wealthy corporations regulations tax breaks

The Rich Get More From Government Than Anyone
research funds tax expenditures corporate welfare cronyism rent seeking

The Cost of Corporate Welfare and Rent-Seeking

When an issue becomes popular on both halves of the political spectrum, then those of us who’re off that spectrum and into geonomics feel encouraged. We trim, blend, and append two 2012 on subsidizing the wealthy from (1) Common Dreams on the left, Jly 16, by P. Buchheit, and (2) National Review on the right, Jly 25, by V. de Rugy.

by Paul Buchheit and by Veronique de Rugy

Did wealthy individuals and corporations make it on their own? There are at least five good reasons why the wealthiest Americans need government as much as the rest of us, and probably more.

1. Security

The police, emergency services, and National Guard are trained to focus on crimes against wealth. In the cities, business interests keep the police focused on the homeless and unemployed. Wealthy Americans can rest better at night knowing that the police are "stopping and frisking" in the streets of the poor neighborhoods.

2. Laws and Deregulations

The wealthiest Americans are the main beneficiaries of tax laws, property rights, zoning rules, patent and copyright provisions, trade pacts, antitrust legislation, and contract regulations. Tax loopholes allow them to store over $1 trillion in assets overseas.

Their companies benefit, despite any publicly voiced objections to regulatory agencies, from SBA and SEC guidelines that generally favor business, and from FDA and USDA quality control measures that minimize consumer complaints and product recalls.

There are even anti-antitrust measures, such as the licensing rules that allow the American Medical Association to restrict the number of doctors in the U.S., thereby keeping doctor salaries artificially high.

3. Research and Infrastructure

Private jets use 16 percent of air traffic control resources while paying only 3% of the bill.

Taxpayer-funded research at the Defense Advanced Research Projects Agency (the Internet) and the National Science Foundation (the Digital Library Initiative) has laid a half-century foundation for technological product development. Well into the 1980s, as companies like Apple and Google and Microsoft and Oracle and Cisco profited from the fastest-growing product revolution in American history, the U.S. Government was still providing half the research funds. Even today 60% of university research is government-supported.

As the super-rich ride in their military-designed armored cars to a financial center globally connected by public fiber optics networks to make a trade guided by publicly funded data mining and artificial intelligence software, they might stop and re-think the old Horatio Alger myth.

4. Subsidies & Tax breaks

Most of the annual $1.3 trillion in "tax expenditures" (special deductions, exemptions, exclusions, credits, and loopholes) goes to the top quintile of taxpayers. One estimate is $250 billion a year just to the richest 1%. Deducting for mortgage interest and rental expense alone returns almost $100 billion a year to millionaires.

280 Fortune 500 companies, which together paid only half of the maximum 35 percent corporate tax rate, received $223 billion in tax subsidies.

The U.S. federal government spent $92 billion on corporate welfare during fiscal year 2006; recipients included Boeing, Xerox, IBM, Motorola, Dow Chemical, and General Electric.

5. Disaster Costs

Exxon paid 2% in U.S. federal taxes from 2008 to 2010, Chevron 4.8%. Yet the petroleum industry readily takes public money for oil spills. Cleanups cost much more than the fines imposed on the companies. Government costs can run into the billions, or even tens of billions, of dollars.

For the bail out, the Treasury and the Federal Reserve granted Wall Street between $3 trillion and $5 trillion. That's enough to pay off both the deficit and next year's entitlement costs.

Taxes supposedly pay for society's benefits, which get bigger and better as people get richer.

To read more

JJS: Enough class warfare. Now for the right wing’s turn. Enjoy the writer’s neutral tone.

Cronyism -- the practice by which government officials provide preferential treatment (such as loans, subsidies, or regulatory preferences) to handpicked firms or industries -- takes many forms: It is Solyndra, the farm bill, subsidies to oil-and-gas corporations, banks and automobile companies, but also the protections granted to the sugar industry and other industries, tax credits to private companies, and much more.

Corporate welfare programs are “programs that provide payments or unique benefits and advantages to specific companies or industries.” They cost $98 billion in spending in fiscal 2012.

That cost, however, doesn’t include things like the higher price of goods and services that American consumers have to pay when the government grants special protection to special interests like it does with the sugar lobby.

Nor does it include the cost to our economy of the time, money, and energy that entrepreneurs and businesses spend asking politicians for those privileges, rent-seeking, as economists call it, instead of devising new ways to create value for customers.

A 10 percentage point increase in the share of students concentrating in law was associated with 0.78 percentage point slower annual growth in per capita GDP. In other words, economic growth was slower in countries where there seemed to be more rent-seeking.

This difference compounds over time. If, since 1980, per capita GDP had grown 0.78 percentage points faster than it actually did, then 2011 per capita production would have been $54,000 rather than $43,000. When governments dispense privileges, economic growth is diminished. It means that real people earn less money than they otherwise could.

This is serious and is just one added layer of evidence that we should end all special favors to private-sector companies.

To read more

JJS: While wasteful spending must be abolished, it won’t stay abolished as long as a deeper problem persists -- our failure to share our common wealth, our society’s surplus, which is the worth of Earth, or the spending by all members of society for land and resources. As long as the many must pay the few for merely owning or using land, then those paying will be at a disadvantage to those receiving. The retainers of "rents" will always constitute an elite class with more clout and make you pay for their privileges.

What can you do? You can adopt geonomics. You can (1) halt the wasteful spending, (2) cut the taxes on useful efforts, on earnings, sales, and buildings, (3) recover all the socially-generated value of land via taxes or fees or leases or dues, and (4) pay the lion’s share of the recovered trillions back to the populace as a Citizens Dividend, a la Alaska’s oil share. When everybody gets a fair share of the pie, then it won’t be available for a few to hog.

Getting a fair share may seem pie-in-the-sky but it has precedents. Already there are Social Security and Medicare for the elderly and conventional welfare for the disabled. Plus, citizens save money by using public schools and public roads whose costs are covered not by users alone but by the general fund.

A Citizens Dividend would expand the disbursement of public revenue to everyone and rather than come from taxes on our efforts would come from “rents” or from the spending we already do for locations.

If you can envision getting such a CD, perhaps you can help make it happen. You can do it locally, and every locality that has done anything even remotely similar has benefited. Top that!


Editor Jeffery J. Smith runs the Forum on Geonomics and helped prepare a course for the UN on geonomics. To take the “Land Rights” course, click here .

Also see:

Subsidizing Risk

Fed balance sheet hits another record size as ...

A Bulletin on Wasteful Government Spending

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