A big news story about Federal, State and Local governments giving $17,000 in tax credit to people who by a certain ($32,000)electric car. The rationale is that “you have to start somewhere”. The issue is where to start. The premise here is that tax incentives for individual people to buy a product that you want them to buy is a good thing. (This is otherwise known as income redistribution. You take tax money from everyone and give it only to people who buy the product you - the Government - wants you to buy. This incentive means raising taxes.
Another form of incentive is not getting in the way of people who develop stuff that can be turned into a profitable enterprise - like the Model T – how much government help did old Henry get?
The argument is in which process is better:
This one gives the makers of this car the ability to sell their product at prices where the company cannot make a profit. Why? Because the government says this is the product we want to push. Not A FUNCTION OF GOVERNMENT. What happens when the tax breaks are withdrawn? Sales fall. Is the government supposed to bail out the business? The logic will be that we have to bail out the business to save the jobs that we created that were unsustainable. Who gets to pay for that bail out?
The other plan is to leave these companies alone. Good ideas are good ideas and will rise to popularity is they are allowed to. So it costs more now - so what. What did the first PCs and cell phones and the Model T cost in today’s dollars. There were ridiculously expensive but people bought them and they became less expensive. Businesses build new stuff because they see a market need and try to fill it and make a profit. A risk /reward issue. There is a risk, and as the potential gain becomes less and less it becomes less worth it to take the risk. The larger the chunk that the government will take the less likely that people will take the risk.
The primary argument against cutting taxes to is that it will create greater deficits. (The problem with all the government (CBO) calculations about tax cuts is that they are by law required to calculate tax projections based upon people not changing their behavior. For example, if the raise the taxes on a pack of cigarettes by $2, the figure that they will get another $2 for every pack of cigarettes currently sold. But people will buy fewer packs so their calcs are always wrong and wrong in ways that show tax increase lower deficits.) Behavior changes; risk takers take greater risks and tax receipts increase, look up what happened under Kennedy and Reagan. Receipts increased after the tax cuts. The problem was that Congress just spent that money and more.
So let people build whatever kind of cars they want and let people buy them. Without the government.