Wal-Mart's Tax on Us

By Greg LeRoy, AlterNet. Posted November 6, 2005.

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, Missouri 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, California, 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, Illinois 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, Illinois, 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.

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.