RE: Tea Party candidate taken behind the woodshed by an old man asking a simple question
June 21, 2014 at 1:42 pm
(This post was last modified: June 21, 2014 at 1:49 pm by Jackalope.)
(June 20, 2014 at 11:38 am)Heywood Wrote: Not taxing something is not a subsidy.
Pedantically, correct. They are not the same thing. In reality - the tax exemption is worth *more* to the recipient and costs everyone else more than. A subsidy does.
Let's do a little thought experiment to illustrate this - I'll keep it simple for purposes of illustration, which will affect the magnitude of the effects, but will retain their relative differences.
The king has three subjects, each of which is taxed equally 100 gold coins. The kingdom requires 300 gold to keep it running. The king doesn't like all if his subjects equally though, and so has a plan to continue to apportion taxes equally amongst his taxpaying subjects, while favoring those he likes.
The king likes subject A very much, and grants him an exemption from taxes. A pockets 100 gold he would otherwise pay.
The 300 gold tax burden is split between B and C, who must now pay 150 each.
But wait, the king also favors subject B, but not as much as subject A - and grants him a 100 gold subsidy, something not accounted for in the original castle budget, which now must be shifted onto C.
Net effect, A is 100 richer, B is 50 richer, and C is 150 poorer. Even though B comes out ahead in this scenario, he comes out less favorably than if A was not exempted. Either way, C takes it sans lube.
By gum, you're right. Dollar-for-dollar, tax exemptions are *worse* than subsidies - that is, for everyone that doesn't receive them.
Only the magnitudes are exaggerated. The relative impacts are not. Everybody that pays taxes is effectively subsidizing non-taxpayers.
