Reprinted with the kind permission of Maurice Marwood.
If government decides not to tax you, are they giving you a subsidy?
Yes, according to the conventional wisdom of many politicians and members of the general public. The basic premise underlying this Marxist view is that government owns all wealth and property, and only through its benevolence may you be allowed to use some of it. Advocates of this idea fail to distinguish between tax exemptions and subsidies-two fundamentally separate and distinct concepts. The socialist agenda is to treat both concepts interchangeably so the differences are obliterated and the gullible public will accept the "package deal".
Liberal politicians frequently imply that a tax break is the same as handing out money-that a tax break is the same as a subsidy.
We often hear public statements in the media about "advantages being given to businesses through tax exemptions…", or that "scarce tax dollars are being used to provide generous subsidies …" or that "tax loopholes must be plugged to stop feeding costly tax freebies to businesses…", etc. These statements are intended to obliterate the fundamental differences between a tax break and a subsidy.
You enjoy a tax break when the government keeps its hands off your property.
A tax break allows you to keep what you rightfully already own. You receive a subsidy when the government coercively confiscates someone else's property and gives it to you-property that does not belong to you. Subsidization is not an automatic result of government refraining from taxation; subsidization is a positive and destructive action taken by government.
In contrast, a tax break is an instance of government taking no action.
Why do some people fail to see this fundamental difference? It is because they mistakenly believe that government owns the wealth of the producers, and the part of it that the producers are allowed to keep is gratuitously bestowed upon them by the rightful owner, the government. They believe a tax break gives some individuals public property they do not deserve. Wealth and profits are too often perceived as privileges bestowed by government, rather than private property that has been earned by right.
So, if profits are generally believed to be a gift from government to business people, how do you suppose business activities will be perceived?
Observe that successful companies reporting "high" profits provoke suspicion. They are often unfairly criticized and examined for keeping too much of the wealth that supposedly belongs to the state and should be used for the "common good". A recent outcry criticized the so-called "windfall" profits that many think the oil companies should give back to society through a $20 billion tax-as if these profits just fell from the sky.
They ignore the fact that oil is $70 a barrel because that is what we are willing to pay for it; they ignore the fact that oil companies take significant risk and invest billions on new projects to extract oil from the ocean floor or from sand deposits in Canada, thereby allowing us to enjoy our life style.
And most of all, they ignore the fact that successful companies are good for society and should be admired, not envied and attacked.
Some business people have also been taken in by the "package deal" and have accepted the legitimacy of the altruistic principle that government owns all the wealth. Many have caved in and tried to purchase "peace" by appeasement, willingly sacrificing their wealth to the non-producers. Once that altruistic principle is accepted there only remains the superficial consideration of who will be sacrificed.
It is time business people stood up for capitalism, free enterprise and property rights, and vehemently objected to government confiscating private wealth and sacrificing victims. We must learn to understand the source of wealth and prosperity and defend the principles that form the foundation of our system. We must vigorously oppose the claim that tax breaks are subsidies. And most of all, business people must proudly defend their right to their own wealth and profits.
There are no "obscene profits", only obscene losses. Profits belong to the producers, and government or society in general does not have the right to claim it at whim through taxation.
Copyright (c) July 2006; Maurice Marwood
The views expressed are those of the author, and not necessarily those of the Nassau Institute (which has no corporate view), or its Advisers or Directors.