Understanding Corporate Welfare in America Today

Corporate welfare in America is a complex issue that affects many people.

The US government provides billions of dollars in subsidies and tax breaks to large corporations every year, often under the guise of economic development or job creation.

These subsidies can take many forms, including direct grants, low-interest loans, and tax credits.

The idea behind corporate welfare is to give a boost to struggling businesses or to encourage companies to stay in the US.

However, critics argue that these subsidies often benefit large corporations at the expense of small businesses and individual taxpayers.

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The term "corporate welfare" has a clear origin, which is worth noting. Ralph Nader reportedly coined the term in 1956.

Ralph Nader's coining of the term "corporate welfare" marked a significant moment in the discussion around corporate benefits.

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The term "corporate welfare" has a specific origin, but its background is just as interesting. Ralph Nader reportedly coined the term in 1956.

Subsidies are often considered excessive or unfair if they benefit large corporations disproportionately. This is exactly what happens with agricultural subsidies in the United States, where a small number of large corporations like Archer Daniels Midland reap the majority of the benefits.

Alan Peters and Peter Fisher estimated that state and local governments provide around $40–50 billion annually in economic development incentives, which critics label as corporate welfare. This is a staggering amount of money that could be used for more pressing needs.

The 2008 bank bailouts in the United States are also seen as a form of corporate welfare by many economists. Politicians have even called out the zero-interest loans from the Federal Reserve System to financial institutions as a hidden form of corporate welfare.

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Chapter 313 was initially defunct, but lawmakers revived it in the 88th legislative session of 2023. House Bill 5, authored by State Rep. Todd Hunter, created a new economic development program that provides a property tax abatement of up to 50 percent to qualifying companies for 10 years.

This new program, also known as the Jobs, Energy, Technology and Innovation Act (JETI), was passed by a significant margin in both the Texas House of Representatives and the Texas Senate. The vote in the Texas House was 120 in favor to only 25 in opposition, and in the Texas Senate, it was 27 in favor to only 4 in opposition.

The revived program has raised concerns about accountability and transparency in how applications for tax abatements are approved. Supporters of the legislation argue that it has ushered in a more transparent process, but critics remain skeptical.

The new program provides economic incentives with no requirement that the school district provide a tax offset, meaning they will seek the revenue elsewhere, such as from individual taxpayers who receive no incentive. This has sparked debate about the fairness of the program.

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Corporate welfare refers to government incentives and benefits given to corporations to encourage economic growth and job creation.

Critics argue that these incentives often benefit large corporations at the expense of small businesses and taxpayers.

Companies have failed to deliver on their job creation promises, yet still received substantial financial benefits.

The practice of "privatizing profits and socializing losses" is a major criticism of corporate welfare, where corporations reserve financial gains for themselves and pass along losses to society.

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In Texas, corporate welfare programs abound, with various incentives designed to attract businesses and stimulate economic growth. The Texas Moving Image Industry Incentive Program (TMIIIP) offers cash grants to film and television productions that meet specific requirements for local spending and employment.

Some notable examples of corporate welfare programs in Texas include the Media Production Development Zone Program (MPDZ), which provides sales and use tax exemptions for permanent moving image production sites. The Major Events Reimbursement Program (MERP) reimburses eligible expenses for major events, such as sports championships and cultural events.

The Texas Abatement Act, also known as Chapter 312, allows local governments to offer property tax abatements to businesses as an incentive to encourage investment and job creation. The program has been extended through September 1, 2029, and requires local governments to publicly post their tax abatement guidelines and criteria online.

The Texas Enterprise Fund (TEF) provides financial incentives to companies that choose to establish operations in Texas, with the goal of creating jobs and stimulating economic growth. The fund has been used to attract high-profile companies, including Toyota, Facebook, and SpaceX.

Here are some key features of the corporate welfare programs mentioned above:

In the United Kingdom, a senior lecturer at the University of York, Kevin Farnsworth, estimated that the government provides corporate subsidies of £93 billion.

This estimate includes tax relief for businesses that invest in new plants and machinery, which Farnsworth estimated to be £20 billion. However, The Register disputed this figure, stating that Farnsworth's calculation was incorrect.

The government also provides various other forms of support to businesses, such as not charging fuel duty on fuel used by railways or airlines, and offering green energy subsidies. But, as The Register noted, not charging businesses taxes under certain circumstances is not the same as giving them a subsidy.

Fuel duty is not charged on airlines due to the Convention on International Civil Aviation, a UN agency that specifies aeroplanes should be exempt from fuel duties.

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The program offers financial incentives in the form of cash grants on a percentage of a project's eligible in-state expenditures, with specific requirements for local spending and employment.

The Texas Film Commission administers the program under the Economic Development and Tourism Division of the Office of the Governor.

The program has faced criticism for favoring large production companies while providing limited benefits to smaller, independent filmmakers.

Other incentives in support of the moving image industry include the Media Production Development Zone Program (MPDZ), which provides a sales and use tax exemption for the construction or renovation of permanent moving image production sites.

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Additionally, the state offers sales tax exemptions and refunds, including exemptions on most items rented or purchased for direct use in production and refunds on the state occupancy tax for hotel rooms occupied for more than 30 consecutive days and on fuel taxes for off-road use.

The Texas Multimedia Production Program (TMPP) was proposed in the 88th Legislative Session (2023) but ultimately failed to pass, despite passing out of the House Culture, Recreation and Tourism Committee.

The TMPP would have provided tax credits to production companies that could be sold on a secondary market, with a focus on productions that spent over $15 million.

The program would have excluded video game, animation, and visual effects projects, and lowered the residency requirement for cast and crew from 70 percent to 25 percent.

The Texas Abatement Act, or Chapter 312 of the Texas Tax Code, allows local governments to offer property tax abatements to businesses as an incentive to encourage investment and job creation in their jurisdictions.

The abatements apply to the increase in the value of the property resulting from improvements or new developments, not to the pre-existing value of the property itself.

Local governments are required to publicly post their tax abatement guidelines and criteria online and hold public hearings before adopting, amending, or renewing those guidelines.

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The chief appraiser is also required to report the appraised values of properties given such abatements for the first 2 years after the agreements expire.

Here are some notable programs in Texas that provide incentives for various industries:

The Texas Economic Development Act was renewed in 2013, expanding its reach to benefit companies that create jobs and boost local economies.

Lawmakers passed House Bill 3390, authored by then-State Rep. Harvey Hilderbran, which extended the qualifying time from 8 to 10 years for property tax reduction.

Companies like Samsung, Apple, and Tesla have taken advantage of the program, receiving significant reductions in their property tax bills, sometimes amounting to tens of millions of dollars over a decade.

The program requires companies to create jobs and boost local economies in return for the tax breaks, but critics argue that it often favors wealthy corporations over individual taxpayers.

The legislation also repealed specific provisions requiring specific wage minimums and added additional qualifiers for applicants, making it easier for companies to qualify for the program.

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Daniel D. Huff, a professor emeritus of social work, conducted a comprehensive analysis of corporate welfare in 1993, estimating that the United States spent at least $170 billion on corporate welfare in 1990.

This number is staggering when compared to other forms of government spending. In 1990, the federal government spent $4.7 billion on all forms of international aid.

The federal government also allocated $4.8 billion for pollution control programs, highlighting the significant investment in corporate welfare compared to environmental initiatives.

In contrast, the federal government spent only $8.4 billion on both secondary and elementary education, demonstrating the vast disparity in funding priorities.

Notably, corporate welfare expenditures exceed the combined spending on several key social welfare programs, including Aid for Dependent Children ($11 billion) and Medicaid ($30 billion per year).

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