Monday, December 29, 2014

Taxes as Performance Incentives

Individuals and corporations act in their own self-interest. Employee bonuses and performance contracting are powerful ways to align broader goals with that self-interest. "If your company or project achieves X, your bonus payment increases by Y."

To achieve policy goals that are important to governments, but off the radar of individual people or companies; nations, states, and/or cities could create a "bonus” with their tax code. 

Examples might be:
  • For every 1% that statewide employment grows in a given year, state corporate taxes will decrease by 3% in that year.
  • If annualized GDP growth exceeds 2.5%, federal corporate taxes will decrease in that year by 1% for every 0.1% exceedance.
  • If city revenue from tourism exceeds $25 million, the remainder will be redistributed evenly as a tax credit to all city residents.
The possible structures are only limited by officials' creativity.

After the incentive payout, there would need to be a way to balance the budget, which could be done with a variable bond issue that would trail by 6 or 12 months, selling only the required number of bonds to cover the difference.

CATEGORY: Political / Economic / Social
IDEATION: December 27, 2014

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