Home > Uncategorized > Assault Subsidies!

Assault Subsidies!

I know it’s inconvenient, but as pointed out here, words mean things and journalists in particular shouldn’t be taking artistic license with language.

The article in question is from The Maine Center for Public Interest Reporting, whatever the hell that is. The claim is that states have subsidized the manufacture of assault weapons to the tune of 19 million dollars. The problem is that it isn’t remotely true. Now understand that that doesn’t necessarily mean I’m in favor of what states have done, nor does it mean I’m against it, I’m just talking about the perversion of language taking place at this point.

What states have done is give 19 million dollars in tax breaks to some firearms manufacturers to relocate or expand in their states. Why isn’t that a subsidy? It’s simple.

Strictly speaking, a subsidy is a form of assistance to a company or a method of price control, sometimes both. On the other hand, the tax breaks given to these firms serve as a kind of bidding process. I remember when the Wal-Mart in my city was built. Then, as now, local property taxes are somewhat high, especially for commercial properties. So the city offered to exempt Wal-Mart from paying property taxes for a fixed number of years, (8 I think).

When Wal-Mart accepted the offer and built the store here, the city did lose out on 8 years of taxes, but the alternative was the store being built in the next town over, so the city wasn’t really losing anything. Of course, now the store employees a few hundred people and more than 20 other stores have been built only a stones throw away, all together they employ nearly 1000 people now. I don’t think I have to mention that the current tax revenue is huge, so huge that the city hasn’t had to raise property taxes at all for the last 15 years (last year they did go up 35 cents per thousand, but its still impressive)

In these situations, no tax money is at risk. If the recipient fails, no loss. If they choose to locate elsewhere, no loss. But, if they succeed, there will in almost all circumstances be new tax revenues coming in, as well as other forms of wealth. Such tax breaks are not anti-market, but an elegant example of the free market.

Imagine you have decided to build a factory and all you need to do is decide where. What things would you consider? The tax rate is obviously a big one. If you were given a property or corporate income tax exemption/reduction for a period of time, on condition you build here, or there, the math is going to start looking very different.

Today, the Wal-Mart store that would very likely still be unproductive forest, pays almost $430,000 a year in property taxes alone.

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