The National Pulse
Photo credit: Carlos Luna via Flickr, CC BY 2.0

Why Is the Government Spending Billions to Help These Big Corporations?

This article is part of a series focusing on Lens of Liberty, a project of the Vernon K. Krieble Foundation.

Did you know that some of your hard earned tax dollars are being used to fund wealthy corporations like Walmart and Google?

Helen Krieble discusses this in her Liberty Minute entitled “Winners and More Winners”:

We hear lots of debate about government picking winners and losers, but most Americans don’t realize how extensive taxpayer-funded subsidies really are. A look through the lens of liberty reminds us that the first principle of American democracy is that all men are created equal and all are entitled to equal treatment under the law.

So why should taxpayers provide billions in subsidies to giant corporations like General Motors, Google, Goldman Sachs, Dow Chemical, Disney, even retailers like Walmart, Abercrombie and Fitch, and Bed Bath and Beyond? Subsidies are intended to help particular industries and encourage particular behavior. But they can only encourage one by discouraging others and they threaten not only our economy, but the essential foundations of freedom.

Commonly referred to as “corporate welfare”, these subsidies and tax breaks cost taxpayers a pretty penny. In fact, one study released last summer found that incentive packages given to Microsoft, Google, Apple, Facebook, Amazon, and other prominent internet companies cost taxpayers almost $2 million per job.

Additionally, a 2015 study found that over the past 15 years, the federal government has spent $68 billion in grants and special tax credits for businesses. Even more concerning is that the majority of it, approximately two-thirds, was given to large corporations. On top of that, the study discovered that many of these companies also receive state and local subsidies:

Eleven parent companies among the 50 largest recipients of federal grants and allocated tax credits are also among the top 50 recipients of state and local subsidies. Six of the 50 largest recipients of federal loans, loan guarantees and bailout assistance are also on that state/local list. Five companies appear on both federal lists and the state/local list: Boeing, Ford Motor, General Electric, General Motors and JPMorgan Chase.

Looking specifically at these state and local subsidies, Good Jobs First keeps a running list of “megadeals,” which it defines as subsidy awards with total state and local costs of at least $50 million. As of October 2017, the number of these deals totaled 386.

In addition to burdening the taxpayer, corporate welfare also harms small business owners. Since the Small Business Administration only awards grants to certain nonprofits and educational institutions, most small businesses are left to fend for themselves. Competing against multi-billion-dollar businesses backed by the government’s financial support, they find themselves in a David-versus-Goliath situation.

Corporate welfare has been the topic of much discussion recently, as Amazon makes its final decision of where to build its second headquarters. Cities all around the country have offered enticing incentive packages in an attempt to lure the corporate giant into their area. The largest bid made public was Newark, N.J.’s $7 billion offer.

Many economists and policy analysts have published their opinions on the Amazon case, cautioning governments not to offer Amazon an “arm and a leg.” Although the prospective job creation can be tempting, they warn that the cost of this massive corporate welfare to government budgets, local businesses, and taxpayers might not be worth it.

Indeed, governments should think twice before offering hefty handouts to any large corporations. Not only are taxpayers required to foot the bill, but small business owners are oftentimes devastated by these corporate subsidies. As Krieble notes, by encouraging large corporations while simultaneously discouraging small businesses, these government handouts threaten both our economy and a basic principle of American democracy — that all are entitled to equal treatment under the law.

Photo credit: Carlos Luna via Flickr, CC BY 2.0

Terry Schilling

Terry Schilling is executive director of the American Principles Project.