New film shows how Wal-Mart keeps its prices low.
Wal-Mart, the Alpha Dog of discount stores, also has become the Alpha Hog at the public trough.
***image1***The phenomenal growth of the world's largest corporation has been supported by taxpayers in many states-a Wal-Mart official once stated that the company seeks subsidies in about a third of its stores. A 2004 national survey by Good Jobs First looked at 160 stores and all of the company's distribution centers and found that more than 90 percent of them had been subsidized.
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, Miss. 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 ***image2***and continued to provide them with full health-care benefits and a pension package.
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).
There also have been cases in which Wal-Mart sought subsidies, didn't get them and still built new sites.
For example, 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.
And there have been cases in which public opposition to subsidies for Wal-Mart has played a role in stopping projects.
For example, 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 also 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.
Wal-Mart's reaction to the 2004 survey of its reach into taxpayer subsidies was to say that 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."
***image4***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, as a retailer Wal-Mart is required to collect sales taxes-that's consumers' money, not the company's. 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.
Similarly, while it's true Wal-Mart "remitted" income and payroll taxes, again, 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 poorly, any net revenue gain is unclear.
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And, of course, Wal-Mart paid some property taxes-all property owners have to support local services. Unless, of course, they get an abatement; the 2004 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 workers' costs, consumers' costs and taxpayers' costs.
***image3***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 a small bit of payback for the huge sums the company has previously drained from taxpayers of America.
