10 Dec 2016

An Interesting Combination of Positions in the Carrier Debate

Libertarianism, Trade, Trump 72 Comments

I don’t want to make too much of this, and I’m not even saying there is an outright contradiction here. I’ll succinctly state the interesting combination in the form of a script, loosely based on actual events that I observed firsthand on social media.

TRUMP SUPPORTERS: You idiot libertarians need to drop your faith in free trade. US manufacturers can’t compete when foreign governments subsidize their exporters through special tax rebates and looser regulations. If we had a level playing field, where foreign companies faced the same taxes and regulations that US companies did, then American workers would come out on top.

LIBERTARIANS: Ha ha, you’re afraid of “dumping”? What a loaded term. Uh, if goods come in more cheaply, that only *helps* Americans. Sure, it might throw particular US manufacturing companies out of business, but the country as a whole benefits because of the gains to consumers. Haven’t you read Bastiat? Are you mad about the “unfair” competition from the sun? Do you even econ, bro?

BOB MURPHY ON CARRIER DEAL: It’s not the tax cut I would’ve proposed, but from a purely ethical perspective, this is reducing a firm’s taxes and in that sense reduces injustice.

LIBERTARIANS: That’s not the issue here Murphy. The issue is providing a level playing field. How are other US manufacturers supposed to compete when Carrier is getting special tax rebates and regulatory relief? How obtuse can you be to not see this?

72 Responses to “An Interesting Combination of Positions in the Carrier Debate”

  1. Darien says:

    Just for clarity: are the libertarians in paragraphs two and four the same actual individuals?

  2. Mark Thomson says:

    If I read you correctly, you’re saying that giving one company preferential tax treatment represents a net reduction in injustice, purely because tax is necessarily unjust.

    Two thoughts:

    1. Doesn’t that assume that there is only a single moral issue in play here? Is that in fact what you believe?

    2. If actual government spending is unchanged, doesn’t the reduction for one party necessarily represent an increase for someone else? Can you still argue there’s been a reduction in injustice?

    • Jan Masek says:

      2. Dr Murphy addresses this point in the podcast. In short: not necessarily. Lowering taxes for one and increasing taxes for another one to make up for the fall are two different steps, you can applaud the former and condemn the latter.

  3. Jan Masek says:

    It seems that some libertarians won’t support any tax cut unless all taxes are abolished, because “level playing field”. E.g Breaking Bad was filmed in New Mexico because of state tax credits, it was originally meant to be filmed in Riverside, CA. I’ve seen people argue that’s bad because the state picks and chooses the film industry in favour of others.
    All taxes are necessarily not a level playing field, so reducing some, any taxes means we’re a little closer to being level.

  4. Jan Masek says:

    That said, I can’t always distinguish between tax credits and subsidies. In my simple mind credits good, subsidies bad. But sometimes the state gives technically a subsidy which cancels out with the tax paid so essentially the same thing as a credit. So I can’t always see the difference.

  5. David R. Henderson says:

    Bob, These are tough issues and I don’t think the resolution is clear. Do you favor all tax cuts, no matter how discriminatory?

    • Jan Masek says:

      A: a 10% tax increase on Joe the Barber. B: a 10% tax increase on everybody. Do you favour B on the grounds it’s not discriminatory?

    • Dan says:

      Why can’t we applaud the tax cut and oppose the discrimination at the same time? If some SJW were president and said they were going to eliminate taxes for all black people and for businesses owned by black people, are we supposed to oppose that? I’d favor it and I’d demand we all get that same treatment. It seems extremely shortsighted to oppose a good thing when coupled with a bad thing, when we can simply explain what we like and don’t like about it.

    • Craw says:

      I gave a clear example on another thread. Congress exempted themselves and their staff from Obamacare. If you oppose Obamacare, must you applaud this exemption?

      • Dan says:

        No, you don’t have to applaud criminals exempting themselves from their crimes. But I still don’t go around saying politicians should be forced to buy health insurance anymore than anyone else. I say it is a good thing that politicians aren’t forced into Obamacare for the same reason nobody should be forced into it. I’d also use that fact to demonstrate how they see themselves as our masters and nothing like this silly notion that they are mearly our servants.

        You might be asking the wrong person, though, because I don’t even think people working for the state should pay income taxes. One, because I oppose all taxes. Two, because it distorts the reality that these people are living at our expense. That they only “earn” what they take from us. It’s stupid to pay someone with taxes and then have them give some back in taxes. Makes no sense.

        • Craw says:

          The ability to exempt a favored few, such as the UAW, was part and parcel of the ability to inflict the law in the first place. It is not sensible to separate them. Free train travel for Jews to Poland was not a nice thing the Nazis did for Jews.

          • Dan says:

            Yeah, and I don’t favor Obamacare, but not because of the exemptions. Exemptions from Obamacare are good.

            If Trump said he was going to raise taxes on everyone except for a select few, I’d oppose that, but not because of the exceptions. I’d oppose it because it increased rights violations on everyone that saw their taxes go up.

            If Trump said he was going to lower taxes for only a select few, I’d support that because it reduces rights violations without introducing any other rights violation.

            • Craw says:

              Two new proposals.

              Plan A. Give everyone $100, and tax everyone $100.

              Plan B
              Give everyone $100. Tax only black people $100.

              By your reckoning B is better?

              You don’t see a rights violation in giving people $13 instead of $100, as they have no right to the $100, so we can adjust the amounts to make the cash flow balance. I understand you think both plans bad, but your argument implies that plan A is worse.

              • Tel says:

                Plan A really has nett tax of zero, which is something of a libertarian optima. So Plan A is hard to beat.

                I mean maybe the evil State is secretly taxing the entire contents of my bank account once every millisecond and then putting it all back again immediately after… I do sometimes lay awake worrying at night, but that particular problem hasn’t been high on my list of concerns.

              • Dan says:

                What part of either plan am I supposed to like? The subsidies or the taxes?

                Look, I get what you are trying to come up with, and I already said in another spot that it’s difficult to determine whether a plan is net good or not if it increases some rights violations while decreasing others. I don’t really care about those plans. I don’t feel a need to take a position on them as a whole. I just say what I like and don’t like from them and call it a day. I don’t vote or even think looking to the state for answers is an effective strategy, so I don’t see a lot of value in analysing their crazy schemes as a whole when I can just have an opinion on it in pieces.

                Now if you want to know if I’d support a tax cut for only white males? Yes, I would. I’d support one for only black males, or only women, etc. I’d support a tax cut for only the top 1%. I’d support one for only my neighbor. I’d support one for only racists. I’d support one for only non-racists. If the plan simply reduces rights violations without adding any new ones then I support it whether it is based on race, sex, sexual orientations, height, etc.

              • Dan says:

                What if Trump said tomorrow that he was going to eliminate all taxes for black people and businesses owned by black people. Are you telling me you’d not support that because it was discriminatory?

    • Major.Freedom says:

      All actions are “discriminatory.” Even if every taxpayer’s taxes were cut, those who don’t pay taxes will not directly be a part of the reduction in harm. They’ll see others benefit from a state action, and could ask why can’t the state reduce a regulation or two against them?

      If we can support any partial reduction in rape or murder, should the “discriminatory” aspect of it really ever be a means to pause and reverse course? Heck no. Same thing with taxation. Yes it probably would not feel very good if my neighbor started to pay fewer or zero property taxes whereas I continued to pay the same. But the injustice is on the property tax, not that someone in the neighborhood is paying fewer or no taxes.

      We ought never become divisive over the spread of mutual peace and productivity no matter how long it takes before you yourself experience more of it. We should feel happy for people who justifiably experience less aggression.

      • Tel says:

        The danger is that the decision makers get to exempt themselves from the consequences of making a stupid decision.

        If we can support any partial reduction in rape or murder, should the “discriminatory” aspect of it really ever be a means to pause and reverse course? Heck no.

        For example if a dictator insists that the entire population is disarmed, EXCEPT he gets to spend a lot of tax money on an excellent and very well armed security force just for himself and his family, then the consequence is that a small handful of people are protected from rape and murder… but no one else is.

        Hypothetically, if the same dictator found that his own security guards also refused to carry weapons when the rest of the country had been disarmed then this would at least make the dictator think about the wisdom of that decision. Admittedly, it’s very unlikely to ever happen but at least you can point out the rank hypocrisy of Obama sending other people’s innocent children into “gun free zones” while maintaining fully armed security for his own family.

        You have this “skin in the game” effect on the decision makers.

    • Andrew_FL says:

      I think that’s the standard Rothbardian view-loopholes, exceptions, special carve outs that over all reduce the amount of tax *anyone* pays are *always* a good thing.

    • Bob Murphy says:

      David R. Henderson wrote:

      Bob, These are tough issues and I don’t think the resolution is clear. Do you favor all tax cuts, no matter how discriminatory?

      I’m going to do a follow-up post to try to frame the issue more clearly. My intent isn’t to tell people what the answer is, but rather to make sure they are holding consistent principles across various scenarios.

      Your question to me is tough, because as a pacifist I don’t favor any taxes, period. So it’s weird for me to say I would oppose a particular tax cut, but on the other hand usually in this situations we have ground rules like, “Given that the government has to have *some* revenue…”

      I am pretty sure it’s right to say that the only major problem I see with “discriminatory” tax cuts is that they might lead to tax hikes on other people (perhaps down the road). So if I am allowed to say I oppose those counterbalancing tax hikes, then yes I think I support all tax cuts in principle.

      • David R. Henderson says:

        Someone proposes a tax cut for white people but no one else. Do you favor it?

        • Andrew Keen says:

          Ah, the old race card. Never gets old.

          • Craw says:

            No, it’s not the race card. DRH is not trying to imply Murphy is racist. He is looking at an admittedly extreme example of an implication from an argument, in order to assess that argument.


            Why the extreme example? Clarity.

            • Andrew Keen says:

              I’m not saying it’s a bad argument, but it’s totally the race card. DRH is trying to scare Bob off his spot by making him defend it against accusations of racism. The fact that the proposed tax is thoroughly unrealistic didn’t give him a moment’s hesitation.

              I would find it very interesting to see Bob respond. Clearly, Bob needs to respond in the affirmative if he wants to be consistent. I don’t see how he can do that without resorting to Dan’s style of argumentative gymnastics. The best argument I can come up with is “I’d support it on principle, but I wouldn’t feel good about it.”

              Luckily, I don’t share Dan and Bob’s stance on this matter, so I don’t have to defend it.

              • Dan says:

                It doesn’t take mental gymnastics to answer that question. I’d support that tax cut for the same reason I’d support one that said only black people get a tax cut, or only liberals, or only women, or only people not named Dan.

                Obviously, if it was only white people then people would automatically assume I support it because I’m racist, but that’s their problem, not mine. I’d support it because it is a good thing to reduce theft. Lowering taxes for white people would reduce theft and it wouldn’t add any new rights violations.

                Let me ask you this, if you could end cancer, but only for white people, would you do it? If so, would you feel any need to apologise for that view? Because I’d end it without a second thought and tell anyone who questioned my motives to eff off.

              • Harold says:

                It seems very fair not to deny some group a benefit just because not every group can share it. But to borrow from Rawls, it makes a difference if we don’t know which group will benefit. We can all support a tax cut for maybe blacks, or maybe whites, or maybe men or maybe women on the nderstanding that any particular group could in principle be the beneficiaries. When we get an actual proposal the situation might be different.

                For example, what if the tax cut was for white men only, and the stated aim of the tax cut was to give white men greater power and control and to marginalize blacks and women?

                As per my comment below, there are external costs and distortions that may cost others more than the savings in tax.

              • Dan says:

                I think I’ve been pretty clear that I support tax cuts as a matter of principle. That’d obviously be an awful and idiotic way to present a plan to cut taxes, but if some racist douchebags lowered taxes for stupid reasons, I’d still support the lower taxes. I, along with nearly every white person alive, would just not share the same goals with our extra money.

                Let me ask you, if the head of the KKK developed a cure for cancer, but it only worked on white people per his design, and he said he created it to empower whites and marginalise minorities and women, would you oppose the cure?

              • Andrew Keen says:

                I agree with Dan that the stated goal of a policy doesn’t matter. The actual effect is what matters.

                I also agree that I would support a cure for cancer even if it only worked for one race.

                But I don’t believe that taxes are an evil on the same level as cancer. I believe that the civil strife that would be caused by reducing taxes only on whites would outweigh the benefits of lower amounts of coercion/confiscation in aggregate.

              • Dan says:

                “But I don’t believe that taxes are an evil on the same level as cancer. I believe that the civil strife that would be caused by reducing taxes only on whites would outweigh the benefits of lower amounts of coercion/confiscation in aggregate.”

                You don’t think the KKK curing cancer only for white people would cause civil strife? I can’t see how either of those fantasy scenarios would result in minorities and women reacting differently.

              • Harold says:

                Interesting question Dan. I guess I would support the use of the white cancer cure. So we can both foresee situations we would implement such things.

                The difference between them is the spillover effects, so I agree with Andrew Keen that the actual outcome is what matters.

                However, the actual outcome on terms of spillover effects of Government implementing openly racist laws I argue is greater than the spillover effects of implementing under sufferance a racist cure for cancer.

                What the Government does is important, in part because if they are not seen to be treating some groups fairly you might end up with Trump as president.

              • Craw says:

                The analogy though is, would you cure cancer for one group by inflicting it on another. With taxes we are looking at a situation where the legislature could reduce taxes for everyone but instead decides to use differential taxes to favor some at the expense of others. It is inherently a package deal.

              • Harold says:

                Yes Craw, there is a difference between something we set up and something we just have to live with. The Govt in the cancer situation has no choice in the matter – they are presented with a cure that only works on whites. We would of course condemn the KKK for developing this deliberately. The Govt in the latter case does have a choice, so we would condemn the Govt for choosing that plan.

                We might conclude that the moral hazard of accepting the Govt plan in the tax case was too great and we should reject such a plan.

        • Dan says:

          David, I did a cursory search and saw an article claiming that 80+% of taxpayers are white (article was from 2004). Leaving aside the race issue, what kind of impact do you think it would have on the economy if we gave 80% of tax payers say a 10% tax cut?

          • Andrew Keen says:

            It would probably be good if you assume that the 60% of the population that isn’t part of the tax cut doesn’t burn everything down.

            • Dan says:

              Granted, I’m sure there would be a ton of anger over a stupid proposal to lower taxes solely for white people, but where are you coming up with those numbers? White people make up nearly 80% of the population in the US.

  6. Transformer says:


    If Trump one day says “If you vote ‘yes’ in the “Trump for life” referendum you get a 20% tax break’ , would you say “great, not my ideal tax cut but a tax cut for some is still better than nothing” ? (Assume that the IRS is given special powers to audit the result)..

    • Dan says:

      Can I simply say the tax cut would be fantastic, and I oppose tying it to that?

      • Craw says:

        You can, but we are not judging you, we are judging your argument. Your argument cannot simply say that. It implies what it implies, and we can judge it based on its implications. If you put forward an argument that implies 2=1 then your argument has a problem even if you personally do not say 2=1.

        • Dan says:

          Nobody is saying you guys can’t come up with difficult examples where a plan has both good parts and bad parts. So what? If Trump did that, then of course the huge tax break for millions of people would be fantastic. On the other hand, he might try to raise taxes in other places to counteract it, and he could become a brutal dictator. So, yeah, it’s not an easy answer. But the problem isn’t that the tax break discriminates against non-Trump supporters or that it gives them an unfair advantage. The huge tax break would be a purely good thing.

          There is nothing written in stone that forces us to take everything as a whole and decide whether we like it or not. Especially, when we have no control over the creation or implementation of it. If someone asks me if I like plan X, I don’t see anything wrong with saying, “I don’t know, but I like this part and I don’t like that part.”

          • Craw says:

            Well, it’s clear we disagree. I do thank you for the honest answers though.

            This is the same issue David R Henderson is pressing Murphy on.

  7. Jan Masek says:

    Of course. It would still not be ideal but far far better than one currently can hope for. What else is elections if not voting for the guy who promises lower taxes?

  8. Transformer says:

    I think there are some tough issues in their area. For example when I see laws being passed that allow people to discriminate against gay people in their business dealings with them it definitely makes me feel uncomfortable to have to take the view “well , anyone has the right to do business with who they please so this law is a step in the right direction” – but I can just about bring myself to do so.

    I simply cannot think about Carrier in the same way. This is a blatant attempt at central planning and I don’t think libertarians can take the view “Central planning is OK as long as it uses the carrot and not the stick, and if it uses both we will still support the carrot bits”. That is the road to hell.

    • Jan Masek says:

      A – Before the deal: the state was going to take Carrier’s money and spend it in line with the central plan. B – After: the money will stay decentralized in Carrier’s hands, other things are equal. I oppose central planning therefore I support A.
      What sense does it make?
      If the “central plan” becomes abolishing taxes, I can get behind such a plan.

      • Transformer says:

        I see that one could make a claim like ‘if it wasn’t for those taxes then Carrier wouldn’t have been moving to Mexico anyway , so removing them is actually a good free market move”.

        The reason I oppose that argument is that the tax breaks were part of a “carrot and stick” package that apear to be part of Trumps central plan of “Keep jobs in the USA even it makes no economic sense to do so” and (combined with the unfairness of giving tax breaks to specially chosen companies) is wrong on both economic and ethical grounds.

        • Dan says:

          So if the Mafia was stealing from company A and company B equally, but then made a deal with company A to steal less so they wouldn’t move to another location, you’d say the ethical position is to oppose the result that ended up with company A having less money stolen because it’d be unfair to company B and because the Mafia used incentives to get them to take the deal?

        • Jan Masek says:

          What do you mean “even if it makes no economic sense”? You said yourself that it does, absent the taxes, no? If it didn’t, then Carrier would presumably still offshore.
          Absolving someone, anyone, of taxes is ethical just like making someone, anyone, pay them is unethical. Giving a tax pardon is the more ethical the more people you give it to but it kicks in from the first guy. How can it be unethical for the first few hundred people and then the same thing all of the sudden becomes ethical when you give the tax credit to all people?

    • Dan says:

      Transformer, I’m concerned with rights violations, not incentives or fairness. A tax cut results in a reduction of rights violations. It’s that simple. If Trump said that he’d eliminate taxes entirely for anyone that said 5 racial slurs every single day, I’d be in favor of it. I’d oppose the stipulation, but since it doesn’t result in rights violations, I’d still support the tax cut.

      Now, if Trump said he’d give tax cuts to anyone who punched a Mexican in the face, I’d oppose it. I mean, I’d still say the tax cut is good and I’d favor that aspect of the plan, but I could never condone committing acts of violence against innocent people. These are the tough issues, when you have a reduction in one rights violation while an increase in another. A tax cut by itself, though, is clearly a good thing from a libertarian prospective.

      • Transformer says:


        You are making some good points (here and in the Mafia analogy above).

        I think we are probably looking into this from different frameworks.

        I think your view is something like “protect people’s rights and everything else will take care of itself. As a major violator of people’s rights the state is functionally equivalent to a criminal gang. If a criminal gang offers to stops committing some crimes, even if this offer comes with strings attached – that is still a good thing”.

        That view seems perfectly consistent and defensible.

        My disagreement is this: I am a free-market libertarian who thinks that the path to a better society is gradual changes to the system to take us in the right direction. Within this framework the Carrier deal is clearly both crony capitalism and anti-free trade and is taking us in the wrong direction and should be opposed.

        • Jan Masek says:

          If reducing taxes for one company is not “gradual change in the right direction”, what is? Is it not gradual? Is it not a change? Is it not in the right direction, i.e. towards no taxes at all?

          • Transformer says:

            I think the fact its a tax break for a single company makes it crony capitalism, and for me that overrides the fact that this single company is being taxed less.

            • Jan Masek says:

              So gradual change is fine as long as the one making the change is not the one who selects the particular receiver of the change.. And Carrier is probably not even Trump’s sponsor the way Wall Street or Boeing support Hillary. Trump possibly had never heard of them until a few weeks ago and you already oppose it. I guess you will never support any tax decrease whatsoever, hard to see why you sympathize with libertarians.
              I understand where you are coming from and you have a point. We should yell “great but give the same to everyone” but we shouldn’t lose sight of the fact it is great.

            • Jan Masek says:

              It is one small step for a president and even smaller for mankind, but it is a step.

            • Dan says:

              Now you’re not saying that is the correct libertarian position, right? I mean that is fine if you oppose it for that reason, but it’d have no basis in libertarianism. Nowhere in that philosophy does it say that a tax cut must be applied equally to all or we should oppose it. We favor all reductions in theft.

              Also, presumably, you believe a reduction in taxes is a good thing. So how many companies must get a tax break before it becomes good? If Trump had reduced taxes for every business in that industry except Carrier, would you oppose it? If not, how many companies need to get the tax break before you’d approve?

              • Transformer says:

                I’m not saying that my view is the correct libertarian position because I don’t believe there is a single uniquely correct libertarian position to compare it to.

              • Transformer says:

                Tax breaks for various dodgy things are pretty common (renewable energy for example). I’d never noticed much libertarian support for them til this Trump thing.

              • Dan says:

                “Tax breaks for various dodgy things are pretty common (renewable energy for example). I’d never noticed much libertarian support for them til this Trump thing.”

                It’s probably because a lot of libertarians have been saying for years that if you want these companies to stop sending jobs overseas then cut their damn taxes and eliminate all the red tape. So when Trump cuts a businesses taxes to keep them here, it sure seems like a step in the right direction to me.

                Sure he’s a douche that also is threatening tariffs, which we obviously oppose, but he’s a politician. I don’t expect much from scum of the earth politicians.

  9. Josiah says:


    You just blew my mind.

    • Bob Murphy says:

      Josiah is this a (rare) time that you’re being serious? Because I actually chuckled to myself when I realized this, which is why I posted it. My aim in life is to let everyone else partake in the amusements of my mind.

      • Josiah says:

        I am being serious.

      • David R. Henderson says:

        Are you planning to reply to me?

        • Bob Murphy says:

          Just did, David. Sorry I read your comment when I was out and then I didn’t come back to it.

  10. Ryan Murphy says:

    1. Libertarian ethical beliefs => any and all reductions in government revenue are good.
    2. Public finance => the economic effects of the failure to tax at equal rates and selectively subsidizing are literally identical.

    Economics is (2), not (1), except under the leviathan theory of government, and even then it’s not really “about” that. So yes, I will evaluate anything like this (and these things come up quite frequently) in terms of (2).

    • Andrew_FL says:

      So what you’re saying is you’re an economist and a technocrat, not a libertarian.

    • Tel says:

      If you keep applying 1 then after a while you don’t have to worry about 2 because when the tax is low enough the subsidy effects become insignificant, so it cannot be literally the same.

      That said, in practice we have not seen much progress in terms of tax reduction over the long term. Quite the opposite if anything. As a big picture strategy, fundamentalist libertarianism hasn’t delivered any huge gains yet (but the counterfactual remains unmeasured… maybe things would have gotten much worse if there were no libertarians).

      • Craw says:

        Many here do not think we should be able to vote in elections. Would a ban on blacks voting be okay?

        As for discriminatory taxes. Let’s have a few years where my company gets a huge advantage, since I pay no taxes, and then when I am rich enough and have a monopoly we can cut all taxes.

        “The power to tax is the power to destroy.” The destructive power is enhanced the more taxation is selective.

        • Tel says:

          I have no personal problem with the concept of elections. Sometimes we just need to make a decision about fundamental stuff and although an election isn’t perfect, it’s better than civil war and better than dictatorship.

          That last part you have Bass Ackwards. First you need the power to destroy, and then you can leverage this into tax collection. Milking the cow gives more in the long run than killing the cow, but killing is a lot easier to do.

        • Andrew_FL says:

          I don’t believe human beings should be allowed to vote at all. Does that count as racist, or is it only racist if I’m secretly a robot?

  11. Ken P says:

    I think there is an inconsistency and I am guilty of it. My brother pointed this out a while back when we switched from discussing tariffs on Chinese produced solar panels to talking about states providing industry targeted subsidies to solar companies. He pointed out that based on my previous argument if other states want to provide these products for less than cost then it is good for consumers in other states.

    I really dont like the picking winners and losers thing though.

    • Tel says:

      The states are forced to keep their borders open, so they know that other states cannot embargo them in retaliation to subsidies.

      However if the US government finds Chinese subsidies unacceptable they can simply whack on a tariff, or just block that industry completely.

      For a country the size of the USA it wouldn’t hurt all that much to close the borders. A small country with less diversity of industry would find it much more difficult. This suggests to me that there is a diminishing returns curve for division of labour.

  12. Harold says:

    One problem with taxes is they distort he economy. If a condition of receiving a lower tax is an even greater distortion of the economy than the tax was then there is surely an argument for opposing the tax cut.

    Say apples are taxed at 20%, oranges 0%. Obviously that distorts the economy in favor of oranges. If there was a offer for apple producers to get a reduction to 0% tax if they moved to Wisonsin. They would only move if the tax savings were worth more than the move cost, so the overall distortion would be lower. I suggest that if the costs and benefits are all internalized then it is impossible to increase distortion by offering incentives to pay less tax. I don’t know this to be the case, but it seems plausible.

    If the conditions imposed introduce externalities the we are in a different game. If we offer apple producers 0% tax if they dump their waste in a stream then we would be substituting the distortion of the tax for a different distortion. It will cost the apple growers nothing but might wipe out the pear producers downstream.

    The question becomes are the Carrier people being encouraged to do something that has an external cost to other people that would be greater than the tax saving? Does it encourage others to behave in a way that introduces more distortions than the tax?

  13. Floozy says:

    I look at a couple of things here. First, one kind of has to that that the tax break was possibly not sufficient to keep the Carrier jobs in Indiana, since Governor Pence could have offered that up prior to the election. Or did Governor Pence withhold the offer of the tax breaks for Carrier so as to not take an issue off the table until after the election was decided? Timing is curious.

    I had also read that Carrier officials had said that cost was not the only issue. They have said that at facilities in Mexico, they see less absenteeism and longer employee retention than they do in the Indiana factories. They characterized this as American’s not viewing these as jobs that they want to have long term. Some of that is not surprising given that it seems the mantra in the US has kind of gone in that direction for some time.

    I am not a fan of this action by the government since it seems to favor specific companies and certainly favor larger companies over smaller ones, which happens in so many ways. Regulations often present a lesser burden for a large company than a small to medium size one, at least in terms of cost per unit. I agree that lower taxes are better but it still seems wrong to applaud any sort of potential cronyism. Ideally, I think Trump should have said, “Put the move on hold for a year and let me show you how much better I can make the economic environment here for Carrier and everyone else. I think you will be glad you did.”

  14. tz says:

    First, you need to update the Contra Krugman header drawing in light (or dark) of your newly acquired facial hair.

    That said, every state has different taxes and regulations and the question of Carrier moving to a southern state (which might need A/C more) v.s. staying is similar. The parallel question is should the Federal Government either act to prevent the 50 unlevel playing fields? (and note AK can be low-reg, but the climate… Do we build furnaces and lights?)

    Also, LABOR can cross between states and does (as Vox Day pointed out in the debate). If Carrier moved to Alabama, some of the workers could and would follow.

    But there is an anti-libertarian aspect to the other countries – If Mexico doesn’t care about dumping toxic waste from the manufacture in the rivers (killing or sickening people), or doesn’t care about worker safety so 5% dead and disabled per year is acceptable – after all 95% will be better off than the poverty, and maybe 5% end up dead or disabled if they didn’t work…

    What bothers me is that Libertarians are ready to arbitrage life and liberty itself including the NAP on the free market. OK, Country X enslaves their people, allows pollution, steals land, executes dissenters, etc. but because the labor is cheaper, and they would be “better off” with the business, it’s a really great thing to destroy jobs in a NAP obeying libertarian community and move them to a slave labor area since the libertarians will get cheaper trinkets.

    Another aspect that was weak is that when the workers (which you did at least mention) will go on employment and welfare and cost the state if the jobs are lost, so there is an interest in keeping the jobs so the workers will pay taxes instead of consuming services.

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