Get Wal-Mart Out of the Public Trough

I have defended Wal-Mart on a number of occasions given its new whipping-boy-of-the-left status.  However, if it wants to get my further support, it is going to have to take it's nose out of the public trough.

It's hard to find reliable numbers on the total value to Wal-Mart of such subsidies. The leading report is Shopping for Subsidies: How Wal-Mart Uses Taxpayer Money to Finance Its Never-Ending Growth
by Philip Mattera and Anna Purinton was published by a left-leaning
advocacy group and funded in part by one of the very unions trying to
unionize Wal-Mart's work force, which will suggest to some a need for
caution. Yet, even if one applies a substantial discount to Mattera and
Purinton's results, Wal-Mart is still doing quite well at the public
trough:

  • In a sample of subsidy deals for individual stores, they found
    subsidies ranging from "$1 million to about $12 million, with an
    average of about $2.8 million."
  • In a survey of Wal-Mart regional distribution centers, they found
    that "84 of the 91 centers have received subsidies totaling at least
    $624 million. The deals, most of which involved a variety of subsidies,
    ranged as high as $48 million, with an average of about $7.4 million."

In a very real sense, Wal-Mart thus is in part a creature of big
government. From this perspective, Wal-Mart's recent hiring of
long-time Democratic operative Leslie Datch and significant increase in
contributions to Democratic politicians comes as no surprise. (Of
course, as Timothy Carney has argued,
it may also be that Wal-Mart is now using big government not just to
boost its own growth but as a tool to squash competition.)

Is Wal-Mart becoming the Archer-Daniels-Midland of retail?  In fact, the article does not even mention the egregious practice of getting local governments to use eminent domain to clear them a building location.  A while back I argued that Wal-Mart was using regulation as a club to pound on their competitors:

Apparently, though I can't dig up a link right this second, Wal-mart
is putting its support behind a higher minimum wage.  One way to look
at this is a fairly cynical ploy to get the left off its back.  After
all, if Wal-mart's starting salary is $6.50 an hour (for example) it
costs them nothing to ask for a minimum wage of $6.50.

A different, and perhaps more realistic way to look at this Wal-mart
initiative is as a bald move to get government to sit on their
competition.  After all, as its wage rates creep up, as is typical in
more established companies, they are vulnerable to competitors gaining
advantage over them by paying lower wages.  If Wal-mart gets the
government to set the minimum wage closer to the wage rates it pays, it
eliminates the possibility of this competitor strategy.  Besides, a
higher minimum wage would surely put more low-skilled people out of
work, increasing the pool of people Wal-mart can hire  (and please do
not bring up the NJ convenience store study that supposedly shows that
higher minimum wage increase employment - no one in their right mind
really believes that demand for labor goes up when the costs go up).  I
am not sure what the net effect on Wal-mart's customers would be --
some would have more money, from higher wage, and some would have less,
from fewer hours or due to being laid off.

I have defended Wal-mart in the past,
but I am going to stop if they become the new auto or steel industry
and use the government to protect their market position.  Already they
are losing my sympathy with their whoring for local relocation subsidies and eminent domain land grabs.

If Wal-Mart wants to seek public funding for its business and impose regulation on its competitors, and thereby make itself a semi-governmental entity, then I am no longer going to have any sympathy for them when governments want to single them out for special regulation, no matter how bone-headed the regulation may be.

  • Debbie

    Hmm, I just apply the regs on a case by case basis. As you have pointed out so well in the past, regs can and will be turned against you. Even going against a corporate welfare queen, I hate to set the precedent.

    We had a recent Wal-Mart opening in my community. The subsidies were staggering. There were all sorts of tax abatements offered to "bring jobs to the area". (It helps to have friends on the zoning board to discover stuff like this)

  • http://www.humanadvancement.net/blog Kyle Bennett

    Tax breaks are not subsidies.

    In the linked article, of the eight so-called subsidies listed:

    4 are tax breaks,

    1 (enterprise zone designation) is probably a grab bag of things that includes further tax breaks as well as actual subsidies,

    1 (road improvement) is something that everyone with property gets, roughly to the extent of the traffic their property generates (though big businesses like Wal-Mart do seem to get this a lot more proactively than most of us),

    2 are actual subsidies.

    It is outrageous that they get those last two - as it is for any parts of the Enterprise Zone designation that are actually subsidies - though I doubt the amount is nearly sufficient to reimburse them for the taxes they still have taken from them.

    So long as we have public roads, the improvement to those is pretty hard to describe as being "in the public trough".

    Finally, the tax breaks: I hope they get even more - I'm not going to hold the fact that I can't get my tax money returned to me against someone who can. If nothing else, it's less money the government has to do stupid things with.

  • http://www.progrowthmd.org Doug

    I have to agree with Kyle. A quick check on Google finance shows that Walmart paid about $1.6 billion dollars in corporate tax in the last *quarter*. I can't blame them for trying to recoup some of that cost.

  • Highway

    Also, how much is this them working the system that's been put in place by localities in order to specifically attract businesses like Wal-Mart? These places are changing their treatment of business in order to get the store in their town, instead of the next town. Any smart business is going to play that system.

    I also agree that you can work both sides of the coin. You can complain about both: Wal-mart getting sweet deals from governments and Wal-mart getting the shaft from governments. Here in Maryland, Wal-mart's competitors got a law passed, over the governor's veto, that targets them for increasing their benefits level. That's certainly something to be opposed also.

  • Bill

    My objection is to the various handouts offered to business to attempt to do some form of social engineering...not to the fact that Wal-Mart takes advantage of what government is offering.

    Assuming that a locality has a sales tax, clearly the government entity will gain far more in sales tax revenue over a period of years than their initial costs, so for the government it is a rational way to increase their revenue.

    Secondly, so long as government makes these programs available, if Wal-Mart (or any other public company) fails to take maximum advantage of them, how long do you think it will be before some predatory law firm will gin up a 'shareholder' suit, accusing management of not looking out for shareholder value?

  • JohnDewey

    If one objects to government development incentives, why single out WalMart? Every large employer or large sales tax generators is getting millions in incentives these days.

    Communities and states, acting through the voters' elected representatives, are providing incentives to attract the WalMarts and the Targets, the Honda assembly plants and the Intel microchip factories. If that's what the voters wish to do, how is it wrong for WalMart or any other corporation to accept those incentives?

  • http://comuse.blogspot.com Allen

    So long as we have public roads, the improvement to those is pretty hard to describe as being "in the public trough". -- Kyle

    I understand the question but why shouldn't Wal-mart pay for roads? There are many developments these days where the developer actually pays for the cost of putting in the roads, water and sewer improvements. And in a way those who buy homes in those developments pay for it too.

    There's a new Wal-Mart distribution center in Windsor, Colorado. They have something like 1200 trucks a day arriving at that facility. It's about 1 1/2 mile off of I-25. Shouldn't something that generates 1200 more semi-trucks, not just cars, in a day pick up some part of the tab for all the road improvements that will need to be done at the Crossroads interchange?

    It may not be a direct subsidy but in a society where so much of the tax code is framed so that those who can most afford to pay for things do, it seems fair to expect them to at least pick up their fair share.

  • JohnDewey

    Allen,

    WalMart's customers directly and indirectly pay for the roads. Most WalMarts I've seen were located on highways or major thoroughfares. Trucks that serve WalMart pay for the highways they use - through fuel taxes. So do WalMart's millions of customers, who also pay fuel taxes.

    Communities that wish to attract large sales tax generators often provide incentives. One incentive is an adequate system of side streets to serve the potential traffic. The amount of such incentives are determined by the elected representatives of the voting public. I hope your objection to such incentives is with the actions of those communities, and not with WalMart and other businesses that would be foolish not to take advantage of them.