We have talked a lot in the Dollar Den about social welfare entitlement spending and how it hurts middle America and the economy. There is also another type of welfare that no one ever talks about. It is given the name corporate welfare.
http://www.ctj.org/html/layoffs.htm
Corporate mergers and acquisitions frequently lead to plant closings and layoffs. Yet the interest on the debt used to finance these mergers is tax-deductible, providing an effective subsidy for corporate raiding.
The tax code's complex rules for taxing multinational corporations fail to make these companies pay their fair share in taxes, and can even encourage multinational corporations to move jobs overseas.
While there are some supposed limits on the deductibility of "excessive" salaries for corporate executives, those limits do not apply to so-called "performance based" compensation. This rule allows corporations to deduct in full compensation linked to stock performance. Downsizing has been one potential way to boost stock prices. In fact, the ten companies analyzed in this study experienced a 54 percent average increase in their stock prices between 1992 and 1995.
Finally, Congress has yet to touch a myriad of industry-specific loopholes that benefit oil, gas and timber companies, insurance companies, banks. These subsidies increase the profitability of the largest, most politically influential corporations regardless of their performance or their treatment of their workers. http://www.corporations.org/welfare/
"After World War II, the nation's tax bill was roughly split between corporations and individuals. But after years of changes in the federal tax code and international economy, the corporate share of taxes has declined to a fourth the amount individuals pay, according to the US Office of Management and Budget." --Boston Globe series on Corporate Welfare
http://socialconscience.com/articles/welfare/
A January 17 analysis of Enron's financial documents by Citizens for Tax Justice finds that Enron paid no corporate income taxes in four of the last five years-- although the company was profitable in each of those years. http://ctj.org/html/enron.htm
http://www.newrules.org/drdave/8-incentives.html
Dr. Dave: Do state and local economic development tax incentives help state and local economies?
A. In the vast majority of cases, the answer is no. Robert G. Lynch, Chairman of the Department of Economics at Washington College sums up the thinking of most economists. There are “little grounds to support tax cuts and incentives—especially when they occur at the expense of public investment—as the best means to expand employment and spur growth.”[1]
http://www.citizen.org/print_article.cfm?ID=12395
Oil Company Tax Break
Title VII, Section 707
Cost to Taxpayers: $295 million
Three companies—BP, ExxonMobil and ConocoPhillips—stand to be the primary recipients of these two tax breaks, totaling $445 million, for building an Alaskan natural gas pipeline and for processing natural gas for the project. Considering that these three companies have enjoyed after-tax profits of $95 billion since 2001, the wealthy shareholders of these companies—not taxpayers—should foot this bill.
Section 706 will allow the three oil companies to depreciate their natural gas pipeline over seven years, costing taxpayers $150 million. Section 707 gives allows natural gas companies in Alaska with a natural gas processing plant to claim a 15% oil recovery costs tax credit, costing taxpayers an additional $295 million.
These three companies combined have contributed over $3 million to federal candidates since 2001, with 85% of that total going to Republicans.
I put a lot of information here because this isn’t just a fringe idea. This has been studied.
It is easy to point at a welfare mom you see everyday driving a huge SUV and paying $500 in food stamps for groceries as milking the system. It is a lot harder to point to things that are happening behind the scenes with government and corporations. Coporations milk the system with the examples above. They milk the system by not having any form of health care for lower level workers.
I am not against corporations at all. Just like everyone else they need to be paying their fair share too.
