What are Corporate welfare costs ? are there any benefits? Plus who gets them?
Once upon a time someone thought it was a good idea for the government to support economic growth and corporate welfare was born. The idea was to help fledgling sectors of the economy grow in a stable and sustainable way. What actually happened was that corporations became depended on government handouts and grew into markets that could not sustain them. This is why we ended up with auto industry and banking industry bailouts to the tune of trillions of dollars.
Corporate welfare helps corporations to swell beyond their natural capabilities while simultaneously creating an uneven playing field for small businesses, who cannot logistically compete with a company that gets government handouts. The argument has always been that allowing certain sectors of the economy to go under would hurt everyone. While this is certainly true, not allowing them to swell beyond their natural capabilities to begin with would also stabilize the economy.
Many recipients of corporate welfare return the kindness of the American taxpayers by incorporating elsewhere to avoid paying taxes. In 2012 Ohio company Eaton received $31.9 million in federal subsidies and turned around and incorporated in Ireland to avoid paying taxes in the United States. Between 2000 and 2015 McDermott received $12 million on corporate subsidies and in turn incorporated in Panama.
Two thirds of the $68 billion in federal tax credits and grants that were awarded between 2000 and 2015 went to 600 companies. There are companies that make decisions based on how much money they can get from the government to do so, and there are probably also companies out there that only exist because of the handouts they are getting from the government.
So what about small businesses? Small businesses are very valuable to the economy and have accounted for the majority of job growth since 1990. Unfortunately the Corporate Welfare Costs for small biz are low. The Small Business Administration only awards grants to nonprofits and educational institutions in specific areas and does not provide direct loans. Small businesses have a difficult time competing in a market where they can’t get the same level of funding help as large corporations.
Agriculture, private colleges, security firms, and the finance sector all benefit from various forms of corporate welfare as well. Every time a donor makes a huge contribution to a private college and gets a major tax write off, that’s money that is taken out of funding college for students in public universities. Every time a private security company calls for a police response that takes the police away from being able to serve the community at large. Learn more about corporate welfare costs from this infographic!