Entitlements and All That Jazz

Entitlements and All That Jazz

"An entitlement is a guarantee of access to benefits based on established rights or by legislation."

--from Wikipedia

"In economics, rent-seeking is an attempt to obtain economic rent [for our purposes, profit. ed.] by manipulating the social and political environment in which economic activities occur, rather than by creating new wealth.

Rent-seeking implies extraction of uncompensated value from others without making any contribution to productivity.

--from Wikipedia

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The United States of Subsidies, a New York Times state-by-state report, December 1, 2012

(www.nytimes.com/interactive/2012/12/01/us/government-incentives.html)

Wisconsin

Wisconsin spends at least 1.53 billion per year on incentive programs, according to the most recent data available. That is, roughly: $268 per capita; 10¢ per dollar of the state budget.

Top incentives by type

1. $957 million in Sales tax refund, exemptions, and other sales tax

discounts.

2. $416 million in Property tax abatement.

3. $107 million in Corporate income tax credit, rebate, or reduction.

Grants to Wisconsin Companies [Top Three of over 600. Ed.]

Mercury Marine Fond du Lac 2011 $65 million in Corporate

tax credit, rebate, or

reduction.

Kohesion Fond du Lac 2012 $62.5 million in Corporate

tax credit, rebate, or

reduction.

Quad Graphics Sussex 2011 $46 million in Corporate

tax credit, rebate, or

reduction.

Tax credits, rebates, incentives, abatements, discounts, all sound like subsidies to me. And they fall under the definition of entitlements (see above) We have a semantics problem here. If money is given to needy individuals, it is an entitlement and thus a subsidy. Something to feared and loathed for it does not produce wealth and promotes indolence and waste. However, if money is given to corporations and companies [corporations and companies are individuals under the law, vide Supreme Court decision, 1879] through our tax system, then it is tax credit, rebate, incentive, abatement, discount, take your pick. Ahh, then do the latter produce wealth and production? Do they foster hard work, diligence, innovation? Could corporations be rent-seekers via the tax codes?

It has been argued that these tax subsidies are necessary to keep corporations and companies in a particular state, else they would move elsewhere. But then this is the crassest form of rent-seeking (see above), a blatant example of taking advantage of political arrangements to extract wealth without investment, growth, or increased production. The question needs to be asked: who is the "maker" and who is the "taker" here?

Texas, that home of Republican orthodoxy and old-fashioned free enterprise, subsidizes its corporations to the tune of 19.1 billion dollars. Capitalism in Wisconsin only costs 1.53 billion.

This problem might be addressed by making the tax credits temporary loans. Each year a tax credit from a previous tax year, ten years ago, would be forgiven. If the corporation wished to move out of state, it would have to re-pay f the subsidies for the previous ten years. If it wished to declare bankruptcy and then move, the law of limited liability would not apply.