by Adam B. Summers, Ankur Chawla
February 05, 2013
This study looks at certain corporation tax and sales and use tax credits, deductions and exemptions in order to evaluate whether they serve their purpose. The argument offered in support of such tax breaks is that they will improve the lives or livelihoods of certain classes of individuals, businesses or industries. But while they may encourage business activity in a certain sector of the economy, this comes at an unseen cost, which is the business activity that would otherwise have taken place in other sectors of the economy. The relevant question then is: does such favorable treatment really result in a net gain to the economy and the state? Or is it a zero-sum game in which politically favored industries benefit at the expense of those without political pull in Sacramento? Or—worse—is it a negative-sum game in which favored interests benefit at the expense of the economy and the state?