Corporate Welfare is my personal bugaboo - I find it hard to get worked up about things like public assistance when we spend exponentially more on giving (imho undeserved and unfair) tax breaks to big corporations.
What are some easy anecdotes or statistics for casual conversation when the subject comes up? I’ve read a ton before, but I can’t seem to find many online (ie. “Did you know that with the amount that we spent on corporate welfare, we could send everyone in the united states to college?”, etc.).
To get anything approximating a factual answer to this question, you need to define more precisely what you mean by “corporate welfare”. Do you mean only federal subsidies paid directly to individual companies? Or do you include federal services provided to companies below market cost? Tax loopholes? Corporate savings from modifying regulatory laws? Or what?
And of course, there’s the question of whether you’re limiting the subject to federal government transactions or including state and local government ones as well.
If, on the other hand, you’re just looking for an unsupported soundbite about a vaguely defined set of unspecified governmental activities that you label “corporate welfare”, I don’t think this forum is the place to find it.
Well, as Kimstu suggests, you need to be a bit more precise in your definition.
For example, a leftist or liberal might consider tax breaks that encourage business investment to be corporate welfare. On the other hand, a conservative or a libertarian might argue that this is precisely not welfare, it is simply government getting out of the way and allowing corporations to function efficiently.
If you want to start with a definition of corporate welfare that focuses more on direct government subsidies to business, and government policies that put public money at the disposal of private companies, a good place to start might be the Cato Institute. This is a libertarian think-tank that produces some very good research about government involvement in the economy.
The folks at Cato note that corporate welfare is defined differently by different people. They define it as:
They support tax reduction for corporations (and everyone else), but do not support targetted tax breaks, for a variety of reasons. You can look into their arguments here. Their main website often has good articles about specific instances of corporate welfare.
In social welfare programs, property (money) is taken from one group of people and given to different group of people. The idea here is that the second group of people somehow has a rightful claim to the money owned by the first group.
Does the same occur for businesses, i.e. is money taken from one group of businesses and given to different group of businesses?
That distinction can get tricky, though. For example, there are a bunch of things such as the Earned Income Tax Credit, Low-Income Housing Tax Credits, low-income child and dependent care credits, etc., that are defined as tax credits but frequently referred to as though they were part of (non-corporate) welfare (i.e., the kind for poor people). Do they in fact count as “tax breaks” or “something taken directly from others”?
AFAICT, this distinction is baseless. Social welfare programs draw on revenues provided by corporations as well as human taxpayers. Likewise, corporate welfare programs draw on revenues provided by human as well as corporate taxpayers.
But it seems to me that a very reasonable case can be made that some tax breaks do constitute corporate welfare.
If we, as a society, have decided that the government has certain responsibilities for our collective liberty and security (and we have; even most libertarians agree on the need for a state in order to preserve liberty through mechanisms such as defense, police, judiciary, etc.)
If we accept that the state needs certain revenues to undertake these responsibilities
and
If we accept that the state needs a system in place to collect those revenues from individuals and corporations
then surely some tax breaks to corporations could be considered corporate welfare.
For example, if corporations in general are given tax breaks, then their contribution to the public welfare declines, and must be subsidized by greater contributions from elsewhere. And if particular corporations are given tax breaks not available to other corporations, then the burden is again unfairly shifted from one group to another. For example, large corporations are often able to negotiate tax breaks not available to smaller businesses. The large corporations, however, still benefit from the public role of government that is paid for through the taxation system. I don’t think it’s too much of a stretch to call this sort of thing “corporate welfare.”
Of course, some people will challenge my underlying assumptions regarding the role of government, or the need to tax corporations at all, but the fact is that society has decided to do these things, so inequitable treatment under the current law can reasonably be called “corporate welfare,” IMO.
May I argue that some corporate welfare is actually good?
Consider this:
Prior to WW1, Great Britain was among the leading nations in steel shipbuilding. In between WW1 and WW2, the shipbuilding industries stagnated.
After the baloon went up in '39, the UK had a hard time meeting it’s emergency needs. Not just for new construction, but refits and repair of existing ships (civilian as well as military) encountered serious bottlenecks.
Some “welfare” for industries deemed critical for an island nation seems to have been called for. (Some was done, but actual war needs greatly exceeded prewar estimates.)
For a present day example, the USA is the third largest producer of steel (101.5 million tons), and is the second largest consumer (115 million tons).
Should the Federal government monitor the supply and demand situation, with an eye toward making sure that the US can not be “put over a barrel” by outside suppliers?
Well, to be fair they are making gargantuan profits because they are gargantuan companies. Their profit margins are not very impressive–about 10% in recent years for Exxon Mobile, for example. I think that is less than the Standard and Poor average of about 11% and certainly less than many other industries. If you do think the profits are extreme, beg or borrow or save some money and buy stock.
I’m not saying there isn’t “corporate welfare” whatever that is. But I think it’s easy for folks to go off on assorted tangents with vague leftist-sounding spiels like the one in your link and sort of miss the big picture of which countries have done well overall and which have not, and among those countries which have managed to live fairly high off the hog and which have not. If I look at my own country (the USA) it seems to me we have done fairly well overall and that our ridiculously chaotic and capricious system has more or less functioned to the benefit of the masses.
Inequities abound. Corporate greed is real. I’m not sure that will ever change in anyone’s system and some complaining about it is a good thing. To the point of the OP, though, I’m underwhelmed when someone’s “personal bugaboo” is corporate welfare but they have to ask around to have someone else cough up some good supporting statistics or an anecdote.
For something to rise to the level of a personal bugaboo, shouldn’t the owner of that bugaboo have researched the topic, have an understanding of the fine points, and have clear proof cases in advance of deciding it is a problem?
Take corporate welfare down to the most basic and personal level. Start with the expense account. On the most basic level, people eating, drinking, entertining, attending sporting evens, enjoying luxary boxes, enjoying the services of vacation resorts and othwise indulging themselves in pretax dollars is corporate welfare. When the hourly employee has to pay for similar things in after tax dollars then you have found one of the most egregious instances of corporate welfare.
Full disclosure: I have, many times, enjoyed such perks. I know all about life at the top.
Next, look at the money that is funneled to specific companies due to their lobbbying or political connections. From there you can send so many people to prison that you will have to build more prisons. You go to some guys house and swim in his pool but underneath is the fact is that his job only exists because his company has a fat government contract that delivers very little for a high price. That’s corporate welfare.
Welfare is sucking at the public tit without equitable production. Is it worse for a welfare mom getting a few extra dollars in food stamps than for a corporation to overbill the government millions of dollars and pay bonuses to their executive with the money? It’s just that the public has been conditioned to punishing the poor rather than holding the rich accountable.
That is why the flat tax proponents are so disingenuous. The rich do not get taxed on all of their bennys yet they try to sell people on the idea that a flat tax is more equitable. It’s total BS. When every cent spent on a luxury box at a stadium is taxed at the same rate that a factory worker taking his kids to Disney World is taxed then I will listen to the justification for a flat tax. Until then, shut up and pay your taxes. The money to run the government has to come from somewhere.
And some “corporate wellfare” generates returns to the government.
For example: supose an oil company is given a royalty break on a particular deep water project in US waters. This may encourage them to go ahead with the project, the profits of which will be taxed. Without the royalty break, no project, no taxes, nobody is happy.
Fake example. If the profits are there corporations will invest and it should require some risk. When we are expected to cover all bets it is welfare. If the people finance the venture ,the people should get the profit.
The tax code has entire sections dedicated to special treatment of specific classes of taxpayers. A lot of whether or not something is corporate welfare depends on your starting point and whether you think the purported rationale makes any sense.
For example, a US corporation is usually taxed on their worldwide income but is given a credit for taxes they paid on that income n other countries. So what a lot of companies do is they create a company in some foreign country and now they are just stockholders in a company that earns income in a foreign country. The idea is that they will be taxed on that income when the foreign subsidiary pays its profits to the US company in the form of dividends. What actually happens in many cases is that the money gets trapped in the subsidiary because noone wants to pay the US tax. A few years ago, this President passed aspecial tax provision that allowed companies to repatriate income into the US and pay 5% tax instead of the normal 35% tax. A LOT of mulinationals took advantage of it and repatriated billions of dollars that they might otherwise have never paid taxes on.
Is that corporate welfare? If you think the starting point is that this money would never have been taxed anyway then it really isn’t corporate welfare but 5% sounds really really low to some people.
Yes, I think that government subsidies (in whatever form,) are worthwhile if they keep our potential in a critical sector up so that we would not be too hurt if we were isolated from the world.
In this situation, however, steel does not appear to be one of those critical industries since we almost meet our demand domestically, but if more plants close, we will start to lose the production potential even if the rest are producing the same amount by working at full production. So we might subsidize them with the goal to keep some potential there.
Similarly, we should subsidize agriculture only to the extent that we keep enough potential to handily feed all of America, which we currently have several times over. OTOH if most of the land starts to be developed, we might want to reintroduce subsidies to keep the land at least farmable.
AFAICT, this distinction is baseless. Social welfare programs draw on revenues provided by corporations as well as human taxpayers. Likewise, corporate welfare programs draw on revenues provided by human as well as corporate taxpayers.