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Date Posted: 19:21:23 06/06/04 Sun
Author: Weird_Enigma
Author Host/IP: 172.132.52.247
Subject: Wal-Mart's $1 billion bonanza

Wal-Mart's $1 billion bonanza

Taxpayers underwrite subsidies granted by state and local officials

NEAL PEIRCE
Washington Post Writers Group

Wal-Mart is not only massive, dominant, global and fiercely competitive. It is also clever.

One would think the world's largest corporation would be embarrassed by revelation that it has benefited from more than $1 billion in various state and local taxpayer-underwritten subsidies -- concessions made by state or local officials to grant the company free or reduced-price land, infrastructure subsidies, property tax breaks, state income tax credits and more.

Washington-based Good Jobs First, the nation's leading critic of government subsidies to private businesses, has been able to document at least $1 billion that Wal-Mart has garnered, transaction by transaction, state by state, locality by locality, across the country (online at www.goodjobsfirst.org).

The study, released in late May, is an independent one, though financed by the United Food and Commercial Workers International Union. It found the subsidies go not just to Wal-Mart stores but to the big distribution centers that have facilitated Wal-Mart's rapid expansion. More than 90 percent of Wal-Mart's distribution centers, Good Jobs First found, have been underwritten by public funds, averaging $7 million.

Could this make sense? Could the corporation hailed as the world epitome of capitalist brilliance, No. 1 on Fortune's list of most-admired American companies for 2004, a firm that earned $9 billion in profits last year alone, have any second thoughts about wresting subsidies from America's state and local governments and their taxpayers?

Apparently not. Wal-Mart has responded that it's not sure the $1 billion figure is correct, but if it is, local governments had made a "jackpot investment." Why? Because the corporation (by its own figures) has, in the last decade, collected $52 billion in sales taxes, remitted $192 million in state and local income and unemployment taxes, and paid $4 billion in local property taxes,

If Good Jobs First's $1 billion tax incentives figure is right, says Wal-Mart spokesman Gus Whitcomb, doing the math shows "that every dollar invested returned more than $30 to that local community."

Wait a moment! Wal-Mart had no choice under law -- it had to pay out the monies it did. And in large part, notes Greg LeRoy of Good Jobs First, "they seem to be taking credit for other people's money."

If Wal-Mart collected $52 billion in sales taxes, for example, that is consumers' money. "It's the legally required contribution for public services from us all," notes LeRoy. It's a "switcheroo," he suggests, for Wal-Mart to claim any credit for it. The same applies to the income taxes and other wages withheld by the company: it's done on behalf of employees, not any kind of voluntary Wal-Mart outlay.

Plus, most retail markets are already saturated. To gain its market share, Wal-Mart had to capture the trade from other retailers. That's why so many Main Street businesses and retail chains have failed in the wake of Wal-Mart openings. People's paychecks aren't bigger because of Wal-Mart -- indeed, given the dislocation the company has caused in so many communities, many are smaller.

Some states do allow localities to take a half or whole penny sales tax at the point of sale. An individual locality may benefit, but the state or region can't because the area has no net added buying power.

But what about the $4 billion Wal-Mart says it has paid in local property taxes -- proudly supporting, as it claims, "schools, police and fire departments, libraries and other services"?

The claim evokes a fuzzy warm image akin to the faces of happy workers on Wal-Mart's television ads. But over 10 years, the yearly property tax average is $400 million, notes LeRoy. Using an admittedly "primitive, back-of-the-envelope" calculation, assuming 3,000 Wal-Mart facilities, LeRoy estimates an average of just $133,000 in property tax per store per year. For the top dog retailing position Wal-Mart assumes in most communities, that's not much -- maybe enough for two teachers and a clerk.

The likelihood, says LeRoy, is that Wal-Mart has actually garnered way beyond the $1 billion in outright public subsidies his organization could track from official (and often incomplete) records. Plus, he notes, Wal-Mart is doubtless claiming big state income tax credits for capital investment or job creation -- gains made only at the expense of competing businesses.

At the same time, Wal-Mart wages are routinely so low that many of its workers, high numbers of whom are held to part-time status, are obliged to turn to government (that's us) for food stamps, for adequate medical care, or for the federal government's Earned Income Tax Credit.

At the same time, the widow and four children of founder Sam Walton's family now have net worth of roughly $20.5 billion each. The richest family on Earth, Forbes magazine reports.

The idea of public tax breaks for this aggressive global corporation, literally rolling in massive profits, should be unthinkable.

But we keep on subsidizing them.

Neal Peirce
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Neal Peirce is a nationally syndicated columnist who writes about state and local government and federal relations. Write him c/o Washington Post Writers Group, 1150 15th St. NW, Washington, DC 20071, or by e-mail at nrp@citistates.com.

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