"Tax incentives are just opportunity costs, not real ones."
Just last week I wrote about US President Trump’s introduction of his Supreme Court nominee, Judge Amy Coney Barrett, on the White House lawn. Now it seems that he and the First Lady, together with half a dozen other notables, were infected with the coronavirus at that event.
Much has been made of the subsequent decision to give Trump an antiviral cocktail even if it’s still experimental. His condition may well be that serious.
Now I’ve always been a great fan of Trump’s conservative domestic agenda, though not so much of his blunderbuss trade and foreign policy. The problem lies in the man himself—the singer, not the song. Much of the rest of the world sees him as the archetypical “ugly American,” an opinion to which more Americans seem to be coming around.
We can only hope that, at the very least, Judge Barrett will still find her way to the Supreme Court and solidify a sturdy conservative majority there. That would be a great legacy from a less-than-great president.
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These days we’re hearing a lot of talk about having to revive the economy from the ravages of the virus. Even as fiscal spending and monetary easing continue to pump money into the economy, it’s become clear that real economic value can be created only by the private sector. This brings us to the confidence issue: Reviving the “animal spirits” that drive entrepreneurship and wealth creation.
Unfortunately, as so often happens with us, we talk a lot better than we walk. One case in point: the uphill struggle of San Miguel to build a brand-new airport from scratch amid the rice fields of Bulacan. It’s an unsolicited proposal, and so the SMC folks haven’t bothered to ask for a single centavo of government support.
Obviously, San Miguel is doing this to make money. Not just from airport revenues, but mainly from appreciation of the surrounding real estate (of which the company has already bought up a heck of a lot) and the positive “network effect” on the rest of the company’s infrastructure projects. Ramon Ang has lately been praised for his philanthropy, because people know that the money he’s shelling out is being earned the hard way, not by printing or taxing.
The company is now asking for tax incentives—no different from what we routinely allow today to foreign and preferred investors. These are intended to help investors through a project’s initial years when most of the risks are front-loaded, and so they should terminate as the project stabilizes. The Bulacan airport does also provide for such sun-setting.
Note that tax incentives aren’t actual government payments into the project, nor are they even contingent liabilities. Incentives are just opportunity costs: Government foregoing its expected tax share from airport-related revenues that wouldn’t even be there if the airport had never pushed through. If the project later goes belly-up, those expected tax collections simply don’t materialize.
But this point is missed even by people who should know better. For example, Men Sta. Ana of the left-leaning think tank, Action for Economic Reforms, says—among other loopy things—that government incentives should be granted only if a project’s social benefits outweigh its private gains.
This is confounding to someone like me who’s always taught his finance students that cost-benefit calculations should be properly bounded. Social returns should be compared only to social costs, not to how much the private partner is earning. It’s a sneaky variant of the soak-the-rich mentality that’s served to hold us back.
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Elsewhere in government, the DTI added another 17 sectors to the list of economic activities that can fully reopen. This is timely and might even be aggressive, since statistics about the virus remain depressing.
But what hasn’t been allowed to open wider are the churches. Now that even shopping malls may be allowed to operate at 100-percent capacity, the churches are still restricted to just 10 percent by the IATF. Absolutely no science has been proffered to justify this discrimination.
The bishops are not asking for much: just increase the limit from 10 percent to 30 percent. This is equivalent to maintaining the one-meter social distancing rule, no more than that. I’m dead sure that virtually all churches are enforcing this and many other restrictions: shorter and fewer Masses, masks and shields, temperature checking and hand hygiene, directional arrows. In my church, we aren’t even allowed to touch the pews in front of us.
If there’s anyone who can be trusted to be concerned about the value of human life, in or out of a pandemic, it’s the bishops and priests. This is an issue over which they’ve had their run-ins with government. We can only hope that it isn’t a case this time of government hitting back at them.
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