Corporate Welfare - Redistribution from Poor to Rich
Corporate welfare is yet another example of wealth redistribution
from the poor and middle class to some of the wealthiest few.
According to some people, this welfare includes tax breaks,
(e.g. health care reform tax credit) while others say a tax deduction
just allows a company to keep more of it's own money, therefore
it isn't a handout. Both views have some truth. It isn't quite
welfare to allow a company to pay less in taxes, but if others
are forced to pay more in taxes, it does constitute using government
power to give some corporations an unfair advantage.
Furthermore, if we assume that there is some level of funding
that is necessary for the federal government to function and
do what we want done, then any tax reduction for this or that
person or corporation does require that someone else pay
more. In other words, a tax break is effectively a form of welfare,
even if it does not meet some technical definitions. This can
be seen more clearly if we imagine all of us paying for the services
a government provides while some pay nothing at all in taxes
(we don't actually have to imagine this, since it is true in
some cases). Those lucky beneficiaries are getting something
for nothing, like courts to protect their contracts, armies to
protect their business environment, patent laws to protect their
intellectual property, etc. This seems a lot like welfare to
some of us, even if some are forced to pay a partial share of
what government costs while others pick up the tab.
The Cato Institute, which is a free market think tank, does
not include tax breaks in its definition. They say:
Corporate welfare should be carefully
defined as any government spending program that provides unique
benefits or advantages to specific companies or industries. That
includes programs that provide direct grants to businesses, programs
that provide research and other services for industries, and
programs that provide subsidized loans or insurance to companies.
Even with its more limited definition it found that the U.S.
federal government spent $92 billion on corporate welfare during
fiscal year 2006. Among the many recipients were General Electric,
Boeing, Xerox, IBM, Motorola, and Dow Chemical. This is clearly
a redistribution of wealth from taxpayers in general to the corporations.
One could argue that this can benefit any who own shares in those
corporations, but that naturally does not include the poor as
often as the rich. Also, the increases profits that result are
used to hand out ever larger bonuses to corporate managers, who
are some of the wealthiest Americans. This then becomes a transfer
of money from the pockets of any who work into those of the wealthy.
According to the Cato Institute there are more than 100 corporate
subsidy programs in the federal budget. Here are a few examples:
Agriculture Department's Market Access Program ($100 million
a year). Created under Reagan, this one gives taxpayer dollars
to food and agricultural products exporters to offset the costs
of their overseas advertising campaigns. Yes, we pay for their
The Export-Import Bank ($700 million a year). Through this
one our money is used to subsidize financing to foreign purchasers
of U.S. goods. This includes direct loans to buyers at below-market
interest rates, guaranteeing private loans to those buyers, and
providing export credit insurance to exporters and private lenders.
Overseas Private Investment Corporation ($70 million a year).
This program make direct loans, guaranteed loans, and political
risk insurance to U.S. firms that invest in developing countries.
Yes, we have our paychecks nicked so companies can more easily
set up shop overseas.
National Oceanic and Atmospheric Administration ($1.9 billion
a year). Mapping, charting, and weather forecasting saves specific
private industries a lot of money for services that are already
being provided by the private sector. We pay for redundant services
just so shipping companies and others can get them free or cheaper.
The list could go on and on. But in addition to the items
that The Cato Institute calls corporate welfare, I would include
other handouts. For example, The 1872 Mining Act allows companies
to get land and resources almost for free. In 1994, American
Barrick Corporation, a Canadian company, patented nearly 2,000
acres of public land in Nevada that contained over $10 billion
in recoverable gold reserves. Taxpayers received less than $10,000.
These lands are supposed to be held in trust for all of us, and
one would think that any rational management would lease them
or sell them at market rates.
Then there is all the corporate welfare that goes on at the
state and local level. For example, New York City, under mayor
Rudolph Giuliani, gave subsidy packages to the New York Stock
Exchange, the American Exchange, the Mercantile Exchange, the
Coffee Sugar and Cocoa Exchange, ABC, NBC, Ziff-Davis, McGraw-Hill,
Reuters, Conde Nast, Time Warner, News America, CBS, Smith Barney
and Bear, and Stearns.
At the moment conservatives are screaming about the "share
the wealth" philosophy of some liberals who propose taxing
the rich more heavily to help the poor and middle class. I don't
favor that approach either, but the complainers would have more
credibility if they were also attacking the many ways the wealthiest
Americans dip into your pockets as well. Corporate welfare is
just one of them, and just as many conservatives as liberals
vote for this kind of redistribution of wealth.
For more on this see the page: More
Examples of Corporate Welfare