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Corporate Welfare: Taxpayer Money Used to Pick Winners and Losers

Nov 28, 2018 by AFP

Tax and regulatory reform have helped spur our economy and Tennesseans are reaping the benefits of President Trump’s tax relief with unemployment continuing to be near an all-time historic low. Despite the good economic situation, state and local governments are engaging in a corrupt and broken system and spending billions of your taxpayer dollars to pick winners and losers in business.

This practice of targeted taxpayer-funded tax breaks is what is known as corporate welfare and is one of the greatest threats to a fair and free economy. Corporate welfare comes in many forms and is often heralded as a “jobs bill” or Economic Community Development (ECD).

Corporate welfare takes away our tax dollars from essential government services, like law enforcement and schools. And taxpayers are forced to foot the bill and subject to tax increases when companies don’t pay their share.

Tax handouts and corporate welfare creates an unfair playing field, where businesses succeed or fail based on their political connections, instead of the value they create for customers. Corporate interests are encouraged to use the political system to advantage themselves and disadvantage competitors.

States and localities are increasingly engaging in this behavior to lure businesses to their state or city,  spending as much as $70 billion of taxpayer money annually. Unfortunately, this trend is going in the wrong direction with corporate welfare tax incentives more than tripling since 1990.

Not only are politicians spending more of your taxpayer dollars on tax breaks to companies, but these incentives don’t help with economic growth. Research suggests that states with the most corporate welfare tend to experience measurably lower levels of economic freedom.

Taxpayers bear the costs of these handouts. Illustratively, almost every state could afford a reduction in major taxes—some nearly completely—if they eliminated their corporate welfare incentives.

Tennessee is no different, as the Beacon Center of Tennessee found the Volunteer State has spent over $3 billion of taxpayer money in corporate handouts. According to the Mercatus Center, Tennessee’s corporate income tax rate could be reduced by 13 percent, and the sales taxes could be cut by two percent if all of the taxpayer handouts were eliminated.

In 2017, the Beacon Center of Tennessee, in its annual Pork Report, highlighted the state’s Department of Economic and Community Development for its dubious Industrial Machinery Tax Credit program, which spent $67 million in three years and resulted in just 55 jobs. That’s $1.2 million per job.

Our elected officials and government should focus on serving all Tennesseans rather than pursuing “economic development” on the backs of taxpayers. If we stop this practice, we can create a better business environment that benefits all companies and ensure a better, long-term impact on jobs and opportunity for Tennesseans.

We need your help in ending corporate welfare and establishing a true free market where businesses thrive based on merit, and not political connections and tax handouts. Click here to let your state senator and representative know they should help end corporate welfare!