I was interested in the article [O+F Weekly Update, May 5, 2004] about Sen. Kerry’s proposals impacting sending jobs overseas as well as comments from other readers. I was, however, dismayed by the partisan bickering and the biased, if not downright uninformed, interpretation of economics.
Many readers indicated that tax-driven incentives are doomed to failure because they interfere with the market. If tax-driven incentives are so doomed to failure, why have we cut taxes on capital gains? These cuts increased the after-tax return on these investments. Likewise, if tax policy were used to reduce the cost of hiring U.S.-based labor (or conversely, increasing the cost of offshore labor by removing tax benefits), I would expect it to have a beneficial impact. I would further argue that eliminating tax incentives for moving jobs offshore, or increasing incentives to keep them here, is far preferable to assembling trade barriers. Deciding which type of interference in the economy you prefer is a value-based choice, but let’s admit that it is values and politics, not misinterpretations of freshman economics, that drive the argument.
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