Corporate welfare is often used to describe a government's bestowal of money grants, tax breaks, or other special favorable treatment for corporations. The definition of corporate welfare is sometimes restricted to direct government subsidies of major corporations, excluding tax loopholes and all manner of regulatory and trade decisions, which in practice could be worth much more than any direct subsidies.
Origin of term
The term "corporate welfare" was reportedly invented in 1956 by Ralph Nader.
"Privatizing profits and socializing losses" refers to the idea that corporations want to reserve financial gains for themselves and pass along losses to the rest of society, potentially through lobbyingthe government for assistance. This practice was criticized in the Wall Street bailout of 2008.
considered excessive, unwarranted, wasteful, unfair, inefficient, or bought by lobbying are often called corporate welfare. The label of corporate welfare is often used to decry projects advertised as benefiting the general welfare that spend a disproportionate amount of funds on large corporations, and often in uncompetitive, or anti-competitive ways. For instance, in the United States, agricultural subsidies are usually portrayed as helping independent farmers stay afloat. However, the majority of income gained from commodity support programs actually goes to large agribusiness corporations such as Archer Daniels Midland, as they own a considerably larger percentage of production. Alan Peters and Peter Fisher, Associate Professors at the University of Iowa, have estimated that state and local governments provide $40–50 billion annually in economic development incentives, which critics characterize as corporate welfare. Some economists consider the 2008 bank bailouts in the United States to be corporate welfare. U.S. politicians have also contended that zero-interest loans from the Federal Reserve System to financial institutions during the global financial crisis were a hidden, backdoor form of corporate welfare. The term gained increased prominence in 2018 when Senator Bernie Sanders introduced a bill, singling out Amazon and Walmart in particular, to require a company with 500 or more employees to pay the full cost of welfare benefits received by its workers.
Daniel D. Huff, professor emeritus of social work at Boise State University, published a comprehensive analysis of corporate welfare in 1993. Huff reasoned that a very conservative estimate of corporate welfare expenditures in the United States would have been at least in 1990. Huff compared this number with social welfare: Huff argued that deliberate obfuscation was a complicating factor.
United Kingdom
In 2015, Kevin Farnsworth, a senior lecturer in Social Policy at the University of York published a paper in which he claimed that the government was providing corporate subsidies of £93 billion. This amount includes the role of the government in increasing trade, tax relief for businesses that invest in new plants and machinery, not charging fuel duty on fuel used by railways or airlines, green energy subsidies, a lower corporation tax rate for small companies, regional development grants and government procurement for businesses. However, The Register wrote that Farnsworth's figure for tax relief for investment was incorrect and that he had made mistakes in his calculations, noting that he was not an accountant. It also stated that not charging businesses taxes under certain circumstances was not the same as giving them a subsidy. Fuel duty is not charged on airlines due to the Convention on International Civil Aviation which specifies that aeroplanes should be exempt from fuel duties.
Political discussion
In 2015, Labour Party leaderJeremy Corbyn said he would "strip out" the £93bn of "corporate tax relief and subsidies" Farnsworth referred to and use the proceeds for public investment. Corbyn did not say which specific policies he would change. The Guardian wrote the policy "sounds wonderful, but careful scrutiny of 'corporate welfare' shows that it includes capital allowances designed to persuade companies to invest, regional aid to boost growth in rundown parts of the UK, and subsidies to keep bus and rail routes open – none of which Corbyn would presumably like to see stopped."
It was observed by The Wire that the effective tax rate was low for the larger corporations which meant companies making smaller profits are competing in an unequal environment against bigger companies with substantial taxation benefits, with the gap in effective tax rates widening over the years. India's Union government's prime minister criticised this practice and said
