but a Prologue to a Farce or a Tragedy or perhaps both. Knowledge will forever
govern ignorance, and a people who mean to be their own Governors, must arm
themselves with the power knowledge gives." James Madison, 1822
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Wal-Mart's Tax On Us
Greg LeRoy
November 09, 2005
Greg LeRoy is the author of The Great American Jobs Scam: Corporate Tax
Dodging and the Myth of Job Creation and executive director of Good Jobs First .
This piece originally appeared on Alternet.org.
Wal-Mart, the Alpha Dog of discount stores, has also become the Alpha Hog at the
public trough.
The phenomenal growth of the world's largest corporation has been supported by
taxpayers in many states through economic development subsidies. A Wal-Mart
official once stated that the company seeks subsidies in about a third of its stores,
suggesting that more than 1,100 of its U.S. stores are subsidized. A national
survey by Good Jobs First in 2004 looked at 160 stores and all of the company's
distribution centers—and found that more than 90 percent of them have been
subsidized. Altogether, 244 subsidized facilities in 35 states received taxpayer
deals of more than $1 billion.
The economic impact of these subsidies on small businesses is given a human face
in one powerful segment of Robert Greenwald's new documentary, "Wal-Mart: The
High Cost of Low Price." The sweetheart deals given to two Wal-Mart Supercenters
in Hamilton, Mo., undermined Red Esry's four family-owned grocery stores. Esry
watched his sales plunge as soon as the Supercenters opened—he couldn't
compete with Wal-Mart's prices and lost almost half of his business virtually
overnight.
In the film, Esry's wife ruefully recounts how her husband went to City Hall to ask
for a property tax abatement to match Wal-Mart's subsidy, but was turned down.
Esry cut costs, but refused to stop paying his employees a good wage and
continued to provide them with full health-care benefits and a pension package.
Red Esry's story is being played out in thousands of communities across America.
Wrong-headed Subsidies
Giving subsidies to suburban retailing is bad policy on many levels. The proliferation
of far-flung stores contributes to sprawl and its many problems: undermining
traditional downtown business districts and worsening traffic jams and air quality.
The diversion of tax dollars into the coffers of developers and big retailers takes
much-needed revenues away from public schools and other services. The low-wage
jobs created in the malls do little to stimulate the economy and actually serve as a
drag, given that workers with McJobs need more assistance from taxpayer-financed
safety-net programs.
The subsidies Wal-Mart lobbies for run the whole gamut: free or reduced-price
land, infrastructure assistance, tax increment financing (TIF), property tax
abatements or discounts, state corporate income tax credits, sales tax rebates,
enterprise zone tax breaks, job training funds and low-interest tax-exempt loans.
The most deals and dollars were found in Texas (30 deals worth $108 million) and
Illinois (29 deals worth $102 million).
And because of poor disclosure in most states, this could be just the tip of the
iceberg.
Of course, the real force driving Wal-Mart's site location behavior is its voracious
appetite for more market share, not subsidies. The 2004 survey found cases in
which the company had sought subsidies, didn't get them—and still built new sites.
In Chula Vista, Calif., a $1.9 million subsidy deal was successfully challenged in
court in 1998, after citizens complained that local redevelopment agencies were
awarding state money to big-box retailers for projects with little benefit to the
public. The Chula Vista Wal-Mart ended up being built without public assistance.
In 2001, voters in Galena, Ill., rejected a $1.5 million sales tax rebate sought by
the company for a planned Supercenter. Immediately after the vote, Wal-Mart said
it would drop the plan, but later decided to move forward after getting the private
seller of the land to agree to a lower price. Wal-Mart also proceeded with the
construction of an unsubsidized Supercenter in Belvedere, Ill. after its request for a
$1.5 million sales tax rebate was opposed by local officials.
Such events are especially controversial in TIF deals, since the governing law often
requires that the beneficiary of TIF affirm that the project would not occur "but for"
the subsidy.
According to a report by 1000 Friends of Wisconsin, Wal-Mart admitted that the
TIF funding provided to a project in Baraboo did not meet that requirement. The
report also noted that the supposedly blighted area chosen for the project
consisted of a cornfield and an apple orchard.
Public opposition to subsidies for Wal-Mart has played a role in some successful
site battles.
In 2000, voters in Olivette, Mo., rejected a $36 million TIF proposal for an 80-acre
shopping center that was to be anchored by a Wal-Mart and a Sam's Club. In
2002, Wal-Mart was rebuffed when it sought an $18 million subsidy in connection
with a project that was to be located on the Near South Side of Chicago. According
to a press report, Mayor Richard M. Daley "guffawed" when presented with the
request. The project was abandoned.
Denver officials dropped plans for a Supercenter project in 2004 that could have
involved as much as $25 million in public money. The plan was controversial
because of the subsidy and because it would have used eminent domain to displace
a group of Asian-American small businesses. In 2004 voters in Scottsdale, Ariz.,
voted resoundingly against a plan to give a developer up to $36 million in sales-tax
rebates for a complex that was to include a Supercenter and a Sam's Club.
Costs And Benefits...Or Costs And Costs?
Wal-Mart's reaction to the 2004 survey of its reach into taxpayer subsidies was
classic bait and switch. The company responded by saying it couldn't verify the
figures, but that if they were correct, then "it looks like offering tax incentives to
Wal-Mart is a jackpot investment for local governments."
Specifically, the company claimed that over the past 10 years, it collected $52 billion
in sales taxes, remitted $192 million in income taxes, wage withholdings and
unemployment insurance, and paid $4 billion in local property taxes. "Do the math
and you will see that every dollar invested returned more than thirty," the company
summarized.
Of course Wal-Mart "collected" sales taxes; as a retailer, it's required by law to do
so. But that's consumers' money, not the company's. Wal-Mart is just a pass-
through. And since much of its sales come at the expense of other retailers, any
gain is obviously offset by lower sales taxes collected at competing stores—and by
the taxpayer costs of abandoned downtowns and malls.
Of course Wal-Mart "remitted" income and payroll taxes—it's an employer, and is
required to deduct taxes from its workers' paychecks. But income tax is not the
company's money; it's money from the workers' meager paychecks. And since Wal-
Mart jobs are largely shifted from other retailers and Wal-Mart pays so poorly, any
net revenue gain is unclear.
And, of course, Wal-Mart paid some property taxes—all property owners have to
support local services. Unless, of course, they get an abatement; our study found
more than 40 such instances. But Wal-Mart offered no disclosure on how much in
property taxes it hasn't paid. And as economists point out, companies pass on the
cost of property taxes to customers as much as market conditions allow.
So there you have Wal-Mart's version of cost-benefit analysis. Taxpayer costs for
economic development are balanced by "benefits" that mostly consist of, well,
workers' costs, consumers' costs and taxpayers' costs.
It's ironic that a company which promotes itself as a free enterprise success story
is so highly dependent on taxpayers. This fact was conveniently forgotten during
the aftermath of Hurricane Katrina, when Wal-Mart garnered widespread accolades
for its role in providing emergency supplies to victims of the storm. Those
truckloads of supplies should be seen not as corporate charity, but as small bit of
payback for the huge sums the company has previously drained from taxpayers of
America.
