The Unseen Costs of Tax Cronyism: Favoritism and Foregone Growth

by Will Freeland, Ben Wilterdink & Jonathan Williams

Introduction

In The Unseen Costs of Tax Cronyism: Favoritism and Foregone Growth, the authors provide an overview on the nature and extent of tax cronyism in states’ tax codes through credits, deductions and other special treatment. This favoritism by state governments toward specific firms and individuals makes it difficult for unfavored or new businesses to compete and violates the most basic rule of fairness in the tax code.

Included in the report is a 50-state data table that unveils the unequal tax treatment of businesses and individuals by state governments and provides specific state data on tax carve-outs.

By compiling data on tax cronyism from every state, citing numerous examples of tax cronyism and referencing the most relevant economic literature, the authors present a compelling case for policymakers to favor a tax code that keeps tax burdens low and treats firms and industries equally. The authors provide several strategies on how states can address the problem of tax cronyism; specifically discussing some successful examples from Michigan and Washington.

Ultimately, The Unseen Costs of Tax Cronyism: Favoritism and Foregone Growth is an overview of a complex and troubling issue that every state faces. The report provides readers with unique data and strategies on how to solve this problem going forward.

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