Widespread in today’s political climate is a fallacy known as the package deal. A package deal is a term that equates opposites due to superficial similarity, while ignoring the fundamental difference.

One example of the package deal that is endemic in the world today is the phrase “corporate welfare.” Two programs given this label are tax subsidies and tax credits.

Tax subsidies are payments given to corporations directly from the government for whatever reason is deemed politically expedient. One example is the ethanol subsidy. Since the government is the benefactor, the source of the subsidy can only come from one place: taxpayers. In essence, a subsidy is the redistribution of forcibly confiscated wealth (taxes) to whomever the government chooses. More important, the beneficiary of the government’s gifts has not earned the money and has no right to it.

On the other hand, a tax credit brings about a decrease in the amount of taxation an entity is forced to pay to the government. Examples of tax credits are deductions from taxable income a corporation is permitted for locating in a particular area, hiring employees from welfare rolls, and providing employees with health care. Basically, the tax credit is a method that lessens the amount of wealth the government is allowed to extort from any particular taxpayer.

Suppose a burglar decided to rob everyone’s home but yours. Would you tolerate anyone that categorized you in the same class as the receiver of stolen goods? This is exactly what politicians do, such as former Labor Secretary Robert Reich. They treat both activities as “gifts” from the government and omit the fact that subsidies involve stealing, while tax credits involve abstinence from stealing. Here lies the package deal.

Tax subsidies are evil for the simple fact that they are not voluntary. If a corporation wants funding for an activity it should look to debt or equity financing, not to gifts from a thief. Tax credits are a good program that the government engages in. It allows a corporation to keep the money it has earned. In one instance, you have something fundamentally evil and in the other something fundamentally good. It should be noted that subsidies and credits also apply to individuals as well as to corporations.

Clever intellectuals and politicians aim to cause the obliteration of principles in the minds of the public by positing package deals. They will next claim that principles are not possible and pragmatism is the only way to deal with reality. American citizens have become conditioned to accept a politician’s “flip-flop” as not a cause for worry. Secondly, the good idea in the package deal has everything to lose by being included, while the bad idea can only gain from being grouped with the legitimate idea. For example, tax credits only lose when they are categorized with tax subsidies, and capitalism loses when grouped with racism or the Oklahoma bomber. This effect provides the means for a package-dealer to bring his or her idea stealthily into common usage.

To protect yourself from package deals it is essential that you define your terms and ask the suspected “package dealer” to do the same. As the philosopher Ayn Rand wrote, “Definitions are the guardians of rationality, the first line of the defense against the chaos of mental disintegration.” 1


1. Ayn Rand, “The Romantic Manifesto” Penguin Books 1971 (p.77)

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Amesh Adalja

Amesh Adalja is a graduate from Carnegie Mellon University with a BS in industrial management.

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