NCPA - National Center for Policy Analysis

Cutting Business Subsidies

January 16, 1997

The billions of dollars in government subsidies to business will get special scrutiny in the new Congress, observers forecast. There is growing hope among groups from the political left and right that a number of the subsidies will be axed.

  • In 1995, the government spent $27.9 billion on direct business subsidies and $2.2 billion on loans, according to the Congressional Budget Office.
  • Of roughly 60 tax breaks accorded business -- which many on the left include in subsidies -- 14 cost the Treasury at least $1 billion per year apiece in lost revenue.
  • The largest tax break, depreciation of assets, cost $32.2 billion in 1995.

Some cuts have already been made.

  • In fiscal year 1995, spending for 35 major subsidy programs was reduced about 15 percent, according to Cato Institute estimates.
  • Last year, Congress began phasing out billions of dollars of farm aid for grains, rice, cotton and oilseeds.

One candidate for the ax this year is the Department of Agriculture's market promotion program, which pays for foreign advertising of American farm goods. That program will get $90 million this year.

Other programs reported to be high on Congressional leaders' hit list include the National Highway Administration's highway demonstration projects and the Overseas Private Investment Corporation.

Groups differ in their opinions regarding what to do with the savings from these proposed cuts. Left-of-center groups want the money to be used for social spending. Conservatives hope the cuts will be part of a larger tax cut program.

Source: Laura M. Litvan, "The Next Big 'Welfare' Battle," Investor's Business Daily, January 16, 1997.


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