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Corporate Welfare Defined

My definition of corporate welfare doesn't include tax breaks, which are not handouts but simply ways for a corporation to keep more of its own earnings. It is true that special tax breaks distort an economy and give unfair advantages to some companies based primarily on political influence. Some people call this corporate welfare, but I just call it bad policy and institutional government corruption.

(Note : Since originally writing this, I have reconsidered this. Although allowing a person or company to keep his or its own money may not technically be welfare, if others have to make up the difference for the necessary services that we all benefit from, the effect is the same.)

My narrower definition is "direct and indirect government subsidies." The "indirect" part get's a bit complicated, but it important to understanding this issue. It includes things like government insurance or government services that reduce expenses for a company or industry. In other words, if taxpayers pay for a road built solely so a logging company can enter public lands to cut trees, thus saving the company that cost, that is an indirect subsidy and therefore corporate welfare.

Another example is The Price Anderson Act of 1957. This law "limits the liability of the nuclear industry in the event of a major nuclear accident." It is estimated that this subsidy has cost us over $100 billion since its inception - that being the cost companies would have paid for insurance if the government did not create this subsidized plan.

Among the critics of this law are the Union of Concerned Scientists, Greenpeace International, Public Citizen and the Cato Institute - not groups that normally all agree on political issues. The act indemnifies companies from nuclear incidents even when they are grossly negligent or engage in willful misconduct (criminal penalties might still apply). Public Citizen pints out that "No other government agency provides this level of taxpayer indemnification to non-government personnel." When the next big accident happens, everything not covered by the plan will be paid for by taxpayers.

In recent months drug companies are looking for special indemnification. They argue that if the government approves a drug they should not be held liable for any damages caused by it. If they get their way, people injured by their products will not be able to sue. Whether or not the government then picks up the tab, this certainly fits my corporate welfare definition. The companies pass on this normal cost of business to either the innocent victims or the taxpayers of the country.

There are many other forms of indirect subsidy that can be included in this definition (for more on this see our page on corporate welfare examples). These include government promotion of industries (why shouldn't they pay their own advertising bills?), below-market leases of land for natural resource extraction (why shouldn't the public get full price for its land?), and dozens of other schemes.

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Corporate Welfare