Corporate Subsidies and Fuzzy Math

$50,000Courtesy of Goldman Sachs are Financial Terrorists, with over 23,000 likes and 192,000 shares.  It’s also been recently shared by more well known, and slightly more “respected” outlets like The Other 98%, with over 1 million followers.  According to the meme, a normal income earner pays trivial amounts of taxes to government services, and a relatively huge sum to “corporate subsidies”.  It turns out this claim is so bizarre as to require fantastical leaps of both math and logic.  On its face, these numbers would mean we pay more than 16 times our entire military budget to corporations!  Something is fishy here, so let’s dig into the numbers.

The Tax Breakdown

It’s impossible to say what anyone who makes $50,000 per year will pay in taxes, as everyone has different circumstances and deductions.  Proclaiming, “if you make $50,000 you pay this much in taxes” is wrong.  This meme doesn’t point this out, but it’s quite possible that some $50,000 earners pay no income taxes if they have enough deductions like children, a house, medical expenses, 401K contributions, student loans, etc.  However, they do still pay Social Security and Medicare.

It’s unclear how this meme determines $235.81 goes to Medicare when Medicare is 1.45% of a paycheck.  To get that number, a worker would earn only about $16,000 per year, not $50,000.  For the sake of simplicity, we’ll consider the most screwed taxpayer at the $50,000 level; a single earner with no extra deductions.  Using a tax calculator, we find this to be the tax breakdown:

  • Social Security- $3,100 (the employer also pays this amount, so it’s really $6,200)
  • Medicare- $725 ($1450 including the employer’s share)
  • Federal Income Tax- $5,696.25
  • State Income/Property/Sales Tax- varies

Now, let’s go to the White House tax receipt calculator (which is even shown as a source in the bottom of this meme) to see the full breakdown of our income tax.

  • Health Care (includes Medicaid, research, food safety and other health services)- $1,565.90
  • National Defense- $1,361.97
  • Job and Family Security (includes pensions, food stamps and other welfare programs)- $1,035.01
  • Net Interest on the Debt- $516.65
  • Veterans Benefits- $337.79
  • Education and Job Training- $204.50
  • Immigration, Law Enforcement and Justice- $113.93
  • International Affairs- $105.38
  • Natural Resources, Energy and Environment- $93.42
  • Science, Space and Technology- $64.37
  • Agriculture- $55.25
  • Community, Area, and Regional Development- $24.49
  • Response to Natural Disasters- $22.22
  • Additional Government Programs- $194.81

Where are the “Corporate Subsidies”?

Certainly nowhere on the government’s website, but admittedly the White House can be deceiving, so the investigation continues.  What does this meme consider to be a “corporate subsidy”.  It doesn’t say, but the fine print on the bottom left of the picture lists a website address that brings us hereThis is where the meme’s data comes from, and where things get truly fantastical.


Yes, this is the data source for this meme!

The website is called “Common Dreams”, which is a progressive news site, not an objective source by any means.  In this particular post, it’s claimed that the average family making $72,000 pays $6,000 in corporate subsidies (from which the meme apparently interpolates $4,000).  They get this number by adding up a laundry list of things that are highly dubious, then they divide that amount among the total number of US families equally, even though taxes are highly unequal.  Wealthy families pay much higher amounts and percentages of taxes, while many poorer families pay zero, or get a net subsidy from the government.  To assume the burden is shouldered equally is wrong and obliterates the entire statistic, but let’s continue anyway.

Only about 15% were direct subsidies. This is what most of us think of when we hear “corporate subsidies”.  For this, they use a stat from the Cato Institute (ironically, a libertarian think tank) that claims corporations get $100 billion in subsidies a year.  There is no reason to doubt this study, as there is all sorts of waste and cronyism between our government and business, but these costs are already baked into the Federal Budget and our tax bill.  They’re a part of the agriculture budget, the research budget, the military budget, food stamp budget, etc.  This isn’t extra money paid in taxes, it’s waste and corruption, or just the realities of the existing budget.  When the government buys tanks, the tank manufacturer gets a subsidy.  When food stamps are issued, the grocery store gets a subsidy.  To get rid of these subsidies would require the government to reduce its existing spending, which was likely the reason why the libertarian Cato Institute published the study.

Moving on, over 1/3 of the listed “subsidies” are not subsidies at all, but come from tax breaks, loopholes and avoidance.  This isn’t a situation of the government taking money from us and giving it to a corporation (a real subsidy), but one where the government isn’t taking as much money from corporations as they might like.  To call this a subsidy is incorrect.  By the same logic, all tax deductions and avoidance, like children, home mortgages and 401k contributions should be considered federal subsidies.  Some might argue that the taxpayer shoulders the burden when companies avoid taxes, but that’s not the case.  The reality is that no one shoulders the burden (at least not yet), as the government just runs deficits instead.

The other items listed in the blog post are also not really subsidies.  For example, it says $1,268 (20% of the entire Federal subsidies) comes from overpriced medication, due to “government granted patent monopolies”.

Back to the Meme

It should now be clear that the $4,000 corporate subsidy number has no basis in reality.  It comes from a flawed blog post that first misidentifies what a subsidy is, and then divides that wrong number evenly among every family, even though lower income families (particularly at the $50,000 level) pay far less than the wealthy taxpayers who pay most of the income taxes.  Most of the subsidies families do pay for are already a part of their income tax, not another sum on top of it.  Ironically, if we really want to get rid of subsidies, we need to reduce government spending and regulations, something the perpetrators of this meme would likely oppose.

21 Comments on "Corporate Subsidies and Fuzzy Math"

  1. What a bunch of Right Wing political BS and nonsense. This is clear a bogus article with no basis in reality.

  2. Specifially, which part is ACCURATE? This is the same false “logic: that has climate change deniers blustering vapid nonsense and keeping otherwise good, sane people from doing anything to change their ways.
    Even if it’s not 100% accurate (it’s called a generalization, refers to what an “average” person pays,) the overall point remains valid.

    • The overall point does not remain valid. The average $50,000 earner pays nowhere near $4,000 of their taxes in “corporate subsidies”. Getting that number defies reason. Additionally, the other amounts (like Medicare) were inaccurate in the meme. The article explains why the meme is in error, and provides links and sources. If you have a credible source that defies this analysis, post it and changes will be made if needed. Otherwise, the MP stands by this analysis.

      • Did you read the sources? The “links and sources” disprove the argument being made. Even if the numbers aren’t universally accurate, it highlights that we are paying for a less competitive market instead of getting things we want/need like education, health insurance, and social assistance programs. As far as this argument goes: “They get [6,000] by adding up a laundry list of things that are highly dubious, they divide that amount among the total number of US families equally, even though taxes are highly unequal” it’s an average. That is literally the definition of how you find the average. And “dubious?” It’s laid out pretty clearly where the money is going. Where are the sources proving this wrong? I don’t see them.

        • Subsidies aren’t necessarily given in cash either they can be given in the form of tax breaks, meaning they don’t get calculated into where our money goes. It just results in less revenue for the government

        • A subsidy is when you get money, not when someone doesn’t take your money. Are taxpayers getting subsidies when they deduct home mortgage, or student loan interest, or children on their taxes? No, they government just isn’t taking as much money from them, huge difference.

        • You can’t take a bill averaged from ALL taxpayers, and apply it to those making $50,000/year. The wealthy earners pay much more of the tax burden, in both percentage and dollar amounts per taxpayer. To take all corporate subsidies and divide it equally among all taxpayers is just plain wrong mathematically and logically. The numbers aren’t even close for $50,000 earners. Furthermore, most “corporate subsidies” are already baked into spending on programs liberals like. Food stamps, housing and infrastructure projects, etc.

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    So good to discover someone with a few unique thoughtys on this subject.
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  4. bibi from wv | March 26, 2016 at 10:32 am |

    And since when is a purchase a “subsidy”? Is it a subsidy to the grocery store when I pay cash? When the government buys something, is that considered a subsidy, in the case of the tank? I’m willing to believe that the number in the meme might misrepresent, or simply be calculated incorrectly, but I don’t believe there’s too much money thrown at corporations who do very little to enhance the life of the American worker.

  5. Sanford Heath | April 3, 2016 at 10:50 pm |

    The point is corporations don’t pay their fare share of taxes while taking advantage of the fact they are American companies. And when you right wingers get your balanced budget amendment who do you suppose will be called upon to pay the taxes to fulfill that dream.

    • deerfarmer | April 5, 2016 at 4:48 pm |

      Sanford health the US has the highest corporate tax in the world at 35%. Do you pay a 35% tax rate? I think not. Get your facts correct before you write something stupid.

      • Um, I AM in the 35% tax bracket. And guess what? I’d gladly pay more IF I didn’t have to pay $14000/year for health insurance that I can’t even use because I have a $8000 deductible and $70 copays. I’d be even happier knowing my taxes ($66000 last year) was helping to pay for EVERYONE’s national healthcare. I can’t even begin to imagine how families are paying these premiums. We are lunatics for allowing insurance companies to charge these kinds of premiums for nothing! It’s time for Medicare for all.

        • deerfarmer | April 5, 2016 at 7:04 pm |

          Beebe you made less than 200k and pay 35% tax. You don’t need better health care you need a better accountant. I make about the same you do and my tax rate is 11%. As for Medicare for everyone, you must be a Bernie supporter. Just so you know my insurance costs $24.00 a month with a $2000.00 annual deductible. Of which $1500 is tax deductible in my FSA. It’s not about how much money it’s about smart money.

        • Actually I made a lot more than that but I’m not here to brag 🙂
          Good for you on your insurance. Both of us are over 50, with a college student enrolled with us. We’re all healthy. It’s the best rate we could get.
          Yes as a matter of fact I am a Bernie supporter.

  6. BasherEdelman | May 13, 2016 at 11:17 pm |

    $870 for Direct Subsidies and Grants to Companies – According to Cato this includes “cash payments to farmers and research funds to high-tech companies, as well as indirect subsidies, such as funding for overseas promotion of specific U.S. products and industries…It does not include tax preferences or trade restrictions.”

    $696 for Business Incentives at the State, County, and City Levels

    $722 for Interest Rate Subsidies for Banks

    $350 for Retirement Fund Bank Fees – not really a corporate subsidy in my view

    $1,268 for Overpriced Medications – this is based on the price drugs have over what their free market price without patent protection would be. I’d call this fairly questionable.

    $870 for Corporate Tax Subsidies

    $1,231 for Revenue Losses from Corporate Tax Havens

    Add It Up: The Average American Family Pays $6,000 a Year in Subsidies to Big Business

    If you treat a deduction, etc. as a subsidy (which is a reasonable interpretation). Then yes the average tax payer is heavily subsidizing the wealthy – primarily via forgone taxation via tax loopholes, special tax dispensations, tax incentives, and direct government funds and subsidies.

  7. David Conklin | August 27, 2016 at 7:32 am |

    >”it’s quite possible that some $50,000 earners pay no income taxes if they have enough deductions like children, a house, medical expenses, 401K contributions, student loans, etc.”

    If that was true, then you should have shown it. Merely claiming it to be so without support suggests that it is a bogus as the original meme.

  8. David Conklin | August 27, 2016 at 7:37 am |

    >They get this number by adding up a laundry list of things that are highly dubious,

    You complain that the source of the meme “The website is called “Common Dreams”, which is a progressive news site, not an objective source by any means” and then in the same paragraph you make a claim with no supporting evidence whatsoever. Guess who is proven to not be objective?

  9. TheLaughingman | January 14, 2017 at 6:29 pm |

    I think this was a very good article. Meme Policeman busted a meme that has a coworker of mine outraged. I ill show him your article. I will update you if you have made him somewhat less outraged and changed his perspective.

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