About the GOP’s proposed tax reform…
The talk is all about how we need it to stimulate investment and therefore boost the economy.
To this, I have one question: When is the last time you handed out money, no strings attached?
If you want a particular result, you hand out the money with conditions. We call these “performance guarantees.” Look at any contract, you’ll see them there. Nobody in their right mind makes large financial commitments or investments without firm guarantees that their money will be dedicated towards producing the agreed-upon result.
In the past, when our government wanted to promote certain behaviors (such as technological innovation, creating jobs, or building new infrastructure) they granted tax breaks once the desired behaviors occurred. Such things are all over the place in our tax code: if you do “X” (say, give money to a charity), you get a break on your taxes AFTER THE FACT. Not before. Long ago, our government concluded that charities are of benefit to our society for a wide number of reasons. Therefore, it did (and still does) encourage us to support them, and gives us back some money once we do so and if we do so – not before. Such practices provide strong incentives for people to engage in the desired behavior. Outright gifts do not.
It may be that a Tax Cut, or at least a streamlining of the tax code to eliminate needless complexity and harmful and/or unnecessary loopholes, is desirable. But, that is not what is being assembled and negotiated in the halls and backrooms of Congress at the present time.
So why, when they have so many very smart people crafting this, is the GOP assuming a “Tax Cut” with no strings attached will produce any positive results? They definitely know better, and there are plenty of examples from past administrations of how to go about successfully achieving the goals they claim they want to see; and the current approach is NOT one of them. In fact, recent articles suggest that it is pretty clear companies have no intention of reinvesting the windfall they’re about to get into the desired goals: more investment, more jobs, a strengthened economy.
I’ll ask the question again: When is the last time you handed out money, no strings attached?
We call that charity.
America’s big corporations and billionaires don’t need charity.
They need incentive.
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