Wal-Mart's Welfare: How The Taxpayers Subsidize Goliath

Wal-Mart, the Alpha Dog of discount stores, has also become the Alpha Hog at the public trough. In many states, taxpayers are supporting the phenomenal growth of the world's largest corporation 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, according to comments by B. John Besio published in the Dubuque Telegraph Herald. A national survey by my organization, Good Jobs First, in 2004 looked at 160 stores and all of the company's distribution centers—and found that taxpayers subsidize more than 90 percent. Altogether, 244 subsidized facilities in 35 states received taxpayer deals of more than $1 billion.

Robert Greenwald's new documentary, "Wal-Mart: The High Cost of Low Price," explains the economic impact of these subsidies on small businesses in one powerful segment. Sweetheart deals 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 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.

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 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 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.

Wal-Mart's subsidies 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).

In Mississippi, the city of Biloxi offered subsidies of $350,000 in 1988, D'Iberville $2.3 million in 1999, Greenville $1.2 million in 2002, Hattiesburg $900,000 in 1999, Waveland $500,000 in 2003, Richland $363,000 in 2001, and Pascagoula an astonishing $5 million in 2003.

The force driving Wal-Mart's site location behavior is its voracious appetite for 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 local officials opposed its request for a $1.5 million sales tax rebate.

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. A 1000 Friends of Wisconsin report showed that Wal-Mart admitted that 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, Chicago officials rebuffed Wal-Mart when it sought an $18 million subsidy in connection with a project that was to be located on the Near South Side of the city. According to a press report, Mayor Richard M. Daley "guffawed" when presented with the request, according to the Rocky Mountain News. The project was abandoned.

Denver officials dropped plans for a Supercenter 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 against a plan to give a developer up to $36 million in sales-tax rebates for a complex including a Supercenter and a Sam's Club.

Costs and Costs?

Wal-Mart's reaction to the 2004 survey of its reach into taxpayer subsidies was classic bait-and-switch. The company said 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 30," the company said in an e-mail fromCorporate Communications Director August Whitcomb.

Of course, Wal-Mart "collected" sales taxes; as a retailer, it is 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 offset by lower sales taxes collected at competing stores—and by the taxpayer costs of abandoned downtowns and malls.

Wal-Mart also "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 workers' meager paychecks. And since Wal-Mart jobs are largely shifted from other retailers, and it 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 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 is ironic that a company that promotes itself as a free enterprise success story is so dependent on taxpayers. This fact was conveniently forgotten during the aftermath of Hurricane Katrina, when Wal-Mart garnered accolades for providing emergency supplies to victims of the storm. Those truckloads of supplies should be seen not as corporate charity, but as a small bit of payback for the huge sums the company has drained from taxpayers of America.

Greg LeRoy is the executive director of "Good Jobs First." You can attend a screening of the Wal-Mart Movie Friday, Nov. 18, at The Computer Co-Op at Rainbow Plaze (2807 Old Canton Road; 601-981-6925) at 6:30 p.m. Click here to learn how to host your own screening or buy a copy of the DVD. They make great Christmas gifts.

Previous Comments

ID
79191
Comment

This article at TomPaine.com notes that Bennie Thompson is one of the "Wal-Mart 22." These are the twenty-two Democrats who voted against an amendment that would have barred the Dept of Labor from implementing inspections of Wal-Mart without notifing them in advance. http://www.tompaine.com/articles/20051107/the_walmart_22.php

Author
avens
Date
2005-11-13T09:15:24-06:00
ID
79192
Comment

Any tax revenue generated from Wal Mart paychecks is highly overshadowed by the tax costs taken on because of higher welfare and health care costs. This doesn't even mention the wear and tear on the roads that come about as people go to and fro from the store. Plus traffic congestion and the rest of that shit and you have one serious tax-payer funded nightmare.

Author
westpark
Date
2005-11-13T23:30:25-06:00
ID
79193
Comment

there may be more recent posts about WM, this is the first that shows up when I search, so here I am. The movie was around for like one day maybe? but it is , sorry if y'all know this, available at http://www.walmartmovie.com/ now 5 for $50 , free shipping, give to friends. and thanks for the links in the JFP article a while back; I finally had time to look at, http://www.petlibrary.com/goldfish/walmart.htm one of several. Vicksburg is pretty much ruled/beholden whatever to Walmart. Smaller stores , pfftt. or soon. and in the meantime, get that Casey Parks back here!

Author
sunshine
Date
2005-12-16T16:42:28-06:00

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