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<h1 class="standard-title opinion-title">The shocking numbers behind
corporate welfare</h1>
<div class="standard-containerByline"> by <span class="standard-byline"><a
href="http://america.aljazeera.com/profiles/j/david-cay-johnston.html"
title="David Cay Johnston" class="standard-byline--link">David Cay
Johnston</a></span> <span class="standard-contact"><span
class="twitter-icon"><a href="http://www.twitter.com/DavidCayJ"
target="_blank" title="@DavidCayJ" class="standard-contact--link">@DavidCayJ</a></span></span>
<span class="standard-dateTime"> <span class="date separator">February
25, 2014<br>
<b><small><small><a class="moz-txt-link-freetext" href="http://america.aljazeera.com/opinions/2014/2/corporate-welfaresubsidiesboeingalcoa.html">http://america.aljazeera.com/opinions/2014/2/corporate-welfaresubsidiesboeingalcoa.html</a></small></small></b><br>
</span> </span> </div>
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<div class="text section">
<p>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.</p>
<p>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 <a
href="http://www.goodjobsfirst.org" target="_blank">shows</a>.</p>
<p>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.</p>
<p>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.</p>
<p>In fact, the numbers significantly understate the true value of
taxpayer subsidies to businesses, for reasons explained below.</p>
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<h2 class="subHeading-title">A fight for transparency</h2>
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<p>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 <a
href="http://reut.rs/1lf41Ni" target="_blank">despite</a> 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. </p>
<p>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.</p>
<p>The data on welfare paid to companies come from Good Jobs First’s <a
href="http://www.goodjobsfirst.org/subsidy-tracker" target="_blank">Subsidy
Tracker 2.0</a>, 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.</p>
<p>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.</p>
<p>Such burdens are especially hard on the poor. The bottom fifth of
households in all but one state pay <a href="http://bit.ly/1fxot8f"
target="_blank">a larger share</a> 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.</p>
<p>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.</p>
<p>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.</p>
<p>We know far too little about taxpayer support for business because
of the ways governments do and do not collect data.</p>
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<p>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.</p>
<p>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.</p>
<p>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.</p>
<p>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 <a
href="http://us.macmillan.com/investmentincentivesandtheglobalcompetitionforcapital/KennethPThomas"
target="_blank">calculated</a> 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.</p>
<p>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.</p>
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<h2 class="subHeading-title">Too big to fly on their own</h2>
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<div class="text section">
<p>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.</p>
<p>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.</p>
<p>Measured against the number of commercial jetliners sold — 648 last
year, at an average of nearly $79 million per plane — these subsidies <a
href="http://seattletimes.com/html/businesstechnology/2022663880_airbusboeingxml.html"
target="_blank">come to more than $20 million per aircraft</a>.</p>
<p>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.</p>
<p>Boeing declined to comment.</p>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<p>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.</p>
<p>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.</p>
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<div class="authorProfileBio">
<div class="authorProfileBio-box">
<p>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.</p>
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