Many governments have programs that offer low interest or no interest loans, or grants for certain types of individuals and/or business activities. For example, if you, as an individual, meet certain demographic criteria, you might be eligible for a low interest business loan. If you are a veteran in the United States, you may be eligible for special mortgage options. If your business makes the right kind of products or offers the right kind of services, you might be eligible for a grant. This is the government’s way of encouraging specific individuals to start specific types of businesses, or to buy property.
Tax breaks are an effective incentive as well. If you get a tax break for installing more efficient windows in your home, you might just do it. If your business gets a tax break for its marketing efforts, you are more likely to market more often. There are tax breaks for all kinds of things. Once you know what they are, you cannot help but be drawn to alter your behavior.
Likewise, if you do NOT get a tax break for some activity, like meals and entertainment, you are less likely to do it. And that leads us to how governments use taxes to discourage behavior. We will cover that in the next money article.
