NCPA - National Center for Policy Analysis

Corporations Hitting-Up Taxpayers

March 12, 1996

Each year, some of America's largest firms dip into the pockets of U.S. taxpayers for handouts administered through more than 100 federal programs. Because it is politically difficult to cut corporate subsidies, critics have called for establishment of an independent panel -- along the lines of the base-closure commission -- to recommend their demise.

Critics point to some glaring examples of corporate welfare:

  • Annual tax breaks of $700 million for producers of the corn-based fuel ethanol, which critics say wouldn't even exist were it not for the federal subsidy.
  • The Department of Agriculture's Market Promotion Program, which spends millions every year to promote overseas the products of such corporate giants as McDonald's, M&M-Mars, Seagram brands, Sunkist, Ernest & Julio Gallo, Tyson Foods and Campbell Soup.
  • Federal subsidies for cheap electricity, which benefit Aspen and its ski resorts, the Hilton Head resort area and the Golden Gate Casino.

Estimates vary on what these subsidies cost taxpayers - from $28 billion to $75 billion a year, or even more. Some claim that special tax breaks amount to an additional $22 billion a year.

Latest to line up at the trough are the television networks which are fighting a move to have them bid at auction for valuable parts of the broadcast spectrum. The networks have launched a scare public relations campaign warning that the auction plan would mean the end of "free TV." But auction advocates doubt that claim, and estimate that requiring bidding would pump anywhere from $11 billion to $70 billion into the Treasury.

Economists claim the subsidies are not only costly, but that they distort and lower economic performance.

  • By shielding firms from normal competitive pressures, the subsidies weaken market incentives for firms to upgrade their products and production methods.
  • They are unfair to competing firms which lack the political clout recipient firms enjoy.

Source: John Merline, "Corporations at the Trough?" Investor's Business Daily, March 12, 1996.


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