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NYT: Tax incentives to businesses fail to produce net gains

Yet across the country, companies have been doing just that. And the giveaways are adding up to a gigantic bill for taxpayers.

A Times investigation has examined and tallied thousands of local incentives granted nationwide and has found that states, counties and cities are giving up more than $80 billion each year to companies. The beneficiaries come from virtually every corner of the corporate world, encompassing oil and coal conglomerates, technology and entertainment companies, banks and big-box retail chains.

The Times seems to be on the edge of a discovery that libertarians and other fiscal conservatives had known for years: a “beggar thy neighbor” approach to tax incentives accomplishes no good, achieves no permanent goals. But the paper misses the real lesson, even as it reports it:

In a few states, the cost of incentives is not significant. But several of them have low business taxes — or none at all — which can save companies even more money than tax credits.

See if you can grasp the concept that eludes the Times: states with lower corporate taxes can attract businesses without the use of special tax breaks. Certainly our own governor and legislature can’t grasp that idea* but then, as the article points out, this is all about politics, the desire of politicians to look as though they’re bringing jobs to their state and city.

And it’s about power: if you let everyone keep more of their money, you lose the ability to reward your friends and punish your enemies, and what’s the point of that? This may shock you, but politicians aren’t in the game because of their great love of humanity – the day of the gentleman farmer reluctantly heading to the new capital to volunteer his services for a short time are over, if they ever existed at all. We have a professional class of politicians now and they have no intention of returning to the fields, ever.

* According to this WSJ article, Malloy has increased these taxpayer giveaways 70% during his tenure.

When policies collide

Congress may, or may not, extend tax break for struggling homeowners. Until 2007, the IRS treated as income any debt forgiven in a short sale (but not, just to confuse matters, debt forgiven on an earlier “cash-out refinancing”). Pretty tough to pay tax on “income” you don’t have, so the other branch of our government gave the debtors a break and declared that a debt forgiveness didn’t count. That seems wise, but in the liberal interpretation of deductions, every dollar held by every American rightfully belongs to the government, so any deduction is counted as a tax break and a cost to the Treasury – hence, this tax loophole which, again employing he terminology of the regressives, is costing $1.3 billion, money that could otherwise be controlled and distributed to friends of Obama.

So what to do? One branch of the government is trying to ease the mortgage mess by paying banks $0.63 on the dollar to write off debt, the other, acting on the regressive’s concept of tax deductions, wants to capture that money by taxing it. Cross-purposes? Our government? Say it ain’t so.

* One could certainly make an argument against this tax forgiveness: a conscientious couple who settle for a $350,000 house because that’s all they can afford may be a little annoyed to see a friend buy a house for $700,000 and, after writing off the debt, continue living in a house twice as nice as theirs at no extra cost whatsoever. Another friend might have refinanced his house back when times were good, taken $250,000 in the proceeds and spent it as he pleased: Disney World vacation, new Mercedes, whatever, and, with debt forgiveness and no tax liability, make himself look like a genius and the good citizens look like chumps. Fairness to the fiscally prudent and punishment for the profligate, however, has never been part of the liberal agenda so we need no concern ourselves with that here.

Christmas festival in Cos Cob a hit

Cos Cob Nativity scene

Everyone turned out for the first annual Christmas Party – Pub Crawl in Cos Cob Saturday night and a good time was had by all. The highlight was the awarding of the “Best Decorated Home” winner, selected and judged by Freddie “Argyle” Camilo. “We went for the traditional look”, Camillo explained to FWIW, “something that captured both the spirit of Christmas and the essence of Cos Cob. This home, and particularly the snow blower figurine, does that perfectly.”