Is there really such a thing as "corporate welfare?"?

Question

My understanding of welfare is payments to people with low incomes, or children they can't support. Some have said that by subsidizing this activity, we get more of it. Even FDR spoke of the "narcotic effect" of these types of payments. Some people know that the government will bail them out, and therefore will "slack off" on their own efforts.

Look at that last sentence again - does this apply to tax subsidies to corporations? Are these tax credits and other "breaks" tied to activities we want to encourage rather than discourage (like oil exploration and drilling, etc.), or are they not tied to anything?

Speaking more broadly, when (if ever) should the government use tax policy to encourage or discourage activity? If you tax it, you get less of it; if you subsidize it, you get more of it. The home mortgage interest deduction is probably the most commonly encountered "tax break" - although I'd hardly call it 'homeowner welfare."

What are your thoughts?

Answer 1

The idea of tax subsidies to corporations is to help fund advances in sectors that are particularly vital to the rest of the economy--subsidies to oil corporations help fund exploration efforts and technological advances to help make a crucial commodity more economically feasible and therefore less expensive to the consumers.

You're right, it can have a narcotic effect, but theoretically, considerably less so in the corporate world. Corporations must compete against each other in the free market. If they use subsidies to line their pockets rather than to invest back into their companies to give them a competitive edge, they are putting themselves out of business by not using every advantage they can to make it better, faster and cheaper than the other guy.

One example of how this didn't work out were the airline subsidies after Sept 11. The govt paid subsidies to the major airlines as a result of the hit to the tourist industry caused by the attacks. The biggest airlines took the subsidies, but were slow to put in place other cost-saving tactics to revitalize their businesses. As a result, there was a surge in the budget airline market, showing that there was a significant market of folks who don't care about the extra olive on their salad, but who basically just want to get there. The bigger airlines continue to feel repercussions five years later--which is why all the mergers, bankruptcies, etc.

To address your broad question, I think individual tax policy is currently the reverse of what it should be, and perhaps should be modeled more after the corporate subsidy model. Rather than have an income tax, which penalizes productivity, the tax system should be based on consumption. You can buy all you want, but just remember that the bigger and more extravagant your purchase, the more tax you'll pay on it. And without an income tax, you are free to strive ever upward, to be more productive, and to earn more without the worry of being penalized at a heavier rate because you're making more (which also allows you to buy more big-ticket items regardless of the tax on them).

As a result, people wouldn't buy half the crap they currently buy that they don't need until they could afford both the item AND the tax, and they'd work harder at getting farther to be able to get what they want.

Sorry for such a long answer, but it was a long question.

Answer 2

There is no such thing as a business tax. All taxes put on businesses get passed on in higher prices and the consumers end up paying for it.

You are completely correct on "payments to people with low incomes, or children they can't support. Some have said that by subsidizing this activity, we get more of it." This is a base of conservatives.

I love seeing this on the leftie filled Answers.

Answer 3

the frightening concern approximately companies that Jefferson warned us approximately became that they function and not applying a ethical ethical experience. no person is accountable, while an corporation does surprising injury to a republic by using bribing politicians, destroying the surroundings, applying down wages, and so on. no person interior the corporate shape feels that the enterprise operates fullyyt simply by fact of them, because it won't be able to. that's why an corporation is the two effectual and obscene oftentimes on an identical time. they seem to be a needed evil satirically like the IRS (or government oftentimes) that must be saved in examine and controlled by using exams and balances.

Answer 4

I used to work for a roller bearing thy got 80 million dollar tax credit for shutting down the plant,and thy got 54 million last years because of unfair import.the owner is now the ambassador to Germany

Answer 5

Corporations should not get any handouts-- they should get by on Free Enterprise.

As for "if you tax something you get less of it, if you subdidize something you get more of it": The Bush Administration has been reducing taxes on UNearned income, for people who wit on their duffs and collect dividend checks, which transfers the burden to working stiffs who work. Think about it.

Answer 6

yes and what they receive far outweighs the people who receive welfare

Answer 7

Yes there is....and lots of it