[alkonaut]

To me it's strange how federal law allows local governments to offer tax breaks to individual companies in order to attract them. Conversely, large corporations can play states against each other for the sweetest deal. As a comparison this isn't allowed e.g in the EU and not between regions within most countries.

Shouldn't a tax reform close that possibility, which should raise a lot of tax revenue, which could then be used to cut corporate taxes, but now in a fair way?

[crusso]

The US Federal government's role isn't to manage all commerce within the states. It's not a matter of what "federal law allows". Managing tax rates within states is not a Federal power enumerated in the Constitution.

It's a good thing that States are forced to compete with each other on offering suitable economic environments for the businesses that they wish to attract. Big corporations can offer significant tax revenues and employment opportunities for the states they call home. There's no reason why States shouldn't use whatever means are at their disposal to attract good companies for their citizens.

[alkonaut]

You misunderstood me: I'm not saying the states shouldn't be competing for business.

I'm saying states shouldn't be allowed to give tax breaks to individual companies and not to others. That's effectively having different tax codes for different companies.

It's is analogous to having different laws for different people (which, I assume would not be constitutional).

The point is to create good economic environments without allowing corporations to play states against each other.

[crusso]

If a state wants to offer tax incentives to green energy companies, that shouldn't be allowed?

[alkonaut]

That could be done without targeting individual companies so yes. Same as it is legal to give incentives to buy green cas by subsidizing light or electric cars taxing gas or heavy cars.

The kind of targeted breaks I'm thinking of is e.g. this: http://app.leg.wa.gov/billsummary?BillNumber=2089&Year=2013#...

That's just basically Boeing saying "Give us a tax break of N billion or we move from Washington". Legislators afraid to lose their jobs approve. The state keeps the jobs, the legislators keep their jobs. Everyone is happy? Well, except the people in the state that lost a ton of tax revenue.

To be clear: this isn't a tax cut for "the Washington aerospace industry". There aren't going to be any competitors creating buildings for the manufacturing of plane fuselages in Washington state - it's a tax cut directed directly towards Boeing alone. You wouldn't have to be a star lawyer to prove that point.

The argument that "but they create jobs in the state so even with the tax break, Washington state benefits from having them there" doesn't float either. That's how blackmail works. I need my knee caps so even after paying the mobster $10000 for keeping them I come out ahead!

If states weren't able to offer company targeted tax breaks like that, then Boeing couldn't have blackmailed Washington legislators like that. Which would benefit everyone involved (Except of course - Boeing).

[crusso]

Hence my question. So now if you allow industry-specific taxation, then you just craft a special bill that cuts taxes for large airplane manufacturers and Boeing gets a tax cut.

Boeing has a lot to offer a state. They could put their production in lots of places, including in other countries. If a state finds value in having Boeing there, there's nothing wrong with incentivizing them to go there.

If smaller businesses find that the state is hostile to them for one reason or another - maybe because they feel overtaxed because of big breaks for the big companies, then smaller businesses will not do as well in that state and will tend to migrate elsewhere. Then the state might need to rethink its tax policy like New York has been doing with its reduced rates for new businesses.

At the end of the day, we don't need the Federal government micro-managing the states. The USA wasn't formed that way and it would be yet another Federal overreach that would create backlash and perverse incentives. You mentioned the EU. The EU is dealing with that sort of backlash now with Brexit and other referenda. Overreach by central governments is a proven route to tyranny.