand from the government. Pence agrees, telling The New York Times, “The free market has been sorting it out and America’s been losing.” That philosophy is at odds with many in Congress, especially traditionally fiscal conservatives who tend to publicly eschew government interference in such matters.
The two competing issues – trying to preserve both jobs and the free market inside the country – has raised difficult questions about how much government should be involved in private corporate matters. That, of course, brings us to today’s Fix The Tax Code Friday question:
Should state or federal authorities provide targeted tax incentives to encourage (or discourage) certain corporate behaviors? If so, what sorts of behaviors?
