[jfim]

> Tax cuts and subsidies are equivalent.

They're not. One can't cut taxes below zero, for starters. Some industries need more than just having negligible taxes to get started, especially in capital intensive businesses.

Furthermore, the idea that the only lever that the government has to induce people to do things is lowering taxes is completely absurd. Tax cuts didn't build the Hoover dam, the interstate highway system, nor send a man to the Moon.

The government can use targeted investments, messaging, procurement, tax cuts, and so on in order to move people towards certain outcomes.

The day that the US government announces that they'll buy 100 million masks a month for a strategic reserve or replace all of the mobile devices for all federal employees, as long as they're at at most a 50% premium over the cheapest option and are fully traceable from raw materials to finished product as being fully built in the US and allied countries, is the day that people will start investigating if it's possible to do so, and start trying to do so if it's possible.

> This seems like something you need Democrats to do rather than something you need Trump to do.

It takes two to tango. Many other countries are able to pass laws and make progress, even in complex multiparty negotiations during minority governments.

[User23]

> They're not. One can't cut taxes below zero, for starters.

This already exists, it's called a refundable tax credit.

[AnthonyMouse]

> They're not. One can't cut taxes below zero, for starters.

You might want to check with the IRS, since that's exactly what the EITC does. It's also the de facto result when a company takes a tax loss (e.g. from deducting more expenses than it had in revenue, common for startups) and can then sell the tax loss to another company to offset its tax burden.

> Tax cuts didn't build the Hoover dam, the interstate highway system, nor send a man to the Moon.

As opposed to Tesla's plant at Niagara Falls, or the various privately-owned rail networks in the world, or SpaceX?

> The day that the US government announces that they'll buy 100 million masks a month for a strategic reserve or replace all of the mobile devices for all federal employees, as long as they're at at most a 50% premium over the cheapest option and are fully traceable from raw materials to finished product as being fully built in the US and allied countries, is the day that people will start investigating if it's possible to do so, and start trying to do so if it's possible.

But that's actually more expensive, and less productive, than just making it more cost effective to manufacture things domestically than somewhere else, because domestic production has low taxes and efficient regulations and production in countries that engage in currency manipulation or have inadequate environmental protections are subject to tariffs.

> It takes two to tango.

That's the problem. It doesn't matter how willing one side is to negotiate if Democrats are too busy fabricating lies about Russia collusion to come to the table. Compromise requires both sides to be reasonable.

[jfim]

> that's exactly what the EITC does

The EITC is for individuals that have low incomes, AFAIK. Can you elaborate on how the EITC would increase the amount of US manufacturing?

> It's also the de facto result when a company takes a tax loss (e.g. from deducting more expenses than it had in revenue, common for startups) and can then sell the tax loss to another company to offset its tax burden.

Can the tax loss be sold separate from the legal entity itself?

> As opposed to Tesla's plant at Niagara Falls, or the various privately-owned rail networks in the world, or SpaceX?

Are you saying that without the TCJA, none of these would have been built?

> But that's actually more expensive, and less productive, than just making it more cost effective to manufacture things domestically than somewhere else

Making it "more cost effective" through tax cuts helps existing businesses, not starting new ones.

If a business needs $10 million in capital to buy the machinery necessary to make widget X, and has to compete with an existing factory that produces equivalent widgets and has paid off their existing machinery, how can they compete? The existing business already has relationships with suppliers, customers, and distributors, and if the new entrant looks like it will be trouble, they can just cut their profit margin such that the new entrant will be struggling to cover the extra expenses associated with building all of those relationships while paying off the loans to acquire the machinery.

Heck, both of those businesses could reduce their profit margins to zero, with both having an effective tax rate of zero, and only the established one would be able to effectively compete due to lower costs.

> That's the problem. It doesn't matter how willing one side is to negotiate if Democrats are too busy fabricating lies about Russia collusion to come to the table.

Or one could say that the Republicans are unwilling to play ball as well (eg. over COVID-19 related stimulus). The fact is, whether one party is at fault over the other, Americans and US businesses are paying the cost of the lack of bipartisan initiatives to improve the state of US manufacturing.

[AnthonyMouse]

> The EITC is for individuals that have low incomes, AFAIK. Can you elaborate on how the EITC would increase the amount of US manufacturing?

The EITC is an example of a "tax cut" that allows for negative tax rates.

> Can the tax loss be sold separate from the legal entity itself?

Actually selling the tax loss is generally only done for defunct companies, since a company expecting a future profit would just keep it in their pocket to use themselves later. Although you could probably still do it if you wanted to by splitting the company in two and then selling the one that "owns" the tax loss or something similar.

> Are you saying that without the TCJA, none of these would have been built?

I'm saying that private entities can build things like that.

> If a business needs $10 million in capital to buy the machinery necessary to make widget X, and has to compete with an existing factory that produces equivalent widgets and has paid off their existing machinery, how can they compete?

The real issue is that if you add a factory, you could be in a situation of overcapacity, and then you're locked in price competition and selling at thin margins, which nobody likes.

The secret is this. Factories have a finite lifetime, e.g. 30 years. So you have an incumbent that has paid off their factory. It's 28 years old. You pay $10M to build a new factory, today. They're going to drive prices below your cost for two years, but then they're going to have to build a new factory themselves... and bow out, because the alternative would mean being locked in unprofitable price competition with you for another 28 years. So you win the market and can go back to charging profitable margins. You just have to time your entry right, i.e. finish your construction just before they start on theirs.

Assuming you're even two different companies. Otherwise you just build your company's new factory in the new place whenever the old one in the old place is ready to be mothballed.

> The existing business already has relationships with suppliers, customers, and distributors, and if the new entrant looks like it will be trouble, they can just cut their profit margin such that the new entrant will be struggling to cover the extra expenses associated with building all of those relationships while paying off the loans to acquire the machinery.

To some extent this is also just a war of attrition. If a new entrant causes oversupply for any reason then it persists until somebody goes out of business. This has more to do with who has more money they're willing to set fire to in order to capture a given amount of market share than who was in the market first.

One way to help your people win is to ensure cheap access to capital (i.e. low interest rates), but that's already there in the US.

> Or one could say that the Republicans are unwilling to play ball as well (eg. over COVID-19 related stimulus).

It was your impression that the Republicans were the ones holding this up? They had every political incentive to accept any reasonable bill before the election, and even now to do it before the inauguration in order to take credit for it.

> The fact is, whether one party is at fault over the other, Americans and US businesses are paying the cost of the lack of bipartisan initiatives to improve the state of US manufacturing.

On this we agree.