Incentives Or Penalties: Which Do You Prefer? | AccountingWEB

Incentives Or Penalties: Which Do You Prefer?

Tax policy is a great thing.  Whether it is federal or state tax policy, the question remains - how does a government stimulate an economy and balance its budget at the same time?  Does it raise taxes and impose penalties to create jobs, attract business and grow the economy?  Or, does it incentivize businesses to hire people by creating tax credits, etc. for expansion?  What would make a company grow more?

Now, I don't claim to be an economist, but I look at it this way.  If you have children, how do you get them to behave well?  Do you constantly impose strict rules and impose harsh penalties for non-compliance?  Or do you create positive incentives for good behavior?  Obviously, you would like to not have to do either, and just have children behave well based on principles and values.  But, when we are talking about an economy and tax policy, a government seems to have to do one or the other. 

Which do you prefer?  Incentives or penalties? 

What would stimulate the economy more?

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Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States.  He also writes a weekly column in Tax Analysts State Tax Notes entitled, "The SALT Effect."  For more info, visit his website:

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Because state and local taxes are deceptively simple and endlessly complicated.

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