The average American pays $6,000 in subsidies to corporations every year. But that gigantic chunk of taxpayer change – the federal government spends $100 billion a year on corporate welfare, according to the Cato Institute – simply is not enough for some special interests.
In a Crain’s Chicago Business op-ed last week, Marc J. Lane, a tax attorney, argued that taxpayers should keep their tax dollars flowing to the Export-Import Bank, which has been a target for some Republicans serious about cutting cronyism in government. The bank, called the Ex-Im Bank for short, is a New Deal-era program that finances loans to international companies to purchase good from American corporations. These loans are funded by our tax dollars.
Supporters of the bank, like Mr. Lane, argue the Ex-Im Bank is a good deal that makes a profit for the Department of the Treasury and supports jobs in Illinois. It has done well in recent years, but there’s no guarantee this will continue, and it hasn’t been a solid investment in the past. The bank asked Congress for a $3 billion bailout in the late 80s and has a history of betting on failures likeEnron and Solyndra. But even if we do assume its bets have been successful recently, taxpayers should never be on the hook for financing projects of any corporation, large or small.
Tax dollars are meant to pay for public goods that everyone uses and that free-riders will enjoy the benefits from if not compelled to pay. Export financing doesn’t come close to meeting that criteria. And any profitability only makes a case for privatization, since profitable deals should have private firms lining up to invest.
But does the bank create jobs for Illinois that wouldn’t otherwise exist? Lane points out that over “1,700 exporters and foreign-owned firms employ more than 270,000 people” in Illinois. That may be, but the Ex-Im Bank is not responsible for that total. Between 2007 and 2014, it only supported 1.4 percent of Illinois exports. Nationally, it only funds about 2 percent of U.S. exports – a tiny portion of what the private markets provide in export funding. There’s no good reason to assume that in the absence of federal financing, private loans wouldn’t be available to pick up that 2 percent difference if the deals are as profitable as its advocates claim.
Indeed, the bank’s financing is hardly going to struggling companies. Instead, it’s padding the bottom lines of some of the largest corporations in the world. Illinois-based Boeing is the bank’s biggest loan recipient. Despite being the world’s largest aircraft manufacturer, it receives over $48 billion through loans provided to airlines to buy its jets. Other big winners include Caterpillar andCase New Holland. Again, these are not struggling businesses.
To help Illinois’ business recovery, we should be removing government from the equation, not defending cronyism. Illinois has a corporate income tax rate of 9.5 percent – one of the top five highest in the country, and the federal corporate tax rate is the highest of any nation in the industrialized world at 35 percent. If Illinois businesses need a competitive edge, cutting tax rates on the state and federal level would do a lot to help them out. But as it stands now, part of their tax dollars are being used to give their competitors a boost through the Ex-Im Bank. There’s nothing fair or rational about that.
Just because some Illinois special interests profit on taxpayer money, it doesn’t follow that we should support them. We get widespread economic growth when we support free-market policies, not giveaways for a select few. There’s not a strong case for supporting the Ex-Im Bank. Hopefully Congress will come to its senses and end it.