As We Know It

A couple of years ago, when the Minnesota Alliance for Progressive Action started toying with the phrase "corporate welfare," they thought of it as effective political satire; there were plans for a skit at the state Capitol featuring a CEO, a caseworker, and a lot of embarrassing questions. Since then the notion has achieved the status of political buzzword; last week the group came out with a "Corporate Welfare Handbook" that totals up some $1.5 billion worth of subsidies by the state to mostly large corporations. Minnesota spent $116 million, by way of comparison, on Aid to Families with Dependent Children; MinnesotaCare, the subsidized health insurance program for the working poor, cost almost $63 million.

Out-and-out grants and loans to businesses by the Department of Trade and Economic Development make up only a little more than 1 percent of the subsidy total, $20.3 million in 1995. That money has been the target of most corporate-welfare politicking, including a "living wage" bill that would require subsidy recipients to pay their workers at least $7.21 an hour. A far bigger corporate windfall comes from what wonks call "tax expenditures"--money the state never collects due to special breaks for particular companies or target industries. One of Minnesota's major new tax expenditures the past few years has been a reduction in business property taxes; MAPA puts the loss to the state at $163 million for last year. Other tax breaks--some copied from the federal tax code, some state-specific--netted businesses $842 million. (The figure does not count breaks that also benefit individuals and small businesses, such as a sales tax exemption for legal services.)

Tax-increment financing has a special place in the annals of corporate welfare, now almost taken for granted by businesses expanding, or simply agreeing to stay, in towns and cities terrified of seeing them leave. In all, the MAPA report says, some 8 percent of the state's property tax base lay in TIF districts in 1995, up from 6.4 percent the previous year. Some $264 million worth of property taxes were not paid to cities, counties, and school districts as a result.

MAPA also analyzed industrial revenue bonds (IRBs)--a form of lower-interest financing used, among other things, for Minneapolis's Target Center and the Mall of America. IRBs are not usually counted as corporate welfare because the money comes from private investors who buy the bonds; however, the report notes, those investors (as well as the developers helped by the bonds, and the bond houses collecting the commissions) benefit from the bonds' tax exemption, and the state loses taxes that might otherwise have been paid on non-tax-sheltered investments.

MAPA researcher Alexa Bradley says the report's figure of $228 million in IRBs issued was "the most solid figure anyone could come up with, but [state officials] told us there's probably hundreds of millions more out there." The same is true for the rest of the report, whose $1.5 billion total does not include the many millions offered up in subsidies by local governments.

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