Corporate welfare can be defined as federal subsidies to profitable, well-established industries that do not need them.
These subsidies can take different forms, including direct payments, preferential tax treatment, or government-backed insurance policies. Some of the most profitable industries in the world, such as oil and gas companies, still receive billions of dollars worth of subsidies from taxpayers every year.
Corporate welfare distorts free market forces and put Congress in the position of choosing winners and losers.
Many industries that receive some form of corporate welfare from the federal government also manage to spend millions on lobbyists and campaign contributions every year to keep these very subsidies in place.
Federal subsidies to profitable corporations are a waste of tax dollars and Congress should eliminate them immediately!
1. Oil & Gas Industry
Companies that drill for oil and gas on federal lands are allowed to use gas, free-of-charge, from those wells to power their drilling rigs and other equipment on the site. Emphasis intended: They pay nothing—that’s what companies pay for that gas. They don’t even pay a royalty, which is only about 12.5 percent of the value.
As you might imagine, there are a lot of oil and gas wells on federal lands–thousands and thousands. Over the last decade, drilling operators reported using gas worth $3.7 billion to power their equipment, or almost $400 million per year. Again, we get nothing.
An analogy: How about the bank taking money out of your account to pay its rent or electric bill.
2. Corn Ethanol Industry
The federal government has in one form or another provided lucrative subsidies to the corn ethanol industry for more than 30 years, wasting tens of billions of taxpayer dollars in the process.
Corn ethanol lobbyists have secured favorable treatment under the tax code, tariff protection from foreign competition, and even a government mandate for its use. While the most expensive taxpayer support – the $6 billion-per-year Volumetric Ethanol Excise Tax Credit (VEETC) – ended in 2011, subsidies and mandates for corn ethanol live on in other parts of the federal government.
3. Crop Insurance Industry
Founded on major subsidies to producers and insurance providers, federally subsidized crop insurance is quickly becoming too expensive and unwieldy.
Taxpayers not only subsidize crop insurance premiums for agricultural producers (on average, 62 cents out of every $1 of insurance coverage), but also provide $1.3 billion of administrative and operating (A&O) subsidies and, in most years, additional profits called underwriting gains to the 19 crop insurance companies selling the subsidized policies. Many of these companies lobby Congress to secure new and expanded subsidies to enhance their bottom lines.