Corporate Welfare fails miserably

I have been against Corporate Welfare for as long as I can remember. I have argued against the subsidization of corporations, especially large ones, in the many ways that they are subsidized. Promoters of “free markets” tend to go silent on this issue (similar to how promoters of a meritocracy also promote the abolition of the inheritance tax). They justify subsidies as being “pro jobs” or “pro growth”, or providing synergies that provide benefits to the community overall (local, county, state, and/or federal as applicable).

Subsidies can take many forms; Tax breaks, loan guarantees, job training, etc. It can be easy to make an argument that these subsidies are beneficial. That easy argument can be severely flawed but convincing nonetheless.

The New York Times published an article by Louise Story on December 1^st that goes into detail describing the practice and the scope and scale of these “incentives”. The article is long, giving many examples of these incentives failing at providing the benefits promised to the community. There is also an impressive searchable database showing, state by state, how much public money is being spent or deprived from public coffers and the corporations that are receiving these benefits.

I will leave the details to the NYT article, but I would like to point out something that the article does not address directly. Though the article points out that these corporations are obligated to their shareholders to seek any and all incentives that could maximize their profits, the point is lost that those increased profits benefit the shareholders. So to reiterate: indirectly, the tax incentives and other public gifts to these corporations are benefiting the shareholders. And so, with around 80% of the entire stock market wealth owned by the top 10%, and only about 2-1/2% of the stock market wealth owned by the bottom 60%, these tax incentives are not only benefiting the corporations and their ridiculously high paid executives, but they also benefit the wealthy, at the expense of the taxpayers.

The wealthy (consider the Bush tax breaks now being debated to avoid the “fiscal cliff”) and large corporations share the tendency to threaten governments and the people that if they are not pandered to they will, like a playground bully, take their ball and leave. 

There are many examples of how an idea originates, and then, as it is implemented and copied, becomes nullified by that replication. In this case, for example, if a state offers incentives to a corporation to locate there, they may get the factory or whatever and benefit. But if all states offer incentives, the playing field has thus been re-leveled and the result is that the only real beneficiary is the corporation while the benefactor financing that is the taxpayer.

So, read the New York Times article, check out how your state subsidizes corporations, and think about this the next time you are asked about what should be cut in government spending.

http://www.nytimes.com/2012/12/02/us/how-local-taxpayers-bankroll-corporations.html?hp