re: #169 Obdicut

If you owe me $1000, and I tell you that I’m forgiving you $200 of it, I really am giving you money by doing so.

Taxes are real obligations. Tax breaks really are relief from actual fiscal obligations.

One aspect to consider is discretionary economic activity.

A tax break can get someone to engage in an activity that s/he may not have otherwise. So the result can actually be more revenue to the government. For example, an incentive for a tax rebate to people who sell automobiles can be used to get a auto dealership to open in a given jurisdiction because, with the rebate, it is then profitable enough to take the risk of opening. So the jurisdiction starts getting revenue on each car sold even at a diminished rate.

Such incentives can actually simply result in a shift of activity from one jurisdiction to another, but not always.

Another example is a reduction in a rate for a short period. When capital gains were cut the treasury saw an uptick in capital gains revenue because it caused many to sell something that they had planned to hold on to and there was uncertainty as to how long the rate would last.

Point is that tax policy is not the zero sum game that both sides of the aisle like to treat it as.