This report is a collection of other reports and documents on Corporate Subsidies only, although it does include some general information on the Oil & Gas Industry, Farm Subsidies and Tax Expenditures. A more specific report on the latter three can be found in reports linked at the bottom.
NOTE: There are literally hundreds of reports on Corporate Subsidies. Many are undermined by self-serving purposes, but some are not. You may find a mixture of those in this report. In addition, depending on what and who these reports included or excluded, the total dollars for a particular subsidy will vary, sometimes considerably.
“The nation’s largest corporations and richest citizens receive more welfare money than our social welfare programs.”
It is important to note that many reports on Corporate Subsidies include other things such as Tax Expenditures. Thus, one of the reasons for the conflicting dollar amounts between reports. This effort attempts to focus just on Corporate subsidies, but does reference reports that include Tax Expenditures. That said, the most common figure quoted for Corporate Subsidies only is about $100 billion each year.
Surge in Corporate Tax Welfare Drives Corporate Tax Payments Down to Near Record Lowfrom an April 17, 2002 report.
Total Corporate Tax Welfare: Fiscal 2002 = $171.1 billion; Fiscal 2003 = $175.2 billion estimated.
Corporate Subsidies have risen substantially since 2002.
“Entitlement spending on households is surprisingly “flat” in the U.S. — the spending is distributed proportionately among the various income groups. However, federal spending tilts in favor of the rich when you add corporate welfare to the mix. And this pro-wealthy favoritism becomes more pronounced when you consider who is paying for it: over the last few decades, the tax rates for the rich have sharply fallen, both in personal income and corporate taxes.”
The Department of Sociology at Virginia Tech produced a study a few years back where, in part, they compared Corporate Subsidies (welfare) to social welfare:
“The nation’s largest corporations and richest citizens receive more welfare money than our social welfare programs. In 1994, the United States spent $104.3 billion on corporate welfare, while spending only $14.4 billion on Aid to Families with Dependent Children (AFDC; now TANF). If we add together recent federal monies spent on AFDC/TANF, food stamps and Medicaid, it comes to about $85 billion annually. The total cost of the corporate tax breaks and subsidies is hundreds of billions of dollars.”
U.S. Companies Get Huge Government Handouts – (from the mid 1990’s)
“While the US establishment is pushing for reduction of welfare for the poor and for developing countries to cut government subsidies, the US government is giving hundreds of billions of dollars of subsidies and tax breaks to its companies and individuals.”
Discounted user fees for public resources
- Direct grants
- Corporate tax reductions and loopholes
- Giveaways of publicly funded research and development (R&D) to private profit-making companies
- Tax breaks for wealthy individuals
nuclear industries′ $7.1 billion subsidy from 1996:
“Most successful US industries wouldn’t be competitive internationally if the federal government hadn’t developed their basic technology with your tax dollars, then given it away to private companies. Computers, biotech and commercial aviation are examples, and so-preeminently-is nuclear power.”
Corporate Welfare and Foreign Policy – from 1999 by the Foreign Policy In Focus, a project of the Institute for Policy Studies.
The U.S. government doles out more than $167 billion annually in what critics dub “aid for dependent corporations (AFDC).”This corporate welfare includes: (1) cash payments by governments to businesses; (2) government provision of below-cost products and services, such as loans and insurance, to businesses; (3) tax breaks for businesses; (4) laws—and changes in laws—that help business bottom lines; and (5) government purchases of goods and services from businesses at inflated prices (though laws are supposed to prevent this).U.S. aid for international investors, exporters, and importers exceeds $32 billion annually and benefits such “needy” recipients as General Motors, Citibank, Archer Daniels Midland, and Boeing. The Market Access Program (MAP), for example, uses taxpayer money to reimburse corporate foreign advertising costs. The Overseas Private Investment Corporation (OPIC) supplies loans and insurance to companies investing abroad. Federal tax law allows exporters to exempt a portion of revenues from taxation.
(The report includes farm related subsidies.)
(In 1998 TIME Magazine published an investagative report entitled “Corporate Welfare”. It was published in parts over four consecutive issues. The report covered Corporate Subsidies at both the Federal and States’ level and includes “Tax Expenditures”, which is a concession of tax revenue’s, as well as direct payouts of money to corporations. As such, it applies to all four of my reports: Corporate Subsidies, Tax Expenditures, Oil & Gas Industry Subsidies and Farm Subsidies. Hence, references to and excerpts from the TIME report may be included in each of those.)
NOTE: References and excerpts included here from the TIME report are primarily about Corporate Subsidies.
The investigation leading to TIME Magazine’s report took 18 months. It was published over four consecutive issues of the magazine: November 9, 16, 23, and 30.The first part begins with an attempt to get ones attention:
“How would you like to pay only a quarter of the real estate taxes you owe on your home? And buy everything for the next 10 years without spending a single penny in sales tax? Keep a chunk of your paycheck free of income taxes? Have the city in which you live lend you money at rates cheaper than any bank charges? Then have the same city install free water and sewer lines to your house, offer you a perpetual discount on utility bills–and top it all off by landscaping your front yard at no charge?”
But then they burst your bubble:
“Fat chance. You can’t get any of that, of course. But if you live almost anywhere in America, all around you are taxpayers getting deals like this. These taxpayers are called corporations.”
As for what states and local governments hand over, this is what Time had to say:
“There are no reasonably accurate estimates on the amount of money states shovel out. That’s because few want you to know. Some say they maintain no records. Some say they don’t know where the files are. Some say the information is not public. All that’s certain is that the figure is in the many billions of dollars each year–and it is growing, when measured against the subsidy per job.”
“There is no uniform definition [for this welfare]. By TIME’s definition, it is this: any action by local, state or federal government that gives a corporation or an entire industry a benefit not offered to others. It can be an outright subsidy, a grant, real estate, a low-interest loan or a government service. It can also be a tax break–a credit, exemption, deferral or deduction, or a tax rate lower than the one others pay.
“Two years after Congress reduced welfare for individuals and families, this other kind of welfare continues to expand, penetrating every corner of the American economy. It has turned politicians into bribery specialists, and smart business people into con artists. And most surprising of all, it has rarely created any new jobs.
“The justification for much of this welfare is that the U.S. government is creating jobs. Over the past six years, Congress appropriated $5 billion to run the Export-Import Bank of the United States, which subsidizes companies that sell goods abroad. James A. Harmon, president and chairman, puts it this way: “American workers…have higher-quality, better-paying jobs, thanks to Eximbank’s financing.” But the numbers at the bank’s five biggest beneficiaries–AT&T, Bechtel, Boeing, General Electric and McDonnell Douglas (now a part of Boeing)–tell another story. At these companies, which have accounted for about 40% of all loans, grants and long-term guarantees in this decade, overall employment has fallen 38%, as more than a third of a million jobs have disappeared.
“FORTUNE 500 companies have erased more jobs than they have created this past decade, and yet they are the biggest beneficiaries of corporate welfare.
“From her second-floor offices bordering the sparkling Caribbean at Charlotte Amalie, the capital of the U.S. Virgin Islands, Catherine Sittig presides over one of the corporate-welfare system’s most enduring success stories.
“Sittig’s company represents hundreds of U.S. corporations–she won’t say exactly how many–that have offshore affiliates in the islands. This isn’t as demanding as it might sound. It’s largely a matter of filing papers and mailing out invoices.
“After all, the companies she represents are just paper entities. But they have come to represent a drain, created by Congress and perfectly legal, of $1.7 billion annually on the U.S. Treasury.
“It works like this:
“A company sets up what is called a foreign sales corporation. Companies can form FSCs in 32 countries designated by Congress–among them Jamaica and Barbados–or in a U.S. possession like the Virgin Islands. The company then funnels its exports (or, more accurately, the paperwork for its exports) through its offshore FSC. Presto: no federal income taxes on a portion of those export profits.
“Programs such as foreign sales corporations are a product of Congress’s attempts to legislate economic behavior–attempts that generally fail, to the detriment of the Treasury. In 1971 legislators became alarmed at the growing trade deficit–imports that exceeded exports–and the threat to American jobs. So Congress came up with a program, the Domestic International Sales Corporation, that deferred corporate taxes on export income. The idea was to encourage companies to keep jobs here.
“It didn’t work: the new law had no impact on the nation’s trade deficit or manufacturing employment. While collecting billions of dollars in subsidies, corporate America continued to move manufacturing abroad. The merchandise trade deficit spiraled from $2 billion in 1971 to $67 billion by 1984.
“How would you like to get the Federal Government to invest with you in a hot new business in the global market? For every buck you put up, the government, in the form of something called the Overseas Private Investment Corporation (OPIC), puts up two bucks. Best of all, if the deal goes sour because of a crumbling economy, currency devaluation or some other unforeseen event, you won’t have to pay back the government’s share.
“Sound too good to be true? It is. Unless you have $1 million or more to put in the pot. That’s most often the minimum investment required for one of these deals. As a result, investors fall into three broad groups: wealthy individuals, institutions such as pension funds, and large corporations like GE and Citicorp.
“In the 1990s, the Overseas Private Investment Corporation has established 26 funds, which have invested $3.2 billion in businesses in Europe, Asia and Latin America. The U.S. Agency for International Development (AID) has established 11 other funds with 1.4 billion taxpayer dollars.
“In the case of AID’s so-called enterprise funds, the investment dollars are supplied directly by you, the taxpayer.
“Who gets to sponsor or manage a government-backed or -bankrolled investment fund? People who have the proper political ties or who are major campaign contributors or both.
“A corporate-welfare bureaucracy of an estimated 11,000 organizations and agencies has grown up, with access to city halls, statehouses, the Capitol and the White House. They conduct seminars, conferences and training sessions. They have their own trade associations. They publish their own journals and newsletters. They create attractive websites on the Internet. And they never call it “welfare.” They call it “economic incentives” or “empowerment zones” or “enterprise zones.”
“The Federal Government alone shells out $125 billion a year in corporate welfare, this in the midst of one of the more robust economic periods in the nation’s history. Indeed, thus far in the 1990s, corporate profits have totaled $4.5 trillion–a sum equal to the cumulative paychecks of 50 million working Americans who earned less than $25,000 a year, for those eight years.
“And what are those costs? The equivalent of nearly two weekly paychecks from every working man and woman in America–extra money that would stay in their pockets if it didn’t go to support some business venture or another.
Evidently Time has archived the articles that followed the first one linked above. However, this was pieced together, including the first part, and convert it to a PDF. It reads like the take-over of a third-world country, and SHOULD BE REQUIRED READING FOR EVERY AMERICAN WHO IS VOTING AGE.
Steven Moore with the CATO Institute testified before Congress in 1999 on Corporate Subsidies. He said there was $75 billion in the 1997 budget [for Corporate Subsidies], the same year “Fortune 500 corporations recorded the best-ever earnings of $325 billion”. Moore did point out that most of these were in the form of Tax Expenditures.
Many of these companies are double, triple and quadruple-dippers into the taxpayer pig trough. And there are no time limits to these Corporate Subsidies — they go on forever, unlike most social welfare programs.
Ironically — ironic in that it was coming from the CATO Institute — Moore said:
“One perverse, but predictable outcome of a $100 billion-plus corporate welfare state is that industry begins to view Congress, rather than consumers, as their real customers. Moreover, industry has done an all effective job at protecting their subsidies.”
However, if you read Moore’s report you will find that he was looking for a way to pay for the elimination of other taxes such as the so-called “death tax” and “capital gains tax” ($95 billion annually at the time), of which only those with more than $2 million of inheritance would benefit, and very wealthy people who have rolling investments where they experience very large capital gains each year.
Another report from the OMB Watch in 2002 gave us the following information:
- Spending for corporate welfare programs outweighs spending for low-income programs by more than three to one: $167 billion to $51.7 billion.
- Total federal spending on a safety net for the poor costs the average taxpayer about $400 a year, while spending on corporate welfare programs costs the same taxpayer about $1400 a year.
- Over 90% of the budget cuts passed by the last Congress cut spending for the poor – programs that ensure food for the needy, housing for the homeless, job training for the unemployed, community health care for the sick. (Source: Center on Budget and Policy Priorities.
- Only 3.9% of total federal outlays go to programs that solely benefit poor people.
Welfare programs for corporations do not play by the same rules as welfare for people. Welfare benefits for individuals and families are limited by strict eligibility requirements and time limits, while corporations get Corporate Welfare benefits regardless of wealth or accountability.
- Individuals and families must demonstrate need to receive benefits, while corporations with billions of dollars in annual income remain on the federal dole.
- Most social spending is in the form of discretionary spending, which is scrutinized in the annual budget negotiating process in Congress; most Corporate Welfare programs are in the form of tax expenditures, which go on and on since they are not subject to annual review by Congress.
A sort of indirect corporate subsidizing comes in the form of health care cost. Since many corporations are significantly decreasing health care coverage for employees, states are having to pick up the cost. From an updated report early last year: “states are being put in a position of subsidizing the cost-cutting measures of private sector employers”. You can check to see if your state is on the list; if not, go to “Show Us the Subsidies” and look up your state.
The last two links above is web pages of “Good Jobs First” whose objective, in big part, is to be a Corporate Subsidy Watchdog group. GJF does not necessarily segregate Corporate Subsidies, Tax Expenditures or Farm subsidies; in many cases they’re combined.
GJF has case studies on:
- Boeing – $3.2 billion tax concession (nearly 100% of their tax liability) from the state of Seattle to remain in that state. In addition taxpayers were stuck with an additional gasoline tax to fund transportation improvements, and they overhauled the unemployment insurance system to reduce costs for employers and tightened up on workers compensation claims. Boeing later received $32 million from the state to cover the cost of training and other unnamed “sweeteners”. Boeing got these concessions through an implied blackmail of the state. They “solicited” other states, finally agreeing to state in Washington where they were: “The strategy was successful, though there were lingering suspicions that Boeing never seriously considered leaving the Seattle area.”
- Cabela’s and Bass Pro – “The company claims that a substantial share of shoppers come from long distances, creating jobs at hotels and restaurants (including those in the stores), and generating new sales tax revenues. Cabela’s uses this model to justify its extraordinary demands for subsidies from the localities where it sites its stores. It has been so successful in obtaining taxpayer funding that subsidies are an essential part of the company’s business plan. Cabela’s made this plain in the prospectus it issued when it became a publicly traded firm in 2004.” This little ploy netted them $500 million in taxpayer subsidies.
- Dell – $262 million in tax concession from North Carolina; In Round Rock Texas, 20 years of no taxes, $50 million in tax-exempt industrial revenue bond financing, and 40 percent of sales tax revenues collected by Round Rock on Dell’s sales; In Nashville, Tennessee, free land for the site worth $6.5 million, 40 years of property tax abatements, $20 million in infrastructure improvements at the site funded by the city and state, one-time credits of $2,000 per employee against state franchise and excise taxes, Metro Nashville tax credits of $500 per employee for 40 years, industrial machinery state tax credits and $4,000 per employee to pay for job training costs. The Kicker: Three years after the deal, Dell announced they were eliminating all manufacturing operations at the facility. From a local newspaper: “It doesn’t take a disenfranchised anti-business character to believe that Dell Computer’s reneging on the spirit of its incentive deal with the city amounts to bad corporate citizenship, to put it charitably.”
- Nordstrom (2005) (a designer apparel, shoe, handbag and beauty chain) – “In 1992 one developer told a reporter: ‘You pretty much have to guarantee that when [Nordstrom] open their doors for businesses, they will not have any money invested in the deal’.” Norfolk, Virginia had to take out a $32.8 million loan to pay for the construction of a store for Nordstrom. That loan, along with many more in other states, were HUD loans; a federal agency designed to help low-income families buy homes.
- Sykes Enterprises (2005) (an outsourcing company) – Tens of millions of dollars in subsidies and direct payments from several states and towns, which, in many cases, resulted in the company pulling up and moving out when customer contracts expired.
- Target – Several states have paid out a total in excess of $100 million and tens of millions more in tax concessions.
In additions to the individual corporations mentioned above, Good Jobs First has case studies on several industries.
Foreign Auto Plants
Private Prisons (2005)
At state levels, Site Location Consultants grease the skids by going into state’s and local communities to instill fear among government officials and local residence. Once that’s accomplished, high-paid lobbyists’ move in to acquire government welfare for the corporations. It’s a coordinated effort. You don’t have to ask how much these two interest charge corporations; it’s in the tens of millions, ultimately paid for by taxpayers.
You can “Discover Where Corporations are Getting Taxpayer Handouts Across the United States” by tracking subsidies.
A Sense of Entitlement
General Electric’s CEO Jeff Immelt became very upset when a subsidy “entitlement” hadn’t arrived as soon as he wanted it to. The Obama Administration has promised $1.9 billion for a wind farm in Oregon, for which GE was going to supply the turbines. Immelt wrote a “shellacking” editorial in the Rupert Murdoch-owned Wall Street Journal, maybe the only newspaper that would have carried it for him. Here’s the real scary part: Immelt was just awarded the job as head of the Economic Advisory Board to President Obama, replacing Paul Volcker.
During the health care debate of 2009 / 2010 several corporations made headlines by declaring that the new health care law would rob them of hundreds of millions of dollars. But the truth was that the new law would require corporations to only pay taxes on the billions they were getting through Corporate Subsidies to supplement medical care cost to their retirees; which was in fact a double subsidy.
Still doing the same thing they were in 2002 and years before, the Export Import Bank is in the business of providing Corporate Subsidies. They guarantee loans made to foreign governments to purchase “American made” goods, but those loans go sour at times and the ExIm Bank pays off. Proponents of the bank insist that it saves American jobs. However, as the linked report above points out, those same companies are moving American jobs overseas at an astonishing rate.
American taxpayers are also in the business of subsidizing the making of rum in the Virgin Islands to the tune of $6 billion. To make matters worse, Diageo, a British-owned company, has moved in and is taking the lion’s share of these American Corporate Subsidies while greatly reducing the number of workers. This process is know as The Rum Excise Tax Cover-Over, which, in great part, is paying the rum-makers a larger profit for their goods.
In February of last year the Obama Administration handed out the second payment of a $54 billion loan to the Southern Company to build two nuclear power plants in Georgia. The commitment for the money was authorized by Congress in 2005. It is tagged as a “loan”; however there is a 50/50 chance of a default by the Southern Company.
$1 Billion: The amount Wal-Mart has received from taxpayers directly or in the form of Tax Expenditures.
When Corporate Subsidies are extracted from Tax Expenditures, it represents at least $100 billion of the federal budget each year. That is a direct payout to corporations using taxpayer money.
Links to Other Studies and Reports
The CATO Institute has many case studies and papers (linked below) on Corporate Subsidies and other subsidies. However, there have been several cases where the CATO Institute’s reports appear to be self-serving in that they are not necessarily advocating an end to certain Corporate Subsidies in the name of reducing net cost to taxpayers. In some cases they simply want to transfer the savings to wealthy individuals in the form of less taxes for them.
Corporate Welfare and Earmarks
Agricultural Policy – Mostly Farm Subsidies
The Corporate Welfare State: How the Federal Government Subsidizes U.S. Businesses
The Corporate Welfare Budget: Bigger Than Ever
Corporate Welfare Update
Corporate Subsidies in the Federal Budget
Cato Handbook for Congress: Corporate Welfare
Archer Daniels Midland: A Case Study In Corporate Welfare
Ending Corporate Welfare As We Know It
Corporate Welfare Update
How Corporate Welfare Won: Clinton and Congress Retreat from Cutting Business Subsidies
Silicon Valley versus Corporate Welfare
The Bipartisan Scandal of U.S. Corporate Welfare
Market Opening or Corporate Welfare?
Full Disclosure for Corporate Welfare
Cutting Corporate Welfare Could Fund a Bush Social Security Plan
No Corporate Welfare for Nuclear Power
Corporate Welfare for Weapons Makers: The Hidden Costs of Spending on Defense and Foreign Aid(PDF)
The Corporate Welfare Information Center appears to be a very old website with most of their references dating back to the 1990’s. However, they have dozens of links on Corporate Subsidies as well as other kinds of subsidies.
Corporate Welfare Headquarters is another who tracks Corporate Subsidies.
The Progress Report has a page called Corporate Welfare: The Shame Page. They cover an awful lot of information on all fronts of government handouts, not just Corporate Subsidies. Certainly well worth the click.