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TAX POLICY BLOG WHIPLASH: TARGETED TAX BREAKS ARE HARMFUL AND NECESSARY?

September 23, 2005

One of the enjoyable aspects of reading group blogs is when two authors make posts at cross purposes. It happened yesterday at the Tax Policy Blog.

Andrew Chamberlain posted a nice piece that makes a persuasive case of how targeted tax breaks, however well-intended, increase rates for everyone by narrowing the income base subject to tax:

tf922chart.jpg
(Source: Tax Policy Blog)

Later in the day his co-blogger Chris Atkins placed a post on the importance of targeted tax breaks to Katrina recovery. He argued that the Sixth Circuit's Cuno decision to limit corporate welfare targeted tax breaks would tie the hands of states in recovering from disaster.

I'm no lawyer, and perhaps Mr. Atkins is correct when he says that Cuno is incorrect as a matter of law. As a matter of policy, though, Cuno's assault against targeted tax breaks is well-supported by Mr. Chamberlain's post. All of the targeted tax credits in the world won't make investment in Louisiana (top rates: 6% personal, 8% corporate) competitive with neighboring Texas (top rates: 0% personal, 4.5% corporate "franchise" tax). Louisiana would do a lot better with low rates for everyone than with tax subsidies for those with good connections to their super-competent state government.

LINK: All Tax Update Cuno coverage

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