Stopping Corporate Welfare
OverviewAt the local, state, and federal levels of government, the well-connected few receive special benefits at the expense of the rest of society. The result is a two-tiered system that features handouts for favored individuals and groups and the destruction of opportunity and prosperity for most Americans.
This form of government-granted privilege, commonly called “corporate welfare” or “cronyism,” often falls within four major problem areas:
- Spending Subsidies: Government often directs targeted payments or other forms of benefit to favored individuals or groups. Spending subsidies can take the form of direct funding, loans or loan guarantees, or bailouts to certain businesses or industries. They are a direct transfer of wealth from one group (taxpayers) to another (special interests).
- Tax Preferences: There are special carve-outs in the tax code given by politicians to their favorite groups—often benefiting the well-connected. Tax preferences allow government to guide investment decisions rather than letting individuals decide what’s most valuable to them. These preferences also make the tax code more complicated and costly to administer, giving the advantage to those individuals and businesses who can afford experts to navigate the tax code for them.
- Regulatory Preference: Government officials often write special rules in favor of chosen beneficiaries, which undermines consumer choice. Some regulations benefit big businesses over small ones; some require burdensome costs and training for certain jobs, making them less accessible; and some mandate that government approve or certify new businesses or individuals before they can participate in the market. Regulatory preference often creates barriers for those seeking employment or trying to start a business.
- Protectionism: Government officials also restrict international trade, limiting global competition to assist a few, well-connected businesses or industries. By imposing barriers like tariffs and quotas, government stifles innovation and harms consumers who benefit from increased competition and choice.
Our senior scholars on stopping corporate welfare
Alison Acosta Winters, managing director, research and policyPrior to joining the Charles Koch Institute, Winters spent 11 years at the Heritage Foundation, where she served as director of the Roe Institute for Economic Policy Studies, managing research on a wide range of domestic economic issues. Under Winters’ leadership, Heritage’s research helped define and communicate the long-term fiscal threats of spending and taxes. Winters has written numerous articles, testified before Congress, and appeared on many television and radio outlets, such as CNBC, CNN, Fox, Bloomberg, PBS, the BBC, and NPR. Her commentaries have appeared in USA Today, The Christian Science Monitor, The Atlanta Journal-Constitution, The Philadelphia Inquirer, National Review Online, The Hill, The Washington Times, and The National Interest Online.
Dana Wade, senior research fellowWade spent several years on Capitol Hill working to stop government bailouts, reduce harmful regulatory barriers, provide needed oversight of federal agencies, and restore incentives for private markets to thrive. Most recently, she served as deputy staff director of the U.S. Senate Committee on Banking, Housing, and Urban Affairs. Prior to that, she served as the Republican deputy staff director of the Senate Committee on Appropriations and as a financial markets budget analyst for Rep. Paul Ryan on the House Budget Committee. She also served as a policy adviser to Senator John McCain in the 2008 presidential race and has worked for the U.S. Options Clearing Corporation and Accenture. Wade graduated from Georgetown University with a bachelor’s in economics and earned a Master of Business Administration at the Wharton School at the University of Pennsylvania.
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