SPECIAL REPORT/CORPORATE WELFARE
NOVEMBER 9, 1998 VOL. 152 NO. 19
Corporate Welfare
A TIME investigation uncovers how hundreds of companies
get on the dole--and why it costs every working American
the equivalent of two weeks' pay every year
By DONALD L. BARLETT AND JAMES B. STEELE
How would you like to pay only a quarter of the real estate
taxes you owe on your home? And buy everything for the next 10
years without spending a single penny in sales tax? Keep a chunk
of your paycheck free of income taxes? Have the city in which
you live lend you money at rates cheaper than any bank charges?
Then have the same city install free water and sewer lines to
your house, offer you a perpetual discount on utility bills--and
top it all off by landscaping your front yard at no charge?
Fat chance. You can't get any of that, of course. But if you
live almost anywhere in America, all around you are taxpayers
getting deals like this. These taxpayers are called
corporations, and their deals are usually trumpeted as "economic
development" or "public-private partnerships." But a better name
is corporate welfare. It's a game in which governments large and
small subsidize corporations large and small, usually at the
expense of another state or town and almost always at the
expense of individual and other corporate taxpayers.
Two years after Congress reduced welfare for individuals and
families, this other kind of welfare continues to expand,
penetrating every corner of the American economy. It has turned
politicians into bribery specialists, and smart business people
into con artists. And most surprising of all, it has rarely
created any new jobs.
While corporate welfare has attracted critics from both the left
and the right, there is no uniform definition. By TIME's
definition, it is this: any action by local, state or federal
government that gives a corporation or an entire industry a
benefit not offered to others. It can be an outright subsidy, a
grant, real estate, a low-interest loan or a government service.
It can also be a tax break--a credit, exemption, deferral or
deduction, or a tax rate lower than the one others pay.
The rationale to curtail traditional welfare programs, such as
Aid to Families with Dependent Children and food stamps, and to
impose a lifetime limit on the amount of aid received, was
compelling: the old system didn't work. It was unfair, destroyed
incentive, perpetuated dependence and distorted the economy. An
18-month TIME investigation has found that the same indictment,
almost to the word, applies to corporate welfare. In some ways,
it represents pork-barrel legislation of the worst order. The
difference, of course, is that instead of rewarding the poor, it
rewards the powerful.
And it rewards them handsomely. The Federal Government alone
shells out $125 billion a year in corporate welfare, this in the
midst of one of the more robust economic periods in the nation's
history. Indeed, thus far in the 1990s, corporate profits have
totaled $4.5 trillion--a sum equal to the cumulative paychecks
of 50 million working Americans who earned less than $25,000 a
year, for those eight years.
That makes the Federal Government America's biggest sugar daddy,
dispensing a range of giveaways from tax abatements to price
supports for sugar itself. Companies get government money to
advertise their products; to help build new plants, offices and
stores; and to train their workers. They sell their goods to
foreign buyers that make the acquisitions with tax dollars
supplied by the U.S. government; engage in foreign transactions
that are insured by the government; and are excused from paying
a portion of their income tax if they sell products overseas.
They pocket lucrative government contracts to carry out ordinary
business operations, and government grants to conduct research
that will improve their profit margins. They are extended
partial tax immunity if they locate in certain geographical
areas, and they may write off as business expenses some of the
perks enjoyed by their top executives.
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