"Wealthfare"

"Wealthfare" (Mooney, Linda, Knox, David, and Schacht)

Laws and policies that favor the rich, such as tax breaks that benefit the wealthy, are sometimes referred to as wealthfare. For example, the richest fifth of the U.S. population receives housing subsidies through the mortgage interest tax deduction that amounts to nearly four times the housing assistance provided to the poorest fifth (Garfinkel 2013). Corporate welfare refers to government subsidies to corporations, including direct payments and tax breaks. The profitable oil and gas industries receive large federal subsidies, and many states give corporations tax breaks as part of their economic development efforts to entice businesses to locate operations in their state.

Although the official federal corporate tax rate is 35 percent, legal tax loopholes enable corporations to pay significantly less than the 35 percent rate. Many corporations pay a tax rate of less than 20 percent and some have paid no taxes in a given year (Americans for Tax Justice 2014). One example of a corporate tax loophole is the practice known as corporate tax inversion, in which company lowers its taxes by merging with a foreign company and changing to an offshore address. Inversions largely occur on paper and typically do not involve moving operations overseas.

Free-market trade and investment economic policies, which some claim to be a solution to poverty, primarily benefit wealthy corporations. Trade and investment agreements enable corporations to (1) expand production and increase economic development in poor countries, and (2) sell their products and services to consumers around the world, thus increasing poor populations’ access to goods and services. Yet, such policies also enable corporations to relocate production to countries with abundant supplies of cheap labor, which leads to a lowering of wages and a resultant decrease in consumer spending, which leads to move industries closing plants, going bankrupt, and/or laying off workers.

Transnational corporations contribute to the trade deficit in that more goods are produced and exporter from outside the United States than from within. These corporations also contribute to the budget deficit, because the United States does not tax income from U.S. corporations abroad, yet transnational corporations pressure the government to protect their foreign interests; as a result, military spending increases. Transnational corporations contribute to U.S. unemployment by letting workers in other countries perform labor that U.S. employees could perform. These corporations are also implicated in an array of other social problems, such as poverty resulting from fewer jobs, urban decline resulting from factories moving away, and racial and ethnic tensions resulting from competition for jobs.

Furthermore, most trade and investment agreements include a key provision that allows corporations to take legal action against governments with policies that protect the public, but at a cost to corporate profits. In 2012, in 70 percent of cases where corporations took legal action against governments for violating trade agreements, the World Bank’s trade court ruled in favor of the corporation, and governments had to pay tens or even hundreds of millions of dollars---money that could otherwise go toward education, health care, and other public investments to improve the lives of the public, and especially the poor (McDonagh 2013).

When corporations claim that their products or services are essential in the fight against poverty, there is actually a different story. For example, powerful food and biotech corporations such as Monsanto, Cargill, and Archer Daniels Midland have used their economic and political power to impose a system of agriculture based on intensive chemical use and patented and genetically modified seeds (McDonagh 2013). These corporations assert that their model of agriculture, which requires farmers to purchase their chemicals and seeds, yields more and better food, and thus is important in global fight against hunger and poverty. Yet, this corporate control of agriculture has resulted in farmers’ dependence and debt (and an epidemic of suicides among poor farmers), environmental degradation (through the increased use of chemicals), and health risks associated with chemicals and genetically modified foods.

Individuals who are poor are often viewed as undeserving of help or sympathy; their poverty is viewed as due to laziness, immorality, irresponsibility, lack of motivation, or personal deficiency (Katz 2013). Wealthy individuals, on the other hand, tend to be viewed as capable, motivated, hard working, and deserving of their wealth. While both sides are receiving assistance and provisions, it is typically only those who are poverty stricken that receive the negative stigma. However, wealthy and large corporations are receiving larger welfare provisions and at a greater cost to society.

Sources

Garfinkel, Irwin. 2013. “The Welfare State: Myths & Measurement.” Spectrum (Winter):6-7.

Katz, Michael B. 2013. The Undeserving Poor: America’s Enduring Confrontation with Poverty: Fully Updated and Revised. New York: Oxford University Press.

McDonagh, Thomas. 2013. Unfair, Unsustainable, and Under the Radar: How Corporations Use Global Investment Rules to Undermine a Sustainable Future. The Democracy Center. Available at www.democracyctr.org

Mooney, Linda, Knox, David, and Schacht, Caroline 2015. Understanding Social Problems. Cengage Learning: Boston, MA.