A very good item at the Huffington Post by Al Norman, “Wal-Mart: America’s Tax Deadbeat,” which describes the lengths the Bentonville company goes to in order to cut its local property tax assessments. This story in essence elaborates on a piece that appeared in the New York Times earlier in the week.
The issue here is two-fold: many communities allowed Wal-Mart to come in and displace local merchants because there were persuaded they would in the end come out ahead, and one of the major elements in the calculus was the taxes Wal-Mart would pay. Aggressively disputing tax bills is thus tantamount to bait and switch.
Second is that Wal-Mart has tremendous resources at its disposal, including a large in house legal team. It’s therefore relatively cheap for them to enter into these battle, while the towns, often on strained budgets, find it difficult to muster the funds to beat the retailer back, and sometimes settle even when they know they have a winning case.
Norman’s article may seem slightly overwrought, and some readers may wonder whether at least some of Wal-Mart’s efforts are warranted (that is, the local assessment was unreasonable). But consider the following: a non-profit group looked at a sample (the Times reported it as 10%) of Wal-Mart facilities open as of 2005 and determined that the company had challenged the tax bills for 1/3 of them. And interestingly, the highest number of disputes in relative and absolute terms were in Texas.
Now why does the high incidence in Texas suggest that Wal-Mart is simply out to shave costs where it can, rather than going after sites where the charges are unfairly high? While I am no expert on real estate taxes, Texas has no personal income tax and no corporate income tax either. Instead,Texas imposes a franchise tax on corporations of 4.5% of earned surplus or 2.5 mills of net worth. By US standards, that’s a fairly modest rate.
So it’s a safe bet that Texas has relatively high real estate taxes to make up for its low income taxes (while local is local and state is state, if a state provides relatively few services and little/no assistance to municipalities, communities can be expected to pick up at least some of the slack. Curious to get any reader input on Texas real estate taxes).
Going after a high proportion of its assessments in Texas suggests that what Wal-Mart really objects to is the cost of doing business, not outlier tax charges.
Some excerpts from HuffPo:
A report released this week by the non-profit group Good Jobs First, concludes that Wal-Mart methodically works to lower its taxes by challenging the assessed value of its stores and distribution centers. Just as the company has become legendary for shaking down its vendors—so the retailer shakes down cities and towns for tax rebates.
The nonpartisan research center in Washington, D.C. documented in an earlier study how Wal-Mart has benefited from billions of dollars in public subsidies to build its stores and site infrastructure. Their new analysis, Rolling Back Property Tax Payments, charges that although the financial take is not as large as its public welfare subsidies—Wal-Mart “drains vitally needed funds from communities by regularly challenging the valuation put on its properties by public officials.” According to Philip Mattera, research director of Good Jobs First, “When the company succeeds in one of these challenges, it diminishes the funds available to pay for education, police and fire protection, and other essential services provided by local governments.” ….
Property assessment disputes pit Wal-Mart’s legal team against local assessors. Such battles are an intimidating financial club wielded by Wal-Mart to lower its cost of doing business. If local assessors balk at giving relief, Wal-Mart just takes their case to a state appellate board, tying up local staff and resources.
Yet Wal-Mart’s success rate in such appeals is as low as its prices. “We were surprised to find that Wal-Mart, despite its enormous resources, loses more assessment challenges than it wins,” said Greg LeRoy, of Good Jobs First. “Even when it wins a reduction, it often fails to get as much as it wanted, meaning that the overall dollar amount of Wal-Mart’s tax reductions is far below what the company sought.”….
I have been writing about Wal-Mart’s tax abatement campaign for at least eight years. Back in 1999, Wal-Mart dragged the small town of Wilton, New York to court over its property tax bill. Wal-Mart disputed its property valuation in Wilton for 4 years, and ultimately sued the town in the New York State Supreme Court. Wal-Mart wanted Wilton to slash its discount store assessment from the $7.5 million in valuation, to $3 million–a 60% tax reduction. The taxpayers of Wilton had to hire a special attorney to argue the case, and spent $2,250 in tax dollars to have a special appraisal done. Because of the expense of defending itself against the Wal-Mart litigation, the town had to call on the School District in Saratoga Springs, and Saratoga County to come up with the cash to defend against Wal-Mart—because the county and the school district stood to lose revenue if Wal-Mart’s property taxes were slashed. That same year, Wal-Mart bragged that it paid $28 million in local and state taxes in New York state.
In 2006, the company picked the same fight with Geneva, New York. Wal-Mart sued to get its assessment more than halved, from $4.8 million to less than $….
In small town after small town, Wal-Mart has picked the same tax fight. In places like Coolbaugh, Pennsylvania, or Saukville, Wisconsin, Wal-Mart promises a tax revenue bonanza, but as soon as they get in, they try to nickel and dime their taxes down….
When this tax dodge study came out this week, instead of assailing the message, Wal-Mart went after the messenger. Study author Phil Mattera told me that Wal-Mart initially did not know how to respond to the Good Jobs First study. “When contacted by the New York Times, which ran the first story on the report, the company was not willing to comment, Mattera said. “Then they reverted to their common practice of union baiting. When reporters contacted Wal-Mart, their public relations people apparently thought that calling Good Jobs First a labor-supported group would discredit our findings. Actually, since our founding, we have received less than 5% of our funding from unions–and most of that has been for consulting work, not donations. Nearly all our money comes from foundations.”