Like The Federal Government, States Just Can’t Quit Wasteful Corporate Welfare

Should taxpayers be subsidizing this?

Should taxpayers be subsidizing this?

On Sunday, the New York Times reported that BP was able to write off the rent it paid for use of the failed Deepwater Horizon rig, saving the company $225,000 per day. The tax code is actually riddled with credits and giveaways to the oil industry like thus, despite the industry’s sky-high profits in recent years.

While corporate welfare for oil companies is especially egregious, there are plenty of tax expenditures — which are spending programs administered through the tax code — that help pet industries without doing much for anyone else. For instance, there is a tax subsidy for NASCAR racetrack owners that will cost taxpayers nearly $50 million, and another for purchasing fertilizer that will give big agricultural companies $1 billion in free money.

Both the Obama administration and some members of Congress have tried to do away with some of these subsidies, but have had little success so far, due to, among other things, lobbyist arguments that cutting subsidies will harm the economy. And it’s not only at the national level that these subsidies have a way of hanging around with little to no scrutiny.

As Stateline reported today, Gov. Jay Nixon (D-MO) has appropriately called the growth of tax credits in his state “rapid and unchecked,” adding that “every dollar we spend on tax credits is a dollar that isn’t available for K-12 schools to invest in teaching, reading, math and science.” But he now wants to create a $150 million credit for car manufacturing in order to entice Ford to overhaul a factory in the state:

Governor Nixon argues that these incentives are critical to preserving Missouri’s century-old auto industry and would help position the state as a leader in advanced manufacturing…Missouri is not the only state that seems to be of two minds when it comes to business tax breaks. Iowa and Colorado also recently stopped to reexamine their tax-incentive programs, in hopes of keeping the ones that pay proven dividends and getting rid of the ones that some would call corporate welfare. But those states, too, are finding that controlling the growth of business tax breaks is easier said than done — especially when thousands of jobs seem to be on the line.

Highlighting the growth of this sort of spending, Missouri currently has 51 different tax credits, and “the cost has grown from $145 million, or 3 percent of related taxes in 1999, to $588 million, or 8 percent of related taxes in 2009.”

Now, some of those programs may be totally worthwhile and even merit increasing. But others are surely wasteful and should be overhauled or scrapped. Doing so — both at the state and the federal level — could save governments a considerable amount of money that could be invested in endeavors that actually create jobs.