Tax Analysts Blog

Where Is the Outrage?

Posted on Mar 12, 2014

I recently read the February 24 Good Jobs First report, “Subsidizing the Corporate One Percent,” by Philip Mattera, a respected thought leader in our business. It says that three-quarters of all state economic development subsidies went to just 965 corporations since the beginning of the study in 1976. The Fortune 500 corporations alone accounted for more than 16,000 subsidy awards, worth $63 billion – mostly in the form of tax breaks.

Think about that. The largest, wealthiest, most powerful organizations in the world are on the public dole. Where is the outrage? Back when I was young, people went into a frenzy at the thought of some unemployed person using food stamps to buy liquor or cigarettes. Ronald Reagan famously campaigned against welfare queens. The right has always been obsessed with moochers. But Boeing receives $13 billion in government handouts and everyone yawns, when conservatives should be grabbing their pitchforks.

According to Good Jobs First, there are 514 economic development programs in the 50 states and the District of Columbia. More than 245,000 awards have been granted under those programs. I ask again, where is the outrage? The system is antithetical to the idea of free markets. A quarter of a million times, state governments decided what is best for producers and consumers. That should make us cringe. First, the government is inefficient at providing public goods, and it is terrible at manipulating the markets for private goods. But more importantly, those 514 economic development programs are almost all the result of insidious cronyism. Narrow business interests manipulate government policymakers, and those interests prosper to the detriment of everyone else. Free markets be damned.

And while I’m looking for outrage, where are the liberals? The 965 companies in the report received over $110 billion of public money. Berkshire Hathaway, a company with $485 billion in assets and $20 billion in profits, received over $1 billion of that money. Its chair, Warren Buffett, is worth about $58 billion. Buffett, by the way, is still a darling of the left. He has some nerve to call for higher taxes. The billion dollars his companies took would pay for a lot of teachers, healthcare, and other public goods.

I don’t blame the corporations. They act rationally. If someone gives you $1 billion, you take it. The blame lies with us. The sheer size of the corporate welfare system should spark outrage whether we are conservatives, liberals, or libertarians. And that outrage should be reflected in how we vote. In the meantime, kudos to Good Jobs First for continuing to highlight this problem.

Read Comments (8)

edmund dantesMar 12, 2014

It's Warren, not William Buffett. Unless he has a brother I don't know about.

A company accepting tax incentives is nothing like the "welfare queen." The
company will be contributing to the economy, employing workers who will in turn
pay more in taxes to the state. Total benefits benefits to the state by Boeing
over the years far exceed the $13 billion in tax relief that they have been
given.

Characterizing tax relief as "on the dole" is also wrong. It assumes that
everything a company earns or owns really belongs to the state, and what they
keep they have only with the state's permission. The real problem is that state
and local taxes are far too high in most states. They are so high that low-tax
states have a meaningful competitive edge for locating businesses. The tax
relief that you rail against is simply a way for states to bring corporate tax
burdens back down to reasonable levels.

Having said that, I abhor the fact that companies have to jump through hoops to
get to a fair tax burden. A free market system would have low tax rates for
everyone, free of government interference and attempted management.

But no one in government would favor that, and the big companies have already
learned how to game the system.

david brunoriMar 12, 2014

Edmund, I suspect we agree much more than your comment suggests. Personally I
would not tax corporations at all. The only thing worse is to tax corporations
and then let some off the hook. And it is the smaller, less connected companies
that pay the full freight. If you are right - the incentives are merely a way
to bring rates to reasonable rates -- what a terribly dishonest system in which
we live.

David StannardMar 12, 2014

Edmund, I'm sorry but I stopped reading your comment after the first sentence.
Where did you get William from? David called him Warren.

david brunoriMar 13, 2014

David, Edmund, My bad. I had a brain spasm and wrote William. The editors fixed
it. I know Buffet's first name as I often wish he was a relative.

dennis corgiatMar 13, 2014

Show me the money and I might be enraged. Take this data and associate it with
campaign contributions to demonstrate graft and corruption, where elected
officials are directing tax-payer dollars to business that give some of it back
to the officials.

edmund dantesMar 14, 2014

the editors fixed "william" after i left the comment.

mr. brunori, i do think we are in total agreement. that's why i was surprised
to see you use the arguments we expect from the left--rich corporations don't
"need" tax breaks, so let's stop the giveaway--in your blog post. i also agree
we have a fundamentally dishonest system when we couple high nominal rates with
deductions for governmentally approved conduct. next thing you know, you've
got lois lerner to deal with.

david brunoriMar 14, 2014

Edmund, It must be the bleeding heart in me. That we would give a dime in
incentives to the richest organizations in the world galls me. Frankly, you can
use my tax dollars to help the poor widow with six sick kids. Everybody above
that station, including Warren Buffett, should get a hell of a lot more
scrutiny.

b l davisMar 15, 2014

Edmund Dante must be a PR consultant for Corporate America. First, corporate
taxes as recently as the 1970's accounted for around 17% of federal revenue
from taxes. The corporate share has dropped to about 8%. What has replaced
that revenue? FICA taxes ! FICA taxes, Edmund, are paid by working people
with incomes less than $113,800 and fund people receiving Social Security and
Medicare based on their contributions throughout their working lives. Now,
let's think local taxes. What is the major expense of most towns and cities?
Education. Education is primarily paid for by property taxes. In my town a
family living in an average home with 2 children in school would pay about
$7,000 in local taxes and use about $32,000 in services of which $30,000 is for
the schools. Who pays the balance? It used to be corporations. Not any
more. The burden falls on the elderly who have remained in their homes for 30
or 40 years. So, Edmund, I think you better do some homework on who pays taxes
and who doesn't. Economic development does not come from lower taxes. If
anything lower taxes encourge companies to become complacent, not able to
compete on a level playing field, and eventually go out of business.

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