Fed Farming Essay

1702 WordsMar 26, 20127 Pages
Federal subsidies are a contentious point in public economics. They are supposed to benefit small businesses in theory but in reality large corporations are usually the ones that gain the most. This paper seeks to determine if there is any advantage to granting federal subsidies. An analysis of the impact federal subsidies (independent variable) have on the amount of corporate taxes paid (dependent variable) will determine the extent of the social benefits of subsidies. Subsidies in effect lower the cost of production which implies that, other things equal, profits should increase for a given quantity of output. Following this logic larger profits should result in an increase in the amount of taxes paid, ceteris paribus. Higher tax revenues would allow Congress to lower inefficient taxes, such as those associated with labor, retire debt, or put this extra money towards any number of government projects. Thus while large corporations stand to benefit from subsidies, which are themselves inherently inefficient, society may stand to benefit from them as well. In particular, this paper will focus on federal agricultural subsidies because they are among the largest and most scrutinized subsidies, and also to narrow the scope of the research. To address policy implications, I will create a regression to determine if subsidies increase output and worker efficiency. Measuring output will help determine the source of corporate taxes paid; the more produce large farms sell, the more profit is generated and hence higher tax bill. Measuring subsidies against worker efficiency will help infer whether corporate farms use the money from the subsidy to increase production efficiency. While it is true that corporate farming brings food more cheaply to our table, the cost to our environment by some of their farming methods far outweighs any savings we may enjoy. This brief

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