Companies Get Tax Breaks, Government Gets Naught

Last updated on December 3, 2021

When companies get bailout or receive tax breaks, it is the government money that gets spent. In an effort to create more jobs in their states, mayor and governors provide tax benefits to corporations. If the reward is more, states get more companies and more jobs. States are, therefore, giving more and more. But problem begins when companies move jobs overseas, go bankrupt or simply do not need incentives because they are making billions. In all of this, it is the American taxpayer who loses jobs or tax money.

http://www.nytimes.com/2012/12/02/us/how-local-taxpayers-bankroll-corporations.html?pagewanted=all&_r=0 explains how much goes as incentives to companies by states:

“Despite their scale, state and local incentives have barely been part of the national debate on the economic crisis. The budget negotiations under way in Washington have not addressed whether the incentives are worth the cost, even though 20 percent of state and local budgets come from federal spending. Lawmakers in Washington are battling over possible increases in personal taxes, while both parties have said that lower federal taxes on corporations are needed for the country to compete globally.

The Times analysis shows that Texas awards more incentives, over $19 billion a year, than any other state. Alaska, West Virginia and Nebraska give up the most per resident.

For many communities, the payouts add up to a substantial chunk of their overall spending, the analysis found. Oklahoma and West Virginia give up amounts equal to about one-third of their budgets, and Maine allocates nearly a fifth.”

With the economy in trouble, tax breaks to corporations large and small hurts. The barter of asking for incentives in return of creating jobs does not sound fair given that companies take on only as many employees as it needs and no more.

Nytimes informs taxpayers that “For local governments, incentives have become the cost of doing business with almost every business. The Times found that the awards go to companies big and small, those gushing in profits and those sinking in losses, American companies and foreign companies, and every industry imaginable.

Workers are a vital ingredient in any business, yet companies and government officials increasingly view the creation of jobs as an expense that should be subsidized by taxpayers, private consultants and local officials said.

Even big retailers and hotels, whose business depends on being in specific locations, bargain for incentives as if they can move anywhere. The same can be said for many movie productions, which almost never come to town without local subsidies.”

The country is moving towards the fiscal cliff and economists are predicting recession. At such times, the government needs to look at these massive tax breaks. At the end of the day, it is the taxpayers’ welfare that is at the centre of it all, and needs to be considered and addressed.