Corporate Handouts: Governing by Tax Code and Subsidy

By: Nick Zaiac - @NickZaiac - Mar 17, 2014, 11:30 am

Good Jobs First, an organization focusing on “corporate and government transparency” and “smart growth for working families” recently published a study outlining the 100 companies that have received the most corporate subsidies from various state government programs.

Source: Good Jobs First.

The author, Philip Mattera, does well to call out companies for using their political connections to rake in massive amounts to subsidies, including over US$13 billion to Boeing, spread across 137 programs. The list includes some highlights that most people wouldn’t have guessed, including upwards of $2 billion in subsidies to Nike, and over $400 million to Apple. Dow Chemical, ranked number 12 on Mattera’s list, has received 416 different subsidies, over 100 more than Warren Buffett’s Berkshire Hathaway (306).

While the study seems relatively well-intentioned, the author includes tax credits as part of what he considers corporate subsidies. While many such credits are indeed subsidies, it would be doubtful if he considers all tax credits subsidies. Is the credit for plug-in electric vehicles for businesses a problem? Are casualty, disaster, and theft credits terrible for society? What about the child tax credit for individuals?

Mattera’s line seems entirely arbitrary by focusing solely on economic development subsidies, and only those granted at the state level. What about grants from the federal government in the form of Community Development Block Grants? The federal government also has massive programs propping up things like the same green energy companies Good Jobs First dreams of.

What is different here?

What makes this study interesting is not its contents, anyone could dig around in state budgets and produce similar numbers, but the reaction to it. Specifically, David Sirota at In These Times attempts to spin the study into a piece bashing the Koch brothers for receiving about $88 million, dating back to 1990. The problem is that the bulk of these subsidies come in the form of tax credits, as opposed to direct subsidies like those received by companies like Boeing and IMB.

There’s a simple solution to all of this, and it would probably satisfy both Mattera and Sirota, at least to some extent. Simplify the tax code and lower corporate tax rates to eliminate the tax credits both loathe so much. Also, eliminate the myriad of programs that give grants to whomever happens to be well-connected on any given day.

I think that’s something we can all agree would be better than the mess we have now.

Nick Zaiac Nick Zaiac

Nick Zaiac is a public-policy researcher in Washington, DC. He also serves as a policy analyst at the Maryland Public Policy Institute. His column, The DC Leviathan focuses on the often-ignored bureaucratic agencies, from the Department of the Interior to the General Services Administration. He has been published in the Baltimore Sun, City AM, CapX, and other outlets. Follow @NickZaiac.