This Week: Corporate Hand-Outs and Write-Offs

We have recently seen a supposedly "liberal" president sign into law welfare reform that will have a sweeping impact on relief and aid to the poor. And yet we continue to see major corporations getting huge hand-outs from the government. Corporations take almost $170 billion in tax-funded federal handouts each year, while all social programs combined -- before reform -- cost just $50 billion.

Consider these examples, culled from "The New York Times" and Michael Moore's book "Downsize This!":

• McDonald's got $1.6 million in federal funds between 1986 and 1994 to export Chicken McNuggets to Singapore.
• $278 million in government technology subsidies went to Amoco, Citicorp, Du Pont, General Electric, GM, and IBM between 1990 and 1994 -- while the same companies cut 339, 038 jobs and posted combined profits of $25.2 billion in 1994 alone.
• Exxon claimed $300 million in tax write-offs on the settlement they paid when the Exxon Valdez spilled 11 million gallons of oil into Prince Williams Sound.
• Forty-two Fortune 500 companies paid no federal income taxes from 1981 through 1985 until a minimum tax was enacted in 1986.
• Every state and cash-strapped county in the country is clearing land, building new roads, upgrading airports, waiving local taxes, and training thousands of new workers -- all at the behest (or threat) of corporations -- and CEOs -- who are making record profits and could easily pay for these items themselves.

Every day, the papers report more record profits, more outlandish salaries for CEOs, more downsizing, and more billion dollar write-offs for major corporations. If they make bad investments or have machinery depreciate, they can charge it to Uncle Sam. If we have the same problems, we're screwed. Is this even remotely fair? Should the government stop carrying highly profitable corporations? Why or why not?

See what Tripod members had to say about information overload in the last survey. For other past survey results, check our survey archive.

A new Work & Money survey is published each Wednesday.

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Here's what Tripod Members said:

ralphb: This is like shooting fish in a barrel. Obviously, nearly all government subsidies like the ones described here are little more that gifts to the corporations involved. The culprit is the lobby industry. Companies and organizations with the financial resources to buy lobby service get the perks like these.

The Wired Magazine "Netizen" column has been saying that this upcoming election is the last of its kind due to the incredible changes in the information infrastructure. I agree, and along with this change needs to come reforms in lobbying, campaign finances, and term limits on legislators.

Kimmy: Not fair. Definitely the U.S. and Canadian governments should snap out of it and stop carrying corporations.

Dickj: The American people are the only ones capable of closing this gash in the integrity injury to this country.

As long as corporate America recognizes the inability of the American people to stop this hemorrhage, it will continue. Dumb is as dumb does. And promoting stupidity appears to be very lucrative for those who can take advantage.

You want it to stop? Then just say no. No to the jobs that depend on reversing principals and integrity to promote the needs of the corporation. Just say no to the corporation.

rikb: TAX THE RICH! VOTE DOWN THE CONTRACT!

VOTE IN 96'

mrchewbacca: If we STOP voting for the same jerks over and over again, we just might see some real changes folks! In other words, on Tuesday, vote for the person that isn't currently in office! The one that's NEVER been in any office if possible!

jerrysxet: Vote for DOLE! And if you can't, then vote for Perot. Either of these guys would fix these kinds of waste and deceit against the American people. I know I'm not better off than I was four years ago!!

sneeboo: How did this deteriorate into a voter registration drive? The subject is corporate handouts, people. They are just wrong -- and the comments by jerrysxet make no sense. The Republicans (Dole) have traditionally been the party in bed with big business. Reagan and Bush deregulated so much of the government's ability to keep corporations in check that we now have the widespread abuses to which this survey refers. And Perot is a billionaire who built the huge information firm EDS on government contracts -- a marriage of big business and the beauracracy. Expecting that rabid little weasel to change the cozy relationship between corporations and the Fed is patently absurd. Stop listening to so much Rush Limbaugh and pay attention to the real world, pal.

Dragon27: I am opposed to corporate taxes in the first place. WHO do you think pays those taxes. Not the corporation, they will NOT let anything cut into their bottom line. The consumer pays corporate taxes -- raise thier taxes and up go the prices.

Other nations subsidize thier industry far more than we. For example, it is cheaper to buy a Japanese car in the US than the same model in Japan. What's different is WHICH companies we subsidize. Instead of pushing industries with real market value we are subsidizing industries which take a hostile view twoard the consumer and give us little trade to show for our efforts.

In my opinion, the best thing for us to do would be to elimanate corporate taxes on purely domestic operations. If a company wants to have an office in Singapore, then tax the corporation. If a company wants to import parts from Mexico, then tax that company. If a company is purely US based then exempt them from all federal and most state taxes.

The whole point in subsidizing industry is to make jobs for Americans. If we subsidize a company who has nothing but corporate offices here and all their plants are overseas, we are actually cutting our own throats with our own money.

sneeboo: Oh, okay. I live in the US year round and only do work here, so I want to be exempt too.

rjnerd: The comment that Dole or Perot would put an end to corporate welfare leaves me speechless. It is exactly the pro-buisness Republicans that did the most to put such policies in place, and Perot was one of the bigger benificiaries of such policies (where do you think his billions came from?).

Why do you think corporations were falling over each other to enrich the RNC? It wasn't so they would "stop wasteful subsidies" (except to those without resources already).

Over the past 30 years, the percentage of taxes has shifted from mostly coming from corporate coffers to draining the pockets of middle America. They have did use this savings to grow the companies, but instead went on a feeding frenzy and ran up huge debts that absorbed any extra income.

Take one industry: Cable: If you simply exclude debt service on mergers and acquisitions, your cable bill would be $5 instead of $20. This is assuming that they used borrowed funds to build their infrastructure. In fact, most of them are somewhat stuck -- they are now having trouble borrowing money to upgrade their cable plant, which explains the 2 year delay in getting the 'Net on cable actually delivered to more than token test sites.

nagarjuna: Government activities are simply a reflection of our collective consciousness. A critical mass of heightened awareness and the subsequent actions that would naturally follow has to take place before anything substantive will truly change in government.

alplatt: You and I are kidding ourselves if we think that things are going change just because we shine the light on a subject. The corporations pay the freight (PAC and candidate contributions) to both parties. The public is turned off by politics and the vast majority don't want to (or can't afford to) pay for campaigns. Politicians and liars are synonymous, so don't expect them to reform themselves. Citizens need to get involved (local, statewide, national). Join parties and speak up. Demand that your local newpaper be critical of vague promises. Write to your congressman and/or newpaper editors. Encourage your friends to get involved. We get what we tolerate in politics. Reagan, Bush, Clinton, Dole, Nixon, etc., etc., etc. are only interested in power, and at any cost. Watergate, Iran-Contragate, Whitewatergate, crooks have been in politics since time immemorial. The corporations are just playing the game. The only way to change the rules is to a combatant, not a spectator.

BroadReach: The hinge that this debate revolves around is found in Section 8 Article I of the United States Constitution: "The Congress shall have the power to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States."

Combined with the power to collect income tax, provided by Amendment XVI, the Congress has the power to redistribute wealth in support of the "general Welfare."

Decades of lobbying, a couple of world wars, an entitlement mentality, and an electoral system whose currency is money instead of votes have conspired to increase the scope of government and to muddy the definition of general welfare. In short, those with the influence get the welfare.

I don't have money, but I vote to retain what little influence I can. Of course, a letter to a represenatative describing the reasons for a vote for or against is a much more focused communication, and probably generates more influence.

paulgowder: Give me a break people! Tax cuts on corporations allow them to profitably hire more people. This lowers unemployment and releases the poor from the chains of welfare dependency. Here, I feel the need to point you to a page I maintain.

This will explain supply-side. To summarize: tax breaks to corporations and investors create jobs, which creates spending (since the poor now have jobs, and more money to spend) which increases corporate profits, which creates more jobs, and so forth.

sneeboo: Supply side and trickle down usually just result in the poor being trickled upon. Companies are taking record profits these days -- and taking record government hand-outs -- while paying execs record salaries and eliminating (or sending overseas) record numbers of jobs. Supply side really just supplies the riches to fat-cat investors and the shaft to the working- and middle- classes.

RalphWaldo: The government should get out of both corporate and social welfare, and return to its proper role of national defense and police protection and NOTHING ELSE. This would allow us to remove the income tax completely and return to the dolar amount per person tax defined in the constitution. We should also return to the gold standard.

pbleier: Quit your sniveling! You'd kill the goose that lays golden eggs, wouldn't you? First of all, you're not about to separate corporations from politics -- they've been in control at least since Hamilton's days. Secondly, who else would you want running things? Bag ladies and pan handlers who couldn't manage their own stolen shopping carts? Get real.

Lainel: So-called "Corporate Welfare" is good for America. At least corporations create jobs. Thats more than those who abuse the real welfare system do (unless drug dealing is considered employment). If we did not give corporations a break on taxes, the cuts would be to the American worker. And if you complain about corporate profits being too high, then you better not have a retirement that is based on investment. Think about it. Your retirement probably is based on investment and, thus, corporate profit. Perhaps some corporate welfare is wasteful, but most of it is necessary in a country where taxes are too high, regulation is too costly, and employee protection is strangling.

ttc1: Well, I actually think businesses should not receive or pay any amount of money to the government. That means no taxes and no handouts whatsoever. This would stop a lot of the problems in this country. Some of the so-called handouts are just tax breaks.

tinsley: A great example of corporate welfare is the government-subsidized sugar companies fighting an amendment on the Florida ballot to charge a penny per pound to clean up the mess *they made* in the Everglades. We all know that they're just going to charge a penny more at the supermarket to recoup their losses. Besides, since Congress has outlawed the import of Cuban sugar, it's not like they have any real competition!

Mspearman: You forgot to mention how much these companies pay in taxes and what they contribute to the GNP. Sure these companies get a bigger dollar amount of breaks than people get for welfare, but all of these companies produce things we use. Welfare isn't producing anything.

Selyf: Corporations should come under the same tax plan that I do.

bugtussle: Corporate welfare takes food out of the mouths of the economically unfortunate in this country, and it must end. We've learned that trickle-down doesn't work -- how many times do we have to make the same mistakes? On paper it looks good, but the execs who make financial decisions don't exist on paper and the trickle down theory leaves out one important ingredient -- greed. It would be one thing if the recipients of these subsidies actually invested in the American public the way we invest in them, but when CEOs get raises to lay people off, of course they'll take the the low road. Don't forget about ADM, a company which has received obscene subsidies for years and pays us back by conspiring to price-fix citric acid and lysine. It's impossible to know how much ADM stole from, not only the American people, but from third world citizens who starve because they can't afford to buy products with artificially inflated prices.

lovekorn: The government is going through welfare reforms and demonizing teenage mothers and the poor in the process. Meanwhile, corporate welfare cost 50 times as much and no one is complaining about that. What gives corporations the right to lay off the people that make their money for them, then post record profits? They do not do a damn thing for themselves, and if they get into financial trouble, then we have to bail them out (after we have been laid off by the same corporations). This needs to be seriously addressed and these corporations need to be penalized and be forced to put back some of the money (who am I kidding -- A LOT of the money) back into the community. People need to realize that the corporations would be nothing without the workers they abuse....

walterh: If we remove all tax incentives from corporations, who will end up paying the taxes? The consumer ultimately pays all corporate taxes. To the corporation, taxes are simply another cost of doing business. The primary purpose of any business is to increase the wealth of the stockholders of that firm. In order to achieve this fundamental purpose the firm must; (1) provide jobs, income and gratification for employees, and (2) produce a good or service which customers will be able and willing to buy at a "reasonable price." The higher the corporate taxes, the more difficult each of these objectives becomes. The same is true with regard to depreciation of equipment. The plant and equipment the company depreciates are just a cost of producing the goods or services that the company provides. If there are no tax incentives, this cost will escalate -- increasing the price to the customers.

Why do local and state governments provide better roads, airports, schools, parks, entertainment, and other improvements? As a "gift" to the company in the form of greater profits? NO; they do this to attract the firms and the jobs that are provided by these firms. Is it better that these companies build plants in Mexico or Japan? The local, state, and federal governments and the people that make these governments are better served by the jobs being provided in our country where employee taxes benefit the community.

Why do companies downsize? The answer is simple -- to remain competitive. Downsizing is usually a result of decreased demand for the product or service the company provides, or from technological improvements that allow the company to produce the same amount of product with a smaller workforce. If the company does not take advantage of new technology other firms will, and the company that does not keep up will no longer be in business. Don't you think the "self interest" of mangers would induce them to keep employees if it would increase profits?

What is a CEO worth? Is Michael Jordan worth $25,000,000.00 a year? Is Oprah Winfrey worth the nearly 100 million dollars she received last year as the highest paid entertainer in the US? Any person is worth what the market will pay, whether that person is an entertainer, a professional athlete, or if he/she runs a business.

A company that continually makes bad investments will not be in business long. Losing $1.00 to save $0.28 in taxes is not good economics and can not go on for long. Should a business be able to deduct losses from taxable income? If the individual tax payer loses money on investments, that person may deduct those loses from taxable income. Why not then allow a business to deduct such loses?

Why does -- and should -- the federal government provide subsidies for American firms (if any companies can any longer be identified with any one country). All firms must continue to exploit the latest technological advancements or be left behind in a very competitive global economic.

As a final note: You must be honest and ask yourself what would have been the cut in jobs without the "subsidies"? Also; the average producing company earns around $0.05 on the $1.00 -- for supermarkets, this is about 0 to 2%.

elange: We have a country full of people who have no problem paying movie stars and ball players millions of dollars in salary per year. We have a country that can't afford to employ its citizens. We have big corporations that suck the blood out of the middle class. And we have a presidential election that hinges on who has the most money to spend to get elected. So what's wrong with corporate welfare? It's so American.

It's only a matter of time before no one can afford to purchase products. But who cares? By that time we'll all be dead because no one will be able to afford health care! Why don't we just give the world to Bill Gates and get it over with...he owns most of the money anyway. This way, everyone but Bill will be in the same boat. Then we can start all over!