Corporate Welfare Debate and Poll
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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. (source: Congressional Budget Office figures)
In the last Congress, spending for the needy absorbed the majority of spending cuts, while corporate welfare spending was barely touched. 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.
Only 3.9% of total federal outlays go to programs that solely benefit poor people.
Individuals and families must demonstrate need to receive benefits, while corporations with billions of dollars in annual income remain on the federal dole.
Some of the corporate welfare programs benefit the public, by stimulating investment they create jobs..
According to the CATO Institute, from 1990 to 1994, the Advanced Technology Program, a federal subsidy for high-tech research, gave more than $250 million to AT&T, GE, GM, IBM and other companies. Nonetheless, the companies reduced their workforce by 329,000 during that period.
Accelerated depreciation rules allows businesses to write off their purchases of machinery, equipment and buildings for tax purposes faster than the assets actually wear out. With the major expansion of depreciation write-offs included in President Reagan's 1981 tax cut act the tax-shelter floodgates opened. By 1983, studies by Citizens for Tax Justice found that half of the largest and most profitable companies in the nation had paid no federal income tax at all in at least one of the years the depreciation changes had been in effect. More than a quarter of the 250 well-known companies surveyed paid nothing at all over the entire three-year period, despite $50 billion in pretax U.S. profits. In response to public clamor, his own newfound misgivings and the disappointing economic results of the 1981 corporate tax incentives, President Reagan helped lead the fight for the loophole-closing Tax Reform Act of 1986. The 1986 act greatly scaled back depreciation and other tax breaks for business property. The changes curbed corporate tax avoidance opportunities and made taxpayers out of most of the former corporate non-payers. While companies paid more in taxes after 1986, however, business investment flourished. As former Reagan Treasury official, J. Gregory Ballentine, told Business Week: "It's very difficult to find much relationship between [corporate tax breaks] and investment. In 1981 manufacturing had its largest tax cut ever and immediately went down the tubes. In 1986 they had their largest tax increase and went gangbusters [on investment]."
In fiscal 2000, the total cost of business tax preferences, including those that benefit business investors or subsidize business products, is estimated to be $195 billion.
Politicians see tax subsidies as a way to exert power over society and the economy without having their efforts show up in the official spending budget. Because of the way the government's budget books are kept, politicians can have their cake and eat it, too. A direct spending program shows up in the official budget as federal outlays and the taxes that pay for the program as revenues. But if an equivalent tax expenditure program is enacted, paid for with taxes on people and/or companies not benefited, the combination shows up in the aggregate budget numbers as a wash. Neither net taxes nor spending will appear to go up in the official budget. In recent years, this has made tax subsidies the tool of choice for many lawmakers. For example, in their 1994 "Contract with America," GOP leaders in Congress talked a lot about cutting spending. But among the most significant specific expenditure changes they proposed in 1995 were more than $100 billion a year in increased tax-based spending programs. Ironically, these huge new tax entitlements--mostly targeted to large corporations and the wealthy--were designed to show up in the budget not as additional spending, but as tax cuts. Likewise, in recent years, many of President Clinton's program initiatives have been styled as tax cuts rather than spending. Ultimately, of course, tax entitlements are not free. If all current tax business and investment tax expenditures were suddenly repealed, for example, income tax rates could be reduced across the board by about a sixth.
Politicians are being influenced more by lobbyist dollars than the publics interest. More than 90 percent of American businesses do not receive subsidies. These companies are disadvantaged by corporate welfare that props up obsolete industries, stifles innovation, corrupts the political system, and wastes taxpayer money.