The Difference Between a Tax Break and a Subsidy

Exposing economic confusion on the left and right

Should American taxpayers stop subsidizing big oil companies? How about abortions? There seems to be a lot of confusion on the issue. In part, that's because there's a lot of confusion about what a subsidy really is.

To hear liberals talk, it's scandalous that Americans are forking over their hard-earned tax dollars to prop up Big Oil. Former Virginia Gov. and DNC chairman Tim Kaine, now running for Jim Webb's Senate seat, last week called on his opponents to join him in opposing "government giveaways for big oil companies," as he put it. "Rep. Tim Scott (R-SC) Defends Fairness of Giving Billions in Oil Subsidies to Exxon," snarled the liberal ThinkProgress last week. " In March, the group groused that "House Republicans unanimously voted to continue big oil subsidies worth billions of dollars a year, even as oil companies are enjoying windfall profits from skyrocketing prices." On Thursday, Virginia Democratic Party executive director David Mills said the oil companies were "getting free money from the government."

Just one problem. Those "subsidies" are not subsidies. They are tax breaks. Of the $4 billion in alleged subsidies to Big Oil, $1.7 billion derives from a domestic manufacturing tax deduction intended to keep factories in the U.S. It is available to every company, not just oil companies. Another $850 million comes from another tax provision, also available to every U.S. corporation, that gives a credit for taxes paid to foreign countries—just as you can deduct your state taxes from your federal income taxes. Yet another $1 billion comes from tax rules that let oil companies treat oil in the ground as capital equipment for write-down purposes, and the rest comes from rules that let oil companies write off certain business costs immediately.

Maybe these are dumb rules. Maybe they need changing. But in no sense can they be called subsidies—i.e., money taken from Smith and given to Jones. The failure to tax Exxon more does not increase your payment to the IRS by one red cent.

How do we know tax credits should not be called subsidies? Just ask The New York Times—which recently tore into House Republicans for their "New Attacks on Women's Rights." The Times editorial excoriated the GOP for passing the "No Taxpayer Funding for Abortion Act." According to the newspaper, the bill "imposes new limitations on abortion access by driving to end abortion insurance coverage in the private market using the nation's tax system as a weapon. A provision would deny tax credits to small businesses that offer private health plans that cover abortion . . . The measure also eliminates the medical-expense deduction for most abortions. . . . Overall, the bill treats tax benefits as the equivalent of public expenditures for abortion." That is something the Times says Congress should not do.

At least regarding abortion. But on May 6, the Times was commending Democratic Sen. Max Baucus as someone who "gets it" on energy. Baucus "is drafting a bill that seeks to repeal $4 billion in annual taxpayer subsidies to the oil industry. . . . The tax breaks—fast write-offs for drilling expenses, generous depletion allowances, and the like—may have been useful years ago but are wholly unnecessary when oil prices and industry profits are reaching new highs."

Likewise, ThinkProgress also considers eliminating the tax write-offs for abortion services the equivalent of a tax hike, calling the proposal a "tax increase on women and small businesses. . . . the bill forces women and small businesses that provide health insurance that covers abortion to pay more in taxes than they would otherwise." Yet when Exxon objected to plans to cut the oil companies' tax breaks, ThinkProgress said the company had "publicly whined . . . that 'they want to increase our taxes.' "

Some conservatives are just as duplicitous—or, if we are being generous to everyone involved, just as unaware of their own contradictions. A tax break for abortion is a government subsidy, they claim, while a tax break for an oil company is not.

Take House Speaker John Boehner. Late last month, he said the oil companies should "pay their fair share" by losing their tax credits and whatnot. But a few days later he recanted, insisting that "raising taxes was a non-starter," as The Hill put it. Then on May 4 Boehner took to the House floor to endorse the No Taxpayer Funding for Abortion Act. "I rise to express my support for . . . applying a ban on taxpayer funding of abortion across all federal programs," he said. "Enacting this legislation would provide the American people with the assurance that their hard-earned tax dollars will not be used to fund abortions."

Well, the law already provides such an assurance, through the Hyde Amendment. And it is fatuous to say that cutting Jones' taxes by $100 because Jones had a medical procedure somehow takes an additional $100 out of Smith's pocket. If that were true, then cutting Jones' taxes by $1,000 would raise Smith's taxes by the same amount as well, and cutting all taxes to zero would at the same time raise all taxes to infinity. Garbage.

(For what it's worth, Virginia's Eric Cantor supports both the abortion measure and the elimination of oil company tax breaks. Two points to him for being consistent.)

A tax break is not a public expenditure and should not be treated as such. But if partisans on the left and right are going to treat it as such in some instances, the least they could do is treat it as such in all of them.

A. Barton Hinkle is a columnist at the Richmond Times-Dispatch. This article originally appeared at the Richmond Times-Dispatch.

Comments

[Enjoy Every Sandwich]

To be consistent one must have principles. Statists, whether right or left, don't. So on the rare occasions when a statist is consistent, it's an accident.

[kinnath]

Social engineering through manipulation of the tax code is evil.

[Mike in PA]

Even though a tax break isn't a public expenditure, a tax credit is.

I know it's splitting hairs, but I think we shouldn't be doing either - for anyone. Basically, we're reducing someone's monetary burden (or outright giving them benefits) if they behave in a way government would like them to behave. It's creating an unnatural incentive.

I know, creating an incentive to businesses to keep them here instead of overseas, right? If that's really the goal, just lower the rate for everyone - not just those with lobbyists that can threaten to go overseas unless they receive a certain benefit. For business, these breaks are just a way to reduce competition; for the poor, it's just a way to make it easier to be poor.

[Al Wayswright]

A "public expenditure" arises when a government agent cuts a check to buy something.

A tax credit is an allowable deduction taken from the total amount a taxpayer owes to government before applying deduction.

Decidedly, a tax credit is not a "public expenditure.

[Dick Fitzwell]

In the instance of personal income taxes, tax credits can result in a negative tax liability though, right?

[Barely Suppressed Rage]

Not all credits are "refundable", but yes, there are "refundable" credits, which means they can be paid to the person who qualifies for the credit, even if the person paid no income tax or paid an amount less than the credit.

[Al Wayswright]

"Negative liability"? That's a most amusing fictitious phrase, like when spin doctors and polite people say "negative growth" rather than 'decline'.

Liability means indebtedness, or obligation to pay debt, or that someone holds a right of action against you.

With personal income taxes, if tax credits reduce one's liability to zero, it is possible that under its own rules, the government might own the filer.

In this case, the government has incurred a liability. The taxpayer has gained a right of action against the government for that tax filing.

Yet, there is no such thing as "negative tax liability."

In a true sense, all liabilities are 'negative'.

[Al Wayswright]

* the government might owe ...

[JT Florida]

A tax break can become money taken from Smith and given to Jones. If the government spends $100 and gives Jones a $50 tax break, it will eventually need to make up the $50 difference. If Jones is favored by the central planner, the govenment will go after Smith for the other $50, or maybe it will eventually go after Smith's children.

In the end, tax breaks don't seem much better to me than subsidies. They are both just efforts by the central planner to play favorites. If anything, the government has found it is politically easier to pick winners using tax breaks than subsidies.

[Gilbert Martin]

Whether someone gets a tax deduction or a tax credit is irrelevant as to whehter he or she is getting a subsidy.

The only thing that determines that is a calculation of total taxes paid on an absolute dollar basis by the individual compared to the absolute dollar value his or her pro-rata share of the particular government activities that can be proven to provide him or her a demonstrable, specific, direct benefit calculated on a user fee basis.

Anyone paying more absolute dollars in taxes than the absolute dollar value of beneifts they personally receive in exchange for their money is subsidizing someone else regardless of what tax deductions or credits that they have.

[Matt Butt]

Well put. The difference between a subsidy and a tax break is arbitrary. It is the result of tax rules, pure and simple. If we start with a flat rate for all then the difference becomes obvious, both simply reduce the total taxes paid, and depending on the nature of you break or subsidy you might actually make a profit. The distinction is one of arbitrary tax law not Econ.

[T]

There's no confusion on the part of the people making the argument. Calling a tax break a subsidy implies the listener's hard earned tax dollars are going to someone repugnant, and further implies all money belongs to the state. It's a deliberate tactic.

It's also a lie, but it's a deliberate one. No one is arguing out of ignorance here, except morons who regurgitate talking points.

[Bruce]

a penny saved is not really a penny earned.

[CE]

a penny saved is not really a penny earned.

You're right; it's actually more than a penny.

If I earn a dollar and my marginal tax rate is 25 percent, I end up with 75 cents.

If I save a dollar, it's like earning $1.33.

So a penny saved is one and a third pennies earned.

[economicTruthiness]

Until inflation kicks in.

[RockLibertyWarrior]

Subsidies I have a problem and tax breaks are given to industries who have helped certain politicians in their campaigns. This article is correct but look where the tax breaks are given too, its still government favoritism.

[kinnath]

Tax Break is not equal to Tax Credit is not equal to Subsidy. While they are all forms of government favoritism, they are different animals.

Is it really too much to ask that people use the right words when dissing government intervention into the marketplace?

[sarcasmic]

yes

[TrickyVic]

""Tax Break is not equal to Tax Credit is not equal to Subsidy.""

Uh yeah. Keep that in mind when "tax credit" becomes the way health care is subsidized.

[kinnath]

The primary function of politics is to make words means something they don't.

[TrickyVic]

A tax credit is a tax credit, and not a subsidy, right? So if government decides to give you a tax credit it's not a subsidy.

[kinnath]

Saying a tax credit is a subsidy is sloppy.

A tax "break" can be the government manipulating deductions or credits to encourage certain behavior.

A subsidy is a direct payment from the government coffers to someone or on behalf of someone (e.g., paying part of the rent to the landlord).

Politicians love to equate giving tax "breaks" to "subsidizing" something or other (used by those for and against whatever is claimed to be "subsidized").

[Hazel Meade]

I disagree. A tax credit may as well be a direct payment from the government. It fully counts against your baseline tax bill, sometime even giving you a refund. The tax code has just become a way to simplify the process of handing out subsidies.

[kinnath]

I would agree that the Earned Income Tax Credit that pays "refunds" to people that don't actually owe income tax is a direct payment and therefore a subsidy.

But I disagree that any business is going to have a negative tax rate due to tax credits.

[TrickyVic]

""I would agree that the Earned Income Tax Credit that pays "refunds" to people that don't actually owe income tax is a direct payment and therefore a subsidy""

Does it really? If so, I'll agree.

[kinnath]

People with zero tax liability can get a refund that exceeds that amount of tax withheld. It's very purpose is to directly transfer money to people in low income groups.

[kinnath]

Negative tax rates 😉

[Hazel Meade]

But I disagree that any business is going to have a negative tax rate due to tax credits.

Well if you end up with a 1% tax rate instead of a 20% taxrate, due entirely to tax credits, does it really matter if it goes into negative territory. Getting substantially large chunks of tax dollars back is functionally equivallent to a direct subsidy.

Now deductions on the other hand .. that's another story. Deductions merely reduce the total income which you used to determine your income tax.

[Matt Butt]

Does it really? Or do deductions simply arbitrarily change your total net taxes by hiding your true income? Regardless of of the name deductions, tax breaks and subsidies all do the same thing... reduce your tax burden relative to others. I agree with the overall goal but the method is suspect.

["Liberal"]

How dare you!

[Al Wayswright]

Men can attest the word 'subsidy' into English from the late 14th century. It came from the the Anglo-French word 'subsidie', in turn from the Old French word 'subside' meaning "help, aid, contribution." The Old French speakers took the word from the Latin 'subsidium' meaning "help, aid, and military assistance."

In political economy and political science, persons speak of "direct subsidies" and "indirect subsidies."

Most assuredly, when politicians and bureaucrats (aka government) grants deduction from income taxation for depreciation of capital, said pols and crats are subsidizing the income earning capacity of a firm.

Likewise, when pols and crats grants deduction from income taxation for mortgage interest, said pols and crats are subsidizing the consumer preferences, lifestyle and living standard of those claiming such deduction.

Of course, always, politicians and bureaucrats do so with other people's money, as they have none of their own and first must take money by force.

[TrickyVic]

With the oil companies, the issue is giving breaks when they are making billions in profits. Their point of view is that they don't need the breaks since they are so profitable.

[sarcasmic]

And taking those breaks away will lower their profits by the same amount.
There's no way that the oil companies will pass those higher costs of business onto consumers in the form of higher prices.
Nope, no way at all because that is not the intent of those who want to eliminate the tax breaks.
Since the intent of those who want to eliminate the tax breaks is to lower corporate profits, no way in hell will eliminating those tax breaks result in more expensive gas.
Intentions are everything.

[TrickyVic]

Living up to the handle on that one.

They may or may not pass the difference to consumer. But they certainly may. But isn't it better to have the customers pay the difference than the pushing off on the tax payer?

[sarcasmic]

Last I checked the oil companies make in the neighborhood of $0.07 / gallon, while the feds take in $0.184, and my state takes in $0.295.

Seven cents to the oil company, forty to the government.

Yep, taxpayers are getting screwed alright.

[TrickyVic]

An oil company is more than just the sell of gasoline. I doubt they could pull in the profit they are on selling gas alone.

[sarcasmic]

I'm still amazed that they can pull that black stuff out from the ground, break down the different distillates, blend them back together, ship it across the country, sell it for what they sell it for, and only take seven cents a gallon profit.

Amazing.

They deserve every penny.

Compare that to how those forty cents are squandered.

What a joke.

[Gilbert Martin]

"Compare that to how those forty cents are squandered."

Indeed. Not only are billions wasted on overpriced union labor courtesy of the Davis-Bacon Act, about 25% of highway trust fund money is diverted to mass transit boondoggles, bike paths, greenways and other assorted crap that has nothing to do with building or maintaining roads. The gas tax is supposed to be a user fee for drivers - not a piggy bank for all sorts of unrelated pork that politicians want to dish out.

[Al Wayswright]

I'm still amazed that they can ... sell it for what they sell it for, and only take seven cents a gallon profit. They deserve every penny.

Compare that to how those forty cents are squandered.

+10x10^23

[OO]

and those gum-mint taxes are used for maintenance on the highways & bridges u drive over. oh that's right, all highways must be private toll roads owned by chinese & indian consortiums. some big improvement there

[Paul]

and those gum-mint taxes are used for maintenance on the highways & bridges u drive over.

Actually, no they don't.

In fact, our taxes have been going to everything but roads, including this 19th century transporation abomination which no one rides.

It seems as of late, roads, highways and bridges are a bit of an afterthought.

But thanks for playing.

[Paul]

One of those bridges that the government is isn't paying for.

[OO]

oh pah leeze, an 80 yr old bridge weakened by 3 quakes aint maintainable

[Paul]

oh pah leeze, an 80 yr old bridge weakened by 3 quakes aint maintainable

According to the government, it ain't replacable either. Because roads and bridget aren't being paid for. In direct contradistinction to your assertion that they do.

But one of these? Sheeit, we have PLENTY of money for that.

[Barely Suppressed Rage]

Also, Somalia.

[Colonel_Angus]

At least then the users would be paying the actual cost, and would see what that cost is to them. If the users were paying their true share, maybe people would choose to use highways less. Public highways are a huge subsidy to trucks, at the expense of cars, as trucks do not pay the full share of the decay they cause to roads.

[Paul]

Public highways are a huge subsidy to trucks, at the expense of cars, as trucks do not pay the full share of the decay they cause to roads.

Putting aside all the actual shenanigans of government not using the gas taxes to pay for the roads they're supposed to maintain, trucks DO pay a gas tax, and because they use more fuel and pay more, they pay more taxes. So I'm not sure why you think that cars are subsidizing trucks.

In addition, here in Washington, there's a commercial GVW (gross vehicle weight) tax. So...

[DKN]

Ooooh, a strawman parade!

A) the interstate hiway sys is a bad example when discussing federal policies; the interstate hiway sys is state owned, operated, and paid for.
b) Why is it that lefties think if we the people want gov to do a thing, like hiways, we have to let gov do anything else? We don't; they are to do what we want, the way we want, when we want, and not a jot more or less.

[Hazel Meade]

Well either the consumer pays for it at the pump, or the tax payer pays for it through the IRS, or through borrowing, interest rates, and inflation.

I prefer direct price signals. Let the price of gas fully reflect the cost of pumping oil, shipping it ot the US and refining it. I'd rather pay for it right then and there then pay for it through a dozen indirect ways.

[Al Wayswright]

sarcasmic says:

There's no way that the oil companies will pass those higher costs of business onto consumers in the form of higher prices.

Of course, in what you have written, that's not how prices arise.

Yet, here is how prices for oil and gasoline.

The great, invariant Law of Prices holds that the winning bids of demand in the face of supply, set the price.

Prices for oil get set by far-seeing speculators of futures contracts who work cleverly to ensure that in the long-run, efficient producers earn profit and live to produce another day.

As crude oil speculators set the price for crude, so too, do RBOB gasoline futures speculators set the price for gasoline.

Once the supply of refined gasoline gets to market, drivers as buyers set the final price at the pumps.

All gasoline taxes amount to a share of the profit absconded by government as all taxes on sales amount to a share of the profits.

Government earns more profit per gallon of gasoline than retailers of gasoline earn and by a substantial sum.

[R C Dean]

Their point of view is that they don't need the breaks since they are so profitable.

The stupid, it burns.

A company that isn't profitable, doesn't pay taxes, and so tax breaks are completely meaningless to it.

[sarcasmic]

"The stupid, it burns."

LMAO!

[TrickyVic]

That's their point of view, and they are wanting to end the breaks for only the most profitable. I don't think that's fair. If you're going to do, do it for all, or leave it for all.

[TrickyVic]

""The stupid, it burns.""

Swing and a miss, but I see you have a fan.

It's not like they are trying to end tax breaks for the ones not profiting.

[TrickyVic]

Since it doesn't apply, of course.

[Hazel Meade]

But may still qualify for tax credits, if they are refundable.

[Gilbert Martin]

But they aren't all that profitable compared to other industries when you calculate their profit margin on sales.

The leftists deliberatly don't want to do that. Instead they always talk about absolute dollars of profits - a misleading number because the scale of the business is enormous.

[TrickyVic]

""But they aren't all that profitable compared to other industries when you calculate their profit margin on sales.""

What is there profit margin on a barrel of oil?

[sarcasmic]

Here ya go!

[kinnath]

Looks like the crack spread has been in the $10 to $20 per barrel -- that's difference between cost of raw material (crude oil) and sell price of finished product (gasoline and heating oil). Cost of production has to and transportation has to come out of that ten to twenty bucks. So it doesn't tell us profit.

[kinnath]

should probably preview before posting

[TrickyVic]

""Crack spread is a term used in the oil industry and futures trading for the differential between the price of crude oil and petroleum products extracted from it - that is, the profit margin that an oil refinery can expect to make by "cracking" crude oil""

That applies to oil refineries. I'm looking for the profit an oil company makes when it sells the oil it extracts. I haven't found any good links. One link claims it costs them $20 a barrel to get the oil. Selling it at $100 doesn't give them $80 profit per barrel since they usually pay royalties, and other costs.

[Paul]

$80 profit per barrel since they usually pay royalties, and other costs.

The Koch brothers don't come cheap.

[R C Dean]

One link claims it costs them $20 a barrel to get the oil.

That sounds low to me. I know that the cost of bringing oil to the surface from a new well is more in the $60 - $70 dollar range.

[Gilbert Martin]

2011 first quarter net income as a percentage of revenue:

Exxon Mobil 9.34%
Microsoft 31.85%
Google 20.97%
Coca Cola 18.07%

Exactly how is that the alleged "profitability" of the oil companies is constantly complained about and nobody says a peep about all the other companies in other industries that are far more profitable than they are?

[TrickyVic]

Sure, and one could argue that they shouldn't get tax breaks either.

[sarcasmic]

They feel that it is immoral to profit off of something that people cannot do without.
It's the same idea as demonizing health insurance profits.
People need to drive. Can't get around it. Unless you are in a metropolitan area and close to everything, you need a car, and you need to buy gas.
It's the same thing with health care. If you don't get health care you could die. They feel it is immoral to profit from health care. That profit represents health care that someone doesn't receive. It's theft. Worse than that it's murder.

This of course ignores basic economics and incentives, but that requires thought. Notice I used the word "feel".

[Gilbert Martin]

It also peddles the absurd idea that others are obligated to arrange their lives and businesses around what these people unilaterally proclaim to be their "needs".

[sarcasmic]

We're all in it together, man.

[JT Florida]

I thought the left wanted gas prices to be high to give the populace greater incentive to move into more dense communities with a lower environmental impact rather than to sprawl out all over the place. The left should be celebrating these high gas prices.

[sarcasmic]

They are outraged at the profits. Not the prices.
What is going to happen if they remove tax breaks raise taxes on oil companies?
Think the prices will drop?
Why do you think they're not issuing any permits?
It's not to cause supply to go up and the price to go down, that's for sure.

[TrickyVic]

""They feel that it is immoral to profit off of something that people cannot do without.""

Yeah, I've had a few conversations where I end up asking what's wrong with making money? Very hard to get them to see the error.

""It's the same idea as demonizing health insurance profits."""

And pharma profits too.

[Fabius]

With your sill "profit margin on a barrel of oil," I assume you mean gross margin (which is meaningless, but whatever). Gross margin for Exxon is 39%, for Chevron is 32% and Conoco is 26%. (Compare to Apple: 39%, Starbucks: 58%, Whole Foods: 35%.)

Net margin is 8%, 10% and 6% for Exxon, Chevron, and Conoco. Compare to Apple, Starbucks, and Whole Foods at 21%, 9%, and 3%.

Taxes as a percentage of operating income (essentially, profit before taxes): 41%, 49%, 40% for the oil companies. Compare to 25%, 34%, and 38% for Apple, Starbucks, and Whole Foods.

[ola]

Are the subsidies just a way of moving the costs of doing business ahead of when they would otherwise be taken as an expense against revenue in future years? If so then the companies taking advantage of those codes are not paying any less in tax ultimately. They are just paying less in tax in a sooner year. They will eventually pay income tax later when they don't have the ability to deduct the expenses they already took in previous years.

[Nick]

That delayed tax payment is not an advantage? OK. You and I start competing businesses today. I get the subsidy and you don't. Let's see who survives.

[ola]

Hey knob, my point is that the government isn't getting any more tax money in the long run, they just are getting it later than they would if the companies could not accelerate the expense. If the stupid congressmen who want to get rid of the tax breaks because of the "obscene" profits were honest, they would just say they want the tax money now instead of waiting for it later on down the road. But the usual demagogues spout their rhetoric and get away with it because the usual jerk off the street isn't paying attention anyway.

[Nick]

Here's an idea. We keep our income. We spend it as we see fit. That is all.

[jacob]

How about a Tax on property rents and little else? Adams said that such a tax has the least negative impact on the economy.

[R C Dean]

Homeowners will not doubt applaud. Renters and commercial property owners, probably not so much.

[Hazel Meade]

How about a tax on interest paid on loans.

[Colonel_Angus]

I am okay with replacing business taxes with higher (flat rate) income taxes, if it would stop this shit.

[Libertard]

The author misses the point, which is that "tax credits" in many cases cause the same devastating economic effects that subsidies do, and they in many cases should be gotten rid of. Ideally, other types of government income should be lowered but this isn't always possible.

See the Boone pickens natural gas bill, ethanol tax credits, etc.

These are not good ideas.

[Mainer]

A. Barton Hinkle Heimer-Schmidt
Hey, that's my name, too
Whenever we.......

oh fuck it.

[Hazel Meade]

Just when I was getting around to telling you people what meanies you all are, and how you're giving him traumatic flashbacks to the 5th grade.

[Paul]

traumatic flashbacks

Unnecessary redundancy. You need only say "flashbacks". The "traumatic" is assumed.

[Hazel Meade]

I like words too much.

[Hazel Meade]

Why don't we all just agree that the oil companies should be paying exactly the same tax rate, without any special deductions and credits, as everyone else.

To the extent these tax break deviate from that baseline, they should be eliminated.

[Paul]

The post essentially argues they are. At least within the context of other large industrial corporations.

But in the bigger picture, absolutely. Level the playing field.

The problem is that a level playing field creates no leverage for power. It's hard to grant political favors when the playing field is level.

[Joe]

This is a silly article. The bottom line is that after accounting for costs and revenues the oil companies get to keep more money than they would if they did not have tax breaks. What if we got rid of the tax breaks and replaced them with subsidies? It would come to the same accounting reality. What angers everyone is that excessive profits are supposed to accrue to people who innovate and come up with big ideas, not to people who know how to hustle and bribe their way into owning vast amounts of mineral rights. Hell, if I owned those rights I would be fabulously wealthy despite my crappy business skills. Libertarians, no doubt, will yell about how all these phat profits are supposed to send a price signal for others to innovate and enter the field in the form of competition. In a perfect world ( a vacuum) this would happen, but most of us like to live in reality and not in our imaginations. Tax break/subsidy, whatever, they are getting wealthy and plowing that money back into the political realm for the sake of maintaining their own power base and distorting the democratic process. They do not merit that kind of wealth, they are just politically positioned to get more money out of our pockets than they should.

[jcalton]

If that were true, then cutting Jones' taxes by $1,000 would raise Smith's taxes by the same amount as well, and cutting all taxes to zero would at the same time raise all taxes to infinity. Garbage.

This is plus and minus, not multiply and divide. Thus, lowering all taxes (except one guy's) to $0 would raise that guy's taxes by $2 Trillion. There's no dividing by zero (which approximates infinity) here because there's no dividing.

Also, comparing tax breaks for oil companies to tax breaks (that may or may not apply) to 3% of Planned Parenthood's procedures is a bit like comparing a billion apples to a million oranges.

[R C Grateful Dead]

Unnecessary redundancy. You need only say "flashbacks". The "traumatic" is assumed.

Sez you.

[R C Grateful Dead]

What angers everyone is that excessive profits are supposed to accrue to people who innovate and come up with big ideas, not to people who know how to hustle and bribe their way into owning vast amounts of mineral rights.

I thought profits were supposed to accrue to those who could figure out how to make their income exceed their expenses.

[Gilbert Martin]

"excessive profits are supposed to accrue to people who innovate and come up with big ideas, not to people who know how to hustle and bribe their way into owning vast amounts of mineral rights."

Just another leftist who thinks he is a better judge than the market in valuing products and services.

[Blammo]

Tax breaks are just indirect subsidies.

Any attempt to describe them as something else is just an exercise in semantics and/or a way to justify subsidizing something (or wanting to engage in some type of social engineering) without having to actually admit to subsidizing something (or having to admit that any government action that financially benefits one action over another is social engineering).

[JT Florida]

"without having to actually admit to subsidizing something"

What you write here is exactly why tax breaks have become so common. You get to reward those who contribute to your campaign, without having to say to other taxpayers that you directly took their money and transferred it to someone else. Of course, you will eventually take from those taxpayers in the future in taxes to pay off that debt you acummulated through the tax breaks.

[overgraduate]

"Tax breaks are just indirect subsidies."

Only under the assumption that the government must take in a certain amount of tax revenue.

If you assume that my income should be fixed at some level higher than it is now, then me not stealing your wallet (a tax break) is the same as my employer giving me a raise (a subsidy).

[Eric Hosemann]

If you believe tax breaks are not subsidies, then you subscribe to something like the mercantilist fallacy. Why should "industry" as a sector get lower taxes to stay here? Why shouldn't it go abroad if doing so means it can produce at lower cost? Why should "industry" be favored over "finance" or "farming" or any other broadly defined sector?

[overgraduate]

You're subscribing to the fallacy that no amount of tax is too much, and therefore anyone paying less taxes than anyone else is receiving a favor.

When the news reports that someone was raped, are you upset for that person or do you wish that everyone else had been raped too?

[martin0641]

Why does it seem that everyone gets all mad when some person feels "entitled" to something, as many do, but when it's a corporation or rich person who is the one feeling entitled to a certain level of profits or growth, they seem to get a pass?

Reminds me of a woman I used to date. I think if I had given her a gold bar, she might have complained that it was too heavy.

[Matt Butt]

Can you not truly see the difference? The first assumes you are demanding something because you feel entitled. The second assumes you keep what what someone freely traded.

[Matt Butt]

Now if you are arguing that the people here believe that businesses should receive a certain profit because of their effort, expenditures, honor, history, greed, etc... then you are sadly mistaken. That would be the equivalent of a subsidy. The other major problem with your post is your confusion of the word entitled. Your first use of the word entitled assumes force. The second, at least in libertarian uses, requires the opposite.

[Francisco d'Anconia]

Article/comments point out the moral hazard of using the tax code to engineer behavior. In my utopia, each man, woman and child would pay an equal share of the federal budget. Such a system would provide a self- regulating effect on the size of government as it would be political suicide to raise that "share" above that which the poor could afford. (Isn't it astounding how paying for only that which you consume, i.e. fairness, naturally produces the best case scenario?)

Utopia aside, I'd settle for a flat percentage of income. If the government can't raise the rate, the only way they can raise more revenue is by encouraging the economy grow.

Both of these ideas eliminate the government's ability to pick winners and losers. (Which is EXACTLY the reason they will NEVER happen.)

[Nils]

Targeted tax breaks are subsidies. This is basic stuff. See Greg Mankiw, Harvard professor of economics (http://www.nytimes.com/2010/11/21/business/economy/21view.html):

"Every time a politician promises a "targeted tax cut," he or she is probably offering up a form of government spending in disguise."

"Pundits on the right, meanwhile, are suspicious of anything that increases government revenue. But they should recognize that tax expenditures are best viewed as a hidden form of spending. If we eliminate tax expenditures and reduce marginal tax rates, as Mr. Bowles and Mr. Simpson propose, we are essentially doing what economic conservatives have long advocated: cutting spending and taxes."

[Dan MD]

One of the cornerstones of "progressive" thinking is the belief that individuals and corporations don't own their resources--the government does. Therefore, a tax break is a "subsidy." You get to keep some of the government's money.

[Small Business Resources]

First of all the Republicans should be ashamed. They are the free market party only when it suits their needs. Yet, when their corporate donors ask for hand outs they give it to them. I also blame the Democrats. They knew they did not have the votes to pass this yet they still brought it to the floor. I would prefer to have our elected officials legislate and not play political games. Now the republicans are going to bring a bill to the floor that would greatly expand offshore drilling. They know it will fail but will use it for political gains.

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[alawrence37]

Do you think preschools like http://www.kidscountry.net/facilities/woodinville/ get a lot of tax breaks? I think they should. All they're doing is teaching kids, you know? Imagine what life would be like without them.