A new report offers Chicago a financial blueprint for the city its residents deserve.
Billions of taxpayer dollars are now going — as ‘incentives’ — to corporations busy stuffing the pockets of America’s richest billionaires.
By Philip Mattera
In its latest listing of America’s wealthiest individuals, Forbes magazine for the first time ranks the members of the top 400 by how much they have overcome adversity on the path to success, reserving the highest score for those who supposedly built fortunes entirely on their own.
This celebration of individual accomplishment turns out to overlook a significant source of top 400 fortunes, both those fortunes that belong to the super rich Forbes calls “bootstrappers” and those the magazine labels “silver spooners.” Many of these rich have received another kind of help Forbes never gets around to mentioning: government subsidies.
A new report my colleagues and I at Good Jobs First have just published offers the first systematic look at how billionaires have benefited from the economic development subsidies state and local governments award to corporations these billionaires either control or own a major stake in.
This new report, Tax Breaks and Inequality, shows that more than one-third of the 258 companies linked to the Forbes 400 are receiving — in the name of economic development — substantial “incentive” awards that range from property tax abatements and corporate income tax credits to outright grants of taxpayer cash.[pullquote]About one-third of the Forbes 400 have links to one or more of 99 highly subsidized American companies.[/pullquote]
Ninety-nine of these subsidized companies have received awards totaling $1 million or more. Five have been awarded more than $1 billion. Among them: Intel ($5.9 billion), Nike ($2 billion), Cerner ($1.7 billion), Tesla Motors ($1.3 billion), and Berkshire Hathaway ($1.2 billion).
The combined value of the subsidy awards to the 99 companies: $19.4 billion, or an average of $196 million each.
Our research has found that about one-third of members of the Forbes 400 have links to one or more of those 99 highly subsidized companies, including every one of the 11 wealthiest individuals on the Forbes list and all but two of the top 25.
These 25 include Bill Gates, whose $81 billion fortune comes mainly from his holdings in Microsoft, a company that has collected $203 million in subsidies, and Warren Buffett, whose $67 billion net worth derives from Berkshire Hathaway, a firm with $1.2 billion in subsidies.
Another $18 million in state and local government subsidies have gone to Oracle business software, the driver of Larry Ellison’s $50 billion net worth. The Koch Brothers, each worth $42 billion, have watched their Koch Industries take in subsidies that total $154 million, and four members of the Walton Family, each worth more than $35 billion, have seen Wal-Mart, the source of their fortunes, pick up $161 million in subsidies.
These subsidies do not make up the primary source of Forbes 400 wealth. But they do make things more difficult for working families. With large corporations controlled by billionaires getting lavish taxpayer subsidies, the rest of society — especially working families — gets stuck with a larger share of the cost of essential public services.[pullquote]Subsidies constitute one factor contributing to our growing inequality of income and wealth.[/pullquote]
To make things worse, subsidies are also going to low-road employers, those companies whose stingy wage levels are depressing living standards for those toward the bottom of the income spectrum. In Tax Breaks and Inequality, we identify 87 low-wage employers among those companies that have received $1 million or more in subsidies from state and local governments. Their total subsidy haul: $3.3 billion.
Retailers dominate this list, with 60 firms awarded more than $2.6 billion in subsidies. Twelve firms in the hospitality sector (restaurants, hotels and foodservice companies) account for more than $245 million in subsidies.
The low-wage companies with the most in subsidies: Sears ($536 million), Amazon.com ($419 million), Cabela’s ($247 million), Convergys ($202 million), Starwood Hotels & Resorts ($166 million), and Wal-Mart Stores ($161 million).
Eight companies both have links to members of the Forbes 400 and pay low wages. Listed in order of their subsidy totals, they run: Sears, Amazon.com, Wal-Mart, Best Buy, Bass Pro, Meijer, Menard, and Allegis Group. All these companies sit in the retail sector except for the staffing services company Allegis.
Subsidies, of course, constitute only one factor contributing to our growing inequality of income and wealth. But these subsidies are definitely making that inequality worse.
Data note: Tax Breaks and Inequality includes an appendix listing all of the highly subsidized companies linked to the Forbes 400, along with the names of the associated billionaires, their role in the firms, and their stock ownership percentages.
Philip Mattera is the research director of the Washington, D.C.-based Good Jobs First.