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Tax Savings as a Provision of Corporate Welfare is a State-Corporate Crime When it Becomes Socially Injurious

  • Author(s): Nery, Annebelle
  • Advisor(s): Reese, Ellen
  • Parker, Robert N
  • et al.
Abstract

This study focuses on the corporate welfare provided by the US government to corporations despite their high profits and argues that the significant and negative consequences to the federal and state tax bases of such welfare make it a state corporate crime. Failure to stabilize or rollback corporate welfare initiatives has resulted in a significant decrease in the percentage of federal and state revenue that comes from corporate tax contributions. I use structural equation modeling to analyze the consequences of corporate welfare initiatives on the federal tax base and the California state tax base. Drawing insights from an integrated theory of state-corporate crime developed by Kauzlarich and Kramer (1998), I examine various forms of deviance and collusion between corporations and the federal government. Specifically, this study explores this collusion on two levels: the structural and organizational levels. That is, I focus on the period before, during and after the implementation of corporate welfare initiatives and the organizational environment of the two groups involved. This study reveals that the federal government facilitated state corporate crime in this case by continuing to provide tax breaks, investment incentives, and loans to corporations despite the high yield in corporate profits, declining corporate tax contributions, high delinquency rates on loans, and the continuous outsourcing of jobs. Because of the lack of government oversight, or deregulation, corporations were able to take advantage of the tax-exempt restructuring offered by the Tax Reform Act of 1986 and Revenue Act of 1987, and tax credits beginning with Economic Recovery Act of 1981. This resulted in social harms that were associated with declining tax contributions to state and federal governments, namely a growing deficit, cutbacks in vital social services, and an increased tax burden among individual taxpayers.

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