Welfare Is Cause of the Fiscal Crisis . . . Corporate Welfare

[This article in the LA Times calls into question the fundamental reasoning behind giving money incentives to corporations — otherwise they’ll go someplace else.  But when you add up all the tax incentives given to corporations, it is child’s play to fix the education budget deficit in every state — a lesson we should apply, for example, to the crisis in Springfield, Illinois (and the city of Chicago to boot).  Thanks to Lorraine Suzuki for calling it to our attention — Lew Rosenbaum]

Corporate welfare and California’s budget deficit

  • Michael Hiltzik

The government handouts include tax breaks for businesses and incentives for some of the state’s largest industries.

By Michael Hiltzik  June 18, 2010 | 6:34 p.m.

I believe we can all agree on the root cause of the state’s $20-billion budget gap.

It’s welfare: all those millions of taxpayer dollars going to recipients who line up for their government handouts instead of competing in the marketplace on a level playing field like the rest of us, who don’t pay their fair share of taxes and who get protected by a politically powerful lobby.

Yes, I’m talking about the business community.

[FOR THE RECORD: The column incorrectly states that $1 billion in revenues from a state oil severance tax would   benefit 1 billion children in the CalWORKS program. As the column states elsewhere, the correct figure is more than 1 million children.]

For all the hand-wringing by Gov. Arnold Schwarzenegger about how there’s almost nothing left to cut in the state budget except services to children, the aged and the destitute, hundreds of millions of dollars are spent every year on handouts to business. That’s despite the lack of evidence that some of these programs keep employers in the state, lure employers from out of state or are cost-effective in any general way.

The governor is asking the Legislature to take such draconian steps as eliminating CalWORKS, the state’s principal family welfare program (serving 1.1 million children), and downsizing child care and mental health programs.

Meanwhile, corporate welfare programs such as tax breaks for some of our largest companies and “incentives” for our largest industries are to survive. To his credit, Schwarzenegger has proposed delaying some new corporate tax breaks.

The state budget is rife with industry goodies. For example, there’s the Hollywood subsidy, currently pegged at $100 million a year in tax credits.

The rationale for this welfare program is to keep productions from fleeing to other states, taking California jobs with them. But you could go blind looking for an independent study, as opposed to studies funded by the state film commissions handing out the dough, showing that such programs produce more in overall benefits than they cost.

Quite the contrary — according to Governing magazine, New Mexico, which had aggressively courted producers with $40 million in tax rebates, concluded in 2008 that for every dollar it spent, it received 14.4 cents in return.

No one knows to what extent the production companies pocketing California’s cash would have filmed here anyway. And the program is hardly aimed at companies on the financial edge — as my colleague Richard Verrier reported recently, $20 million is going to pictures being shot here this year by Warner Bros. The money isn’t allocated according to need but on a first-come, first-served basis among qualified productions, the California Film Commission says. In other words, it’s more a windfall for the nimblest applicants than a program targeted at productions most likely to leave without it. [Click here to read the entire article}

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