[News] The shocking numbers behind corporate welfare

[Anti-Imperialist News]

  The shocking numbers behind corporate welfare

by David Cay Johnston 
<http://america.aljazeera.com/profiles/j/david-cay-johnston.html> 
@DavidCayJ <http://www.twitter.com/DavidCayJ> February 25, 2014
*http://america.aljazeera.com/opinions/2014/2/corporate-welfaresubsidiesboeingalcoa.html*

State and local governments have awarded at least $110 billion in 
taxpayer subsidies to business, with 3 of every 4 dollars going to fewer 
than 1,000 big corporations, the most thorough analysis to date of 
corporate welfare revealed today.

Boeing ranks first, with 137 subsidies totaling $13.2 billion, followed 
by Alcoa at $5.6 billion, Intel at $3.9 billion, General Motors at $3.5 
billion and Ford Motor at $2.5 billion, the new report by the nonprofit 
research organization Good Jobs First shows <http://www.goodjobsfirst.org>.

Dow Chemical had the most subsidies, 410 totaling $1.4 billion, followed 
by Warren Buffett's Berkshire-Hathaway holding company, with 310 valued 
at $1.1 billion.

The figures were compiled from disclosures made by state and local 
government agencies that subsidize companies in all sorts of ways, 
including cash giveaways, building and land transfers, tax abatements 
and steep discounts on electric and water bills.

In fact, the numbers significantly understate the true value of taxpayer 
subsidies to businesses, for reasons explained below.


    A fight for transparency

On a shoestring budget --- roughly $1 million a year --- Good Jobs First 
has for years dug through disclosure statements in all 50 states to 
compile reports on subsidies. Many of these subsidies exist despite 
<http://reut.rs/1lf41Ni> strong provisions in many state constitutions 
prohibiting corporate welfare. New York state, for example, gets around 
this because its highest court ruled in 2011 that while the state may 
not give gifts directly, it can create an agency and let it give the gifts.

Good Jobs First does not oppose all subsidies. Rather, it favors 
transparency in the hope, executive director Greg LeRoy said, that any 
subsidies will be used wisely to expand the economy and not just prop up 
inefficient enterprises.

The data on welfare paid to companies come from Good Jobs First's 
Subsidy Tracker 2.0 <http://www.goodjobsfirst.org/subsidy-tracker>, an 
improved Web tool that examines subsidies by linking subsidiaries to 
parent companies. The older version of the tool obscured the benefits to 
brand name corporate parents such as Apple, Google, Toyota and Walt Disney.

The size and range of the subsidies the tool has uncovered helps explain 
the burdens taxpayers must bear because so many major corporations rely 
on welfare for much or all of their profits rather than earning them.

Such burdens are especially hard on the poor. The bottom fifth of 
households in all but one state pay a larger share 
<http://bit.ly/1fxot8f> of their income in state and local taxes than 
the top 1 percent of earners. This means that corporate welfare 
effectively redistributes from the poor to those rich enough to own 
corporate stock.

Many forms of subsidies to business are excluded from Subsidy Tracker 
2.0. For example, Good Jobs First does not count federal subsidies. It 
also leaves out indirect subsidies like perpetual monopoly rights of way 
for pipelines as well as rules that limit competition in 
pharmaceuticals, telecommunications and a host of other industries.

Phil Mattera, the organization's research director, starts with publicly 
announced subsidies. With his small staff, he then gathers whatever 
records state and local governments make public or disclose through 
various Freedom of Information Act--type laws.

We know far too little about taxpayer support for business because of 
the ways governments do and do not collect data.

Federal, state and local governments publish exhaustively detailed 
statistical reports on welfare to the poor, disabled, sick, elderly and 
other individuals who cannot support themselves. The cost of subsidized 
food, housing and medical care are all documented at government expense, 
with the statistics posted on government websites.

But corporate welfare is not the subject of any comprehensive reporting 
at the federal level. Disclosures by state and local governments vary 
greatly, from substantial to nearly nonexistent.

Good Jobs First has prodded some states to expand disclosures. In many 
cases, though, the amounts and terms of corporate welfare are unknown 
because state and local governments assert that the information is 
confidential.

The best estimate of total state and local subsidies comes from 
Professor Kenneth Thomas, a political scientist at the University of 
Missouri at St. Louis. In 2010 he calculated 
<http://us.macmillan.com/investmentincentivesandtheglobalcompetitionforcapital/KennethPThomas> 
the annual cost at $70 billion. No serious challenge has been made to 
this conservatively calculated figure, which in 2014 dollars comes to 
$75 billion. That is about $240 per person --- nearly $1,000 annually 
for a family of four. That amounts to more than a week's take-home pay 
for a median-income family with two parents and two children.

Few people realize the cost, however, because it is not represented by a 
deduction on their paychecks. What appears, rather, are burdens they 
bear in the form of taxes and Social Security.


    Too big to fly on their own

Good Jobs First found that just 965 companies collected 75 percent of 
the value from 25,000 subsidy deals identified in Subsidy Tracker 2.0.

Boeing's $13.2 billion is a bit more than its pretax profits for the 
last two years. It is also equals a stunning 70 percent of the $18.2 
billion of equity owned by Boeing shareholders.

Measured against the number of commercial jetliners sold --- 648 last 
year, at an average of nearly $79 million per plane --- these subsidies 
come to more than $20 million per aircraft 
<http://seattletimes.com/html/businesstechnology/2022663880_airbusboeingxml.html>.

While the subsidies did not go just to commercial jets and were not for 
one year, those figures give some perspective to the huge amount of 
money that taxpayers lavish on Boeing.

Boeing declined to comment.

Second on the subsidy list is Alcoa, the old Aluminum Co. of America, 
which benefits from 91 subsidies totaling $5.6 billion. On the basis of 
its pretax income for last four years, that amounts to all the pretax 
profits Alcoa shareholders can expect for the next 189 years.

Alcoa operates in 35 countries, so I also calculated its state and local 
subsidies against its share of U.S. business for the last three 
profitable years. Measured this way, the subsidies equal 17 years of 
pretax U.S. profits.

These facts may surprise Alcoa shareholders, since the company makes 
virtually no mention of these gifts from taxpayers in its annual 10-K 
disclosure report. The only mention of subsidy is in terms of how 
Medicare drug benefits for retirees will lower annual pension costs, 
explaining about a nickel on each dollar of subsidy that Alcoa collects 
from American taxpayers.

In response to the findings, Alcoa said that, due to complexities in 
electricity pricing and to closing part of its New York smelting 
operation, the value of the subsidy was significantly less than Subsidy 
Tracker showed.

Taxpayers who want to understand the full dimension of their burdens 
should demand that Congress require and pay for detailed annual 
statistical reports showing every federal, state and local subsidy 
received by corporations, including the value of indirect subsidies like 
those perpetual rights of way to pipelines and other legal monopolies.

Without that information, we have no idea of the true cost of welfare or 
the cost of propping up companies that, evidently, cannot make their way 
on their own.

David Cay Johnston, an investigative reporter who won a Pulitzer Prize 
while at The New York Times, is a best-selling author who teaches the 
business, tax and property law of the ancient world at Syracuse 
University College of Law.

-- 
Freedom Archives 522 Valencia Street San Francisco, CA 94110 415 
863.9977 www.freedomarchives.org
-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://freedomarchives.org/pipermail/news_freedomarchives.org/attachments/20140225/cdf2c941/attachment.htm>