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Wednesday, 23 April 2014 08:28

United States Taxpayers Are Subsidizing Walmart

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 (Image: <a href=" https://www.flickr.com/photos/truthout/4401314497/in/photolist-" target="_blank"> Lance Page / t r u t h o u t; Adapted: daliborlev, Kenneth Hynek</a>) (Image: Lance Page / t r u t h o u t; Adapted: daliborlev, Kenneth Hynek)BILL BERKOWITZ FOR BUZZFLASH AT TRUTHOUT

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Let's face it, people: Walmart is kicking our collective butts; to the tune of more than $7 billion in taxpayer subsidies. A new report by Americans for Tax Fairness points out that the American taxpayer - read that, you, me and probably everyone you know - "is providing enormous tax breaks and tax subsidies to Walmart and the Walton family, further boosting corporate profits and the family's already massive wealth."

In addition to accruing tax breaks from the rest of us, the report points out that "the Walton family is avoiding an estimated $3 billion in taxes by using specialized trusts to dodge estate taxes – and this number could increase by tens of billions of dollars."

And, the family "also benefits significantly from taxpayer-funded public assistance programs that pump up the retailer's sales. For example, Walmart had an estimated $13.5 billion in food stamp sales last year."

Walmart is the largest private employer in the United States, with 1.4 million employees. The company, which is number one on the Fortune 500 in 2013 and number two on the Global 500, had $16 billion in profits last year on revenues of $473 billion.

However, according to WALMART ON TAX DAY: How Taxpayers Subsidize America's Biggest Employer and Richest Family, "The Walton family, which owns more than 50 percent of Walmart shares, reaps billions in annual dividends from the company. The six Walton heirs are the wealthiest family in America, with a net worth of $148.8 billion. Collectively, these six Waltons have more wealth than 49 million American families combined."

"The annual subsidies and tax breaks to Walmart and the Waltons include the following":

  • "Walmart receives an estimated $6.2 billion annually in mostly federal taxpayer subsidies. The reason: Walmart pays its employees so little that many of them rely on food stamps, health care and other taxpayer-funded programs."
  • "Walmart avoids an estimated $1 billion in federal taxes each year. The reason: Walmart uses tax breaks and loopholes, including a strategy known as accelerated depreciation that allows it to write off capital investments considerably faster than the assets actually wear out."
  • "The Waltons avoid an estimated $607 million in federal taxes on their Walmart dividends. The reason: income from investments is taxed at a much lower tax rate than income from salaries and wages."

The Street's Orit Nathan Mahalal recently noted that the Americans for Tax Fairness report "found that each Walmart Supercenter employee costs the taxpayer $3,015 to $5,815. Since Walmart has 1.4 million employees nationwide, the total estimated cost to U.S. taxpayers is $6.2 billion. The assistance that Walmart employees receive includes school breakfasts and lunches for their kids, earned income tax credits, section 8 housing assistance, food stamps and other benefits."

U.S. News' David Brodwin also took a look at Walmart's overall practices and found that while "Walmart's low prices appeal to consumers," the company "destroy[s] Main Street retail shops, drive down wage rates and damage local economies. Walmart's aggressive negotiations with their suppliers tend to force consolidation upstream, driving smaller independent operators out of the supply chain. The labor practices of big box chains often hurt workers and take a free ride on the backs of taxpayers. For example, when a chain that doesn't offer health insurance wipes out local retailers that did offer insurance, the cost of health care doesn't go away, it just gets shifted to patients themselves, and it racks up budget deficits at county hospital emergency rooms."

Americans for Tax Fairness is made up "of 400 national and state organizations that collectively represent tens of millions of members. The organization was formed on the belief that the country needs comprehensive, progressive tax reform that results in greater revenue to meet our growing needs. ATF is playing a central role in Washington and in the states on federal tax-reform issues."

Walmart's foray into organics

Keeping in mind that Walmart's tax avoidance is harming all taxpayers, consider the company's recent announcement regarding organic food.

For many people, choosing to buy and eat organic food is a difficult decision. It's often too darned expensive to buy organic fruits and vegetables, canned goods and boxed products. And organic foods are not readily available in many areas of the country. Would people buy organic if it was priced reasonably and it was easily obtainable? Walmart is betting that its customers will.

If you listen to spokespersons for Walmart, their recent announcement of its partnership with WildOats – a former subsidiary of Whole Foods – will dramatically change the U.S. organic food industry. The superstore giant aims to grab hold and shake up the industry by offering an expanded line of organic products at Walmart prices.

"Out on the mean streets of the U.S. organic foods industry, Walmart has stepped onto the corner with both guns drawn," Grist.org's Eve Andrews recently reported in a story titled "Why you should be skeptical of Walmart's cheap organic food". The company will "offer a line of organic goods at unprecedentedly low prices in 2,000 of its U.S. stores." Walmart will start out with "canned goods and other pantry staples that will cost up to 25 percent less than those of other organic brands."

For some, this is deja vu all over again. As NPR's Dan Charles recently pointed out, "we've heard this before": "Back in 2006, Walmart made a similar announcement, asking some of its big suppliers to deliver organic versions of popular food items like mac-and-cheese. A Walmart executive said at the time that it hoped these organic products would cost only 10 percent more than the conventional alternative."

"We're removing the premium associated with organic groceries," Jack L. Sinclair, executive vice president of Walmart U.S.'s grocery division, told the New York Times.

Not surprisingly, Wal-Mart's newly made-over organic mission is controversial, raising questions about land use, sustainability and organic food growing practices.

Andrews spoke with Coach Mark Smallwood, executive director of The Rodale Institute in Kutztown, Penn., "about how Walmart could manage to offer such low prices, and what that might mean for organic farmers across the country. Smallwood explains that the concept of a 'premium' associated with organic food is misleading, because the price of an organic good reflects the true cost of its production.

"The issue is that there aren't the subsidies available to organic farmers that there are [for conventional farmers.] So there's a question in my mind about how Walmart is going to pull this off and be able to make profit," Smallwood said. "And for them to even come out and make that statement before they've started is a huge question mark. Somebody's going to have to pay, and my hope is that it's not the organic farmer."

"Will a large agricultural operation come in and buy up tens of small family farms and put them all under one name, and then create that slash-and-burn model?" Smallwood said. "That's what I'm afraid of. That's the [possible] downside."

Finally, will Walmart's employees be able to afford Walmart organics even at lower prices?