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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 advertising.

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

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Corporate Welfare