Tax incentives — credits and deductions for government-approved economic behaviors — often end up being where liberals and conservatives collaborate toward the passage of bad public policy.
Conservatives support special tax incentives because they’re a way for the conservative politician to claim he or she managed to cut taxes. Liberals like the incentives because they are a nice way to transfer wealth and do a bit of social engineering, too. Both sides of the political spectrum, upon passage of said incentive, get to go back to their constituents and tell how they’ve “helped” meet a certain societal objective. Lawmakers also get to also talk about how they cut taxes, even if by doing so they’ve helped drive up the base tax rate.
Now we are starting to hear a debate take place at both the state and national level about the appropriateness of these political devices. At least two presidential candidates are making “flat taxes” a central theme of their candidacies. Flat taxes are those that are devoid of special interest tax incentives and thus allow people to file their tax returns without much time commitment, accountants or lawyers.
Some reforms are monumental, even if they appear incremental on the surface. Congressman Raul Labrador is co-sponsoring a bill that would repeal tax credits and other incentives for plug-in and hybrid vehicles and alternative energies. The bill would save taxpayers $90 billion over ten years. The measure takes that money and uses it to lower corporate tax rates.
Labrador says the bill “would empower the free market to determine which forms of energy our families and businesses use each and every day” and would “scale back the size and scope of government in hopes of beginning to phase out its influence in our markets and our lives.”
Nice. Now if we can get state lawmakers to follow Labrador’s smartly constructed free-market lead. The draft of a state energy strategy being considered by Idaho lawmakers would support the expansion of an existing tax break “to include additional technologies and extend to Idaho businesses as well as households.”The draft plan recommends that the tax deduction cover “specific types of renewable energy equipment used to produce electricity or to provide fuel for heating or propulsion of vehicles.”
The plan also calls for lawmakers to adopt a new income and sales tax breaks for Idahoans who might buy hybrid and flex fuel vehicles.
Such government interference in the free market requires that some taxpayers subsidize the economic choices of other taxpayers or industry groups. If renewable energy equipment or fuel makes sense, the government wouldn’t have to incentivize its use.
It so happens that I drive a Prius. The government shouldn’t force my neighbor to pay for my purchase decision. Nor should my neighbor be forced to subsidize new insulation for my attic, which is how Idaho’s tax code is structured today.
If a new car, a new house or new energy products are good choices for consumers, then consumers should make those decisions without government intervention in those purchase decisions. Tax breaks that penalize what the government deems “bad” behaviors and reward the government’s “preferred” actions have no place in either state or federal tax codes.