It’s Time to End Corporate Welfare

It’s Time to End Corporate Welfare

By Mark Nestmann • November 28, 2017

When I moved to Phoenix, Arizona in 1996, one of the first local political controversies I encountered was over the funding of a stadium for a Major League Baseball (MLB) team.

On one side was an investor consortium who wanted to bring the Arizona Diamondbacks to Phoenix. On the other side were the taxpayers of Maricopa County (which includes Phoenix) who were being asked to pony up hundreds of millions of dollars for the stadium.

In the end, Maricopa County agreed that taxpayers would finance most of the cost to build a stadium for the Diamondbacks. In return, the Diamondbacks promised to lease the stadium through the 2027 ball season. In all, taxpayers paid $238 million to build the stadium.

The county authorized spending hundreds of millions of tax dollars to build a baseball stadium for a group of multi-millionaires when Phoenix and Maricopa County were facing a budget crisis. Government officials had to sharply cut funding for many popular programs and did not hold a referendum to approve the spending, despite a 1989 voter initiative that prohibited the use of tax revenue to build stadium projects.

Two decades later, in January 2017, the Diamondbacks sued Maricopa County seeking to break the lease. The team claims that the stadium requires $185 million in urgently needed repairs to bring it up to MLB standards. The county acknowledges that about $20 million in “capital repairs” are necessary and are a taxpayer responsibility. It contends that the $185 million figure is grossly inflated.

I’ve attended several games at Chase Field, most recently in 2015. It’s a gorgeous facility. Taxpayers bought a huge new $10 million scoreboard in 2008, and there are plenty of VIP suites and other amenities. From my perspective, there’s nothing at all wrong with the stadium.

I agree with the sentiments of Maricopa County Supervisor Andy Kunasek, who described Major League Baseball as "evolving into a parasitic enterprise."

The Diamondbacks saga is only one of many examples of taxpayer funding for projects that benefit wealthy investors and big business. For instance, the Atlanta Braves hoodwinked taxpayers in Cobb County, Georgia into forking out more than $400 million to build the team a new stadium. There was no voter referendum – not even a public meeting – to approve what turned out to be a secret deal between a former county official and the Braves.

Meanwhile, in Arlington, Texas, the Texas Rangers just scored a new $1 billion stadium roof, funded 50/50 by taxpayers. But in this case, voters approved the spending.

I’ve come across dozens of other examples of local governments subsidizing fat-cat investors and big business while local taxpayers foot the bill. One of the most outrageous examples involves Amazon, a company with a market capitalization that exceeds $500 billion. That makes it the fourth largest company trading on a US stock exchange.

Amazon wants to build a new headquarters, which it calls HQ2, somewhere in North America. And it’s asking for taxpayer handouts. While it isn’t asking outright for tax dollars, the company put out an RFP (request for proposals) to cities or regions wanting to host HQ2. Since Amazon is promising to create “as many as 50,000 high-paying jobs,” state and local governments are going crazy with generous incentives.

New Jersey has offered Amazon up to $7 billion in tax incentives if the company builds HQ2 in Newark. California is offering $300 million in incentives. Stonecrest, Georgia has even offered to donate several hundred acres of land to Amazon so the company could actually have its own city named Amazon.

I understand that the incentives sought by Major League Baseball teams, Amazon, and other corporate giants are simply part of the American political landscape. But let’s use the right term to describe those incentives: corporate welfare. In effect, American taxpayers have placed the largest corporations in the world on the public dole.

According to a study by the research institute Good Jobs First, three-quarters of all state and local economic development subsidies went to just 965 corporations since 1976. And most of the awards went to Fortune 500 companies.

Conservatives should be outraged by these incentives, because the free market suffers. In Amazon’s case, for instance, companies that don’t get similar incentives will find it harder to compete with Amazon.

I’d love to see libertarians and conservatives work together to put a stop to corporate welfare.

At the very least, any governmental body considering subsidizing big business should have to put the matter to a vote. That way, voters will have a say in what is going on, even if they approve an expansion of the welfare state.

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About The Author

Since 1990, Mark Nestmann has helped thousands of clients seeking wealth preservation and international tax planning solutions. He is the author of highly acclaimed Lifeboat Strategy and other books & reports dealing with these subjects.

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