Monday, February 27, 2012

What makes Manufacturing so special?

We have Rick Santorum out there plumping for extra special good tax breaks for "manufacturing". We already have a 9% tax break in the the federal corporate tax for "manufacturing" companies. Under that law, oil drilling counts as manufacturing. Obama was on the warpath about that a few months ago, calling it an unwarranted tax break for the oil industry.
There are a raft of crucial-to-the-economy businesses which are not manufacturing. To name a few, airlines, railroads, farms, mines, telecommunications, broadcasting,construction, electric power, and shipping.
Why should manufacturing get a tax break that these industries don't? Better is to treat all businesses alike.
Remember that free market is better at allocating money than central planners. Moscow central planning used to allocate the Soviet Union's economic resources, so much to heavy industry, so much to collective farms, so much to this and so much to that. How well did that work out for the Russians?
Free market means that if there isn't enough of something, the price rises. When the price rises people make more of it. When there is too much of something, the price falls, and people produce less of it. This system works. It's produced the largest and most advanced economy in the world, with the highest standard of living in the world.
Let's not mess it up.
Corporate taxes should be a level playing field, not special tax breaks for those with the best lobbyists.

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