I was struck by the contrast between a posting in the topic on tax ceilings and another posting in aother topic. The first posting attacked the idea of a 60% tax bracket for the very wealthy, arguing that this was confiscatory. Our correspondent noted that it was certainly legal to do so, but appealed to human decency, asking "Please, do not steal."

In the other topic, it was noted that some unknown Congressman with a great deal of power had somehow slipped into the appropriations bill a rider that amounted to a giveaway of about a billion dollars to companies in the home district of -- wait for it -- Speaker of the House Tom Delay! The poster raised questions about the legality of this action, because it was taken AFTER official discussions of the appropriations bill had been concluded. However, another correspondent noted that there were complicated legal considerations that made it all perfectly legal. Well and good, I thought -- but did anybody ever think that this might be wrong even if it is legal? After all, spending the taxpayers' money to enrich the friends of the Speaker of the House doesn't quite seem like the most stand-up course of action, does it? Yet we all know that this kind of thing is done all the time. Billions of dollars in subsidies go out to large companies with big campaign contribution checks to fill out.

So here in this topic we see one person admitting that it's perfectly legal to tax millionaires, but human decency forbids it. In another topic, we see a different person defending the giving away of billions of dollars because it's all perfectly legal, without raising any issues of human decency. Of course, these were two different people, but I was still struck by the contrast. It seems to me that there's something of a double standard in this country. When it comes to taxation, we talk liberty and freedom and why the government should not single out any particular group for special treatment. But when it comes to expenditure, we look the other way when Congresscritters hand out billions in subsidies to various moneyed interests. It seems to me that, if we want to be consistent, we should object to special-case subsidies just as vociferously as we object to special case taxes. So I present the question to the readership:

Is it hypocritical to condemn progressive taxation without also condemning subsidies to any special interests?

In the hypothetical situation you suggest, I think everybody has to say "yes." But I don't think it applies at all to the good folks here at .

The problem is that this is a one-sided question. I'm sure that all of us here are against "subsidies to special interests" (while being aware that it goes on all the time, and that it will never go away), and I'm sure that some of us are for progressive taxation and some are not. The difficulty arises when you try to figure out what is a special interest, and what is an important need. For each slice of pork, there is someone ready to defend it as kosher.

I agree with Victoria about this question. It is rather one-sided and as one of the "correspondents" involved in the thread referenced, there are some corrections that should be made to the characterization of that thread.

First of all, Tom DeLay is not the Speaker of the House, he is rather the Majority Leader. Dennis Hastert is the Speaker. Secondly, the item in the Energy bill raised by that other thread was an item that was agreed to by the Chairmen and ranking members of both the Senate and House Energy committees, none of whom by the way are Tom DeLay. Also, the questions in that thread had nothing to do with whether or not the practice outlined was a good practice or not, only whether or not it was legal and/or ethical. As I pointed out, the original complaint cited in the opening post to that thread cited a letter by Waxman that was in effect retracted by Waxman in his follow-up letter the next day.

I haven't read the section cited in the Energy Bill specifically, but based on the characterizations of it I would call it an R&D section. Now, if one wishes to characterize expenditures for R&D as "subsidies", that's fine. However, that would also make government funding of such things as studies on global warming, cancer research, stem cell research and countless other things also "subsidies". One must question whether people really want to head down that slippery slope.

Regardless of what the responses were on this or that thread, or a slip up of who is speaker of the house etc- the question was-

Is it hypocritical to condemn progressive taxation without also condemning subsidies to any special interests?

Especially since subsidies rarely go to your over-burdened middle income tax payer eh?

I think every single subsidy that does not go to a person with a personal net worth of under 2 million dollars should be taxed exclusively to those that have a net worth of over 20 million dollars.

They might feel a little different about those subsidies then LOL

So yeah, I think it is hypocritical in the extreme.

Victoria, you're quite right that the wording is off. I shall therefore hone the question to be more precise:

Is it hypocritical to condemn progressive taxation without also condemning Congressionally mandated payments or tax breaks to any non-governmental entity other than a non-profit corporation?

The thrust of the question is, if we want to be absolutely even-handed in the way we take money away, should we not also be absolutely even-handed in the way we give money out?



There's no slippery slope here. Confine R&D money to non-profit research outfits such as universities. And I'm sorry if I offended you by referring to your post; you certainly seem to have taken umbrage at some of my inaccuracies. But my intent was certainly not to offend, as I made it clear that there was no hypocrisy involved inasmuch as the views came from two different people.

Let me respond to the corrected question.

I don't really see this as hypocrisy, as much as two separate issues that seem somewhat related. In a similar way, it has often been said that somebody who opposes the death penalty under all circumstances, but who supports making abortion legal under some circumstances, is a hypocrite. (I have deliberately chosen my own opinions on these issues as an example.) My defense would be that these are two very different issues, although they may seem similar.

I can certainly see that somebody could sincerely oppose progressive taxes on the basis of "fairness" while also supporting some subsidies and tax breaks to particular private businesses on that basis that appropriate use of these would be good for the economy in general. It is also possible, of course, for somebody to take both of these positions because it would line her pockets. I don't think we should jump to this conclusion, however.

For the record, I think that taxes should be progressive to some extent, and that some government subsidies and tax breaks are appropriate under certain very limited conditions. I'm no fan of corporate welfare at all, and there are clearly many blatant examples of pure pork in the US budget, but I would not oppose such policies under all circumstances.

Is it hypocritical to condemn progressive taxation without also condemning Congressionally mandated payments or tax breaks to any non-governmental entity other than a non-profit corporation?

Of course not. There are perfectly legitimate government expenditures. The government should utilize the company where they receive the maximum combination of quality and economy while favoring US companies. Not too many non-profit companies building military equipment.

I assume that you agree that contracts should be made by the appropriate agency, not Congress, and under an open-bid system, rather than simply written into law as was the case here?

I'm not so sure that there was any contract written into law in this case. I would agree with you though that any new contracts should be awarded by the appropriate agency.

I checked into the bill in question based on Waxman's letter. He references HR. 6
and you can get the enrolled bill here. It's a PDF file and 1273 pages long. I did a text search on the bill for the word "Halliburton" and came up empty. However, I would direct attention to Waxman's first letter which is a PDF file here.

In that letter Waxman references a provision that requires the Department of Energy to "contract with a corporation that is constructed as a consortium". It doesn't name Halliburton. Waxman's letter names Halliburton as a member of a consortium that he considers to be the leading contender for this contract.

No kidding? One of the largest oil drilling, exploration and services companies in the world might be a member of a group of companies competing for an energy contract on advanced recovery techniques?

OK, I confess: I'm too lazy to plough through a 1200-page pdf to resolve this matter. I will observe that Waxman's letter claims that the bulk of the money will go to a particular consortium, but also admits that this consortion is only the "leading contender" for the contract. Thus, we are left nothing solid to convict anybody on. Apparently, the contract will go out for bids; apparently, everybody already knows who's going to win the bidding. We could try to blame this uncompetitive situation on venal legislators circumventing the honest bidding process, or we could try to blame it on a noncompetitive industry, but in neither case would we have a solid foundation for blame. In any case, I'm sure you'll agree, this situation stinks.

I too have no desire to wade through 1200 pages of legislation. They count on that I think with some of these massive bills. And with regards to the situation, if you mean the process, you're right. It has the stench of rotting pork built into it. Over on the other thread we've kind of touched on this sort of thing and frankly, short of a Constitutional Amendment authorizing a line item veto, I'm not sure quite what to do about it.

I've been thinking about this for a while and I have a proposal which may reduce pork, i.e. problematic subsidies.

My proposal: modify the tax system so that the federal government may only tax state governments. That is, the federal government would be disallowed from taxing individuals or corporations directly. This would give more control to states to spend the money they get via revenues and avoid the "rebate" system we currently have.

But, to the main question:

Is it hypocritical to condemn progressive taxation without also condemning Congressionally mandated payments or tax breaks to any non-governmental entity other than a non-profit corporation?

If the reason one is against progressive taxation is "singling out", then yes it is hypocritical to be in favor of subsidies which "single out" too. I suppose one could be against taxation in all forms in which case being in favor of subsidies isn't necessarily hypocritical.

So, you are against bringing business into an area, thereby employing perhaps thousands of people? You would prefer these people then had lower-paying jobs, or perhaps even no jobs at all? Has it ever occurred to those against these 'hand-outs' that you never, ever hear complaints from the people that get jobs because of them? Why are the people in the communities that are having money pumped into them from these businesses not up in arms? In short, why is it only those people who are essentially unaffected by these things the only ones that complain? Isn't that a bit hypocritical itself?

Is it hypocritical to condemn progressive taxation without also condemning Congressionally mandated payments or tax breaks to any non-governmental entity other than a non-profit corporation?


No, it's an apples and oranges comparison. The vast majority of the tax breaks mentioned are done to encourage business. Business employs people. So, unless you're against the people getting employed by these businesses, there really isn't anything to complain about. It produces wealth that benefits all those in the area. It baffles me why those who supposedly care most about 'middle America' want to drag down all those who benefit from these tax breaks...and all so that they can pay more themselves in taxes. It just doesn't make any sense....

In general, the argument about subsidizing business to make jobs is a crock. Business can't function without employees; they have to hire somebody. The only thing that local tax breaks do is steal jobs from one area and transfer them to another area. There's no net gain for society.

Now, when we look at the issue from the viewpoint of society as a whole, it is true that anything that dampens economic activity reduces jobs. Almost any government intervention in the economy will reduce jobs. For example, consider the income tax. By taking money out of the pockets of taxpayers and using it to hire people for government work, we produce a net loss of jobs because the government activities will never be as efficient as the market. A billion dollars in people's pockets might produce 20,000 jobs, but the same billion dollars taken from the people and spent by the government will likely yield only, say, 19,000 jobs -- because the government can never match the economic efficiency of the marketplace.

Subsidies in the form of tax breaks simply distort the marketplace. The government intervention results in greater economic activity in one market sector, and necessarily less economic activity in a sector that the market thinks is more important. The net result is always a net reduction in overall economic output.


What doesn't make sense is distorting the economy for the benefit of a small group. (Well, I suppose it makes perfect political sense if you're a Congresscritter and you get campaign contributions from the party that gains -- but I'm talking about what's best for the people as a whole.)

Here's the classic example: in State Congressional District #12, there are a lot of almond growers. They are getting clobbered by imports, so they ask their Congresscritter for a tariff. The Congresscritter, realizing that he gets more campaign contributions from local almond growers than from national almond buyers, uses his influence to get the tariff. Now the price of almonds paid by consumers goes up by, say, $50 million over the entire country. Of course, half of the almonds are coming from outside the country, so the foreigners get half of the higher price. This leaves a $25 million benefit for the almond growers (of which maybe half a million gets kicked back to the Congresscritter.) Thus, the growers gain $24.5 million. However, the American people as a whole lose $50 million in extra costs for almonds. This is a simple example of how special treatment of industry works to the detriment of society at large.

Ah, but wait! you say. What about all those extra jobs created by the money that keeps the almond industry alive? Well, yes, that money does create jobs. Let's say that it creates jobs at the convenient figure of one job for every $24,500. That means that this extra 24.5 million creates 1,000 additional jobs. Hooray for subsidies! But wait -- don't forget the $50 million we took out of the people's pockets in higher almond prices. If they had kept that $50 million, they wouldn't have stuffed it under their pillows -- they would have spent it on things. Assuming the same price for creating a job ($24,500), then that extra $50 million would have created more than 2,000 jobs. In other words, the subsidy reduced overall jobs by over 1,000 jobs. Boo on subsidies!

The moral here is simple: you can't mess with Mother Marketplace. You try to twist her around, and all you accomplish is a net loss.

Also Erasmussimo, don't forget what the result of the tariff on almonds is. Higher almond prices for the consumer. So not only is the middle class schlepp paying more taxes to fund the pork, but they are paying more at the marketplace for the goods they need to survive. Consumers buy less almonds so the entire almond industry is competing for smaller potential profits. How do you increase profits? We see it time and again...get the work force and work the people you twice as hard.

Is it hypocritical to condemn progressive taxation without also condemning subsidies to any special interests?

Toughy. First instinct is that it is hypocritical, but I understand why it happens. Income tax rates change fairly regularly. Rules on pork spending haven't changed, and that creates a feeling that we are powerless over it.

This depends on how you define 'society'. It must be kept in mind that there's nothing that says that said business needs to stay in our society at all, so if they can get a subsidy from somewhere else that enables them to be more competetive, then they're going to do it, and those jobs indeed are lost. From the microperspective, local government is going to define society as its locale, so again if that business locates somewhere else, then also those jobs were lost to that society. Which, of course, is why local governments do offer these breaks in the first place, and the local community that benefits from it (and also pays for the tax break) doesn't complain about it, since there was indeed a net gain for that community.




Not necessarily, although I'm certainly all for taking government out of the equation. Government can incent businesses in certain areas that then spur other business, creating an overall net gain in business, employement, taxes...win, win, win. Further, consider that the same applies whenever government gets involved in anything...it creates a distortion in the marketplace and a net reduction in overall economic output. So, this is really an argument for a minimalist federal goverment strategy, which I would have to agree wholeheartedly with.



Again, this depends on who is supplying the incentive. Frequently, the tax incentives are provided by the location where the business is going. For that area, the entire economy will usually benefit, creating a net gain for everyone.



Now, for those instances where this is pure pork being applied by said Congresscritter, then I am in agreement. I'll dig the pit, you fire up the coals, and we can have a good pig roast.



Preaching to the choir! Yes, I am in full agreement. These decisions are almost always made for political benefit, not economic...the economic 'benefits' usually cited completely ignore the costs you have stated. The sad thing is that the very people (consumers) who end up paying for this remain ignorant to the fact that they're bearing the cost. Also, I would add that, in the end, the subsidies remove the incentive to become competetive, so the jobs eventually end up lost anyway. So, consumers end up paying for nothing (unless you consider the votes gained by the supposedly sympathic Congresscritter).

In short, then, it seems like we probably need to separate 'pork' from local business tax incentives. I think a good economic argument can be made for the latter, whereas the sole purpose for the former is generally buying votes or political favor. So, think of that as involuntary campaign contributions....not sure most people would be in favor of that at all.

It sounds to me like you were listening to Walter E. Williams the other day on the radio. He made this EXACT argument (although he didn't use almonds, he used candy I think).

Is it hypocritical to condemn progressive taxation without also condemning subsidies to any special interests?

I don't think so. Do proponents of progressive taxation(not just progressive, confiscatory levels of progressive taxation) also decry government subsidies from agencies such as the National Science Foundation, which gives out billions each year to over 10,000 recipients each year? Does the fact that many such grants go to individual recipients (inventors and scientists) who have pretty cushy teaching and engineering jobs make any difference? I don't know, but I personally can't complain since I could (and probably should) apply for such grant money.

These two ideas are separate, but I will grant that they are connected. The fact that one is against confiscatory tax rates on a minority in this country does not mean that you are against the government giving money to those who have good ideas and create jobs.

OK, I can agree that local communities have an interest in providing incentives for businesses to locate there. If we think of it as a marketplace of communities, all bidding for the business to locate in them, then I suppose that it is an effective mechanism. So yes, I'll agree that subsides work at the local level. And I think we agree that they don't work at the national level.


If that were true, then why wouldn't a startup company address that need directly, create the product that spurs other businesses, etc etc? I agree that there is a level of abstraction or indirection in investment where the marketplace fails to function properly, and that is research: the creation of information that is too abstract to directly yield products, and which is widely dispersed as part of the research program. I therefore conclude that government funding of research is a Good Thing. Note also that research benefits all companies equally because it's public information.


I have never heard of Walter E. Williams, but I can't claim any authorship of the example, as it appears in most econ textbooks and was pushed hard by Milton Friedman.

Again, I'll point out that research grants are good for society as a whole. And I'm not sure that it's correct to say that these grants go to individuals. Yes, there are principal investigators, and yes, some of that money will eventually end up in the pockets of individuals, but almost all the time these things are administered by the research institution. Legally, the recipient is almost always an institution, not an individual. This is a fine point, to be sure, but surely you will agree that such grants are entirely different from, say, the subsidies that go to particular industries.

With perhaps a very few exceptions, as per the example below, yes, I would agree.



This would apply solely in situations in which the benefit accrues not to the provider of the good, but to the economy in general. Consider the potential benefits of rolling out nationwide high speed Internet access and wireless access. This would likely spur incredible development of products that would take advantage of this pipeline...but potentially have almost no direct benefit to the provider of the bandwidth, since it would have to be free or close to it for the product development to be encouraged. The government would get a net benefit from rolling this out, since it would accrue additional tax revenues from the spin-off products. But it would very difficult for any individual company to reap the rewards of doing this. Very similar to the buildout of our nations railways...without incentives, no company would have done this, yet the benefits to the economy as a whole were worthwhile. For anything less than this specific scenario, then I am indeed against the multitude of pork which infests nearly every spending bill. However, I will grant that circumstances such as that described are few and far between: your inclusion of research and development funding would cover the majority of other circumstances, and I agree with that.