When Amazon announced it was scouting potential locations for a new headquarters, state governments quickly found themselves engaged in a bidding war with one another. They competed to offer the company incentives, such as tax breaks, if they would relocate to that state. New York alone offered Amazon a total of $3.4 billion in tax incentives and grants in order to build a headquarters in Long Island City. That deal ultimately fell through, and Amazon is moving forward with plans for a new Virginia location instead, even though New York offered them the most incentives by far.
Supporters of the New York deal argued that the $3.4 billion in subsidies would pay for themselves as Amazon created jobs and helped the local economy. On the other hand, opponents of the deal argued against Amazon’s corporate policies, and said they would prefer to see that money spent on public housing and other social and economic programs for people living in the area. Eventually, the political heat became too intense in NY, and Amazon pulled out.
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What is Corporate Welfare?
The bidding war that took place over Amazon’s relocation, with state governments competing to offer them tax breaks as financial incentive to move to their state, is a form of corporate welfare. Corporate welfare is a broad term that describes any sort of government level financial support or subsidy given to a corporation or other type of private business. This can take the form of tax breaks, bailouts, and subsidies.
Corporate Welfare vs. Social Welfare
Social welfare is defined by similar methods of support — direct payments and tax breaks — but social welfare programs are intended for the benefit of individuals and families, rather than of businesses. Food stamps, disability programs, and unemployment programs are examples of social welfare.
Supporters of corporate welfare believe this type of support creates a stronger economy, ensuring that entities can keep providing jobs and encouraging businesses to stay in the country’s borders. Opponents to corporate welfare, however, often argue that rather than courting individual businesses, the money would be better spent on social programs, and that corporate welfare exacerbates poverty by diverting public money away from such programs and increases the tax burden on American families.
Subsidies are often much more complex topics than other forms of corporate welfare, as they are money given to industries for the express purpose of keeping the goods and services produced affordable. Subsidies and corporate welfare are often legislated in combination with social welfare programs, especially when it comes to essentials like food.
The Farm Bill is one example of this relationship. Within the same massive bill are laws that provide subsidies for the farming industry, but also for family-owned farms, farmers markets, and other small businesses. The bill also includes legislation about food stamps, local food programs, and other types of social welfare. In this case, although there is always argument about the specifics of the bill, the two types of subsidy are closely related.
On the other hand, not all subsidies are intended for small business or tied to social programs. The majority of the money going toward subsidies, in fact, isn’t tied to small business or individual families at all, but instead affects large companies
Boeing has been the largest recipient of government subsidies over the last 16 years, at more than $14 billion, with the next two largest recipients being General Motors and Intel, each at around $6 billion (earliest date of recording 1994). The biggest recipient of corporate welfare in 2018 was Toyota-Mazda, at $900 million. According to the CATO Institute, the US government spends around $100 billion annually on corporate welfare.
At the same time, tax breaks and legislation loopholes allow companies like Amazon to pay $0 in federal taxes. These kinds of corporate welfare are much more disconnected from the concerns of regular Americans and small business owners than the welfare provided by legislation like the Farm Bill.
Corporate Welfare in the Crosshairs
As more socially progressive candidates enter political positions, it’s become clear that the democratic party and its voters are shifting further to the left than in recent years. Even though New York was bidding for the HQ, progressive political forces killed the deal. Political candidates in the democratic party are becoming much more comfortable talking about the relationship between governments and private businesses.
Conservatives and center politicians often argue that corporate welfare is a net gain for local economies and America’s national economic interest. They keep companies from outsourcing to foreign workers, and incentivize companies to create better jobs for Americans, argue supporters of corporate welfare. However, as illustrated by Amazon’s struggles in New York, there are a growing number of people on the left, and-in other areas of the political spectrum, who argue against corporate welfare. Even well known businessmen like Charles Koch are starting to talk about it. Arguments are arising that we should be taxing companies, not giving them loohopes, and using the money currently spent on corporate welfare instead for social programs, public works, and infrastructure.
Whether corporate welfare is going to be dismantled or strengthened is impossible to predict, but the conversation about it is happening more loudly, and more often.
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