Amid law suits and continuing news of Wal-Mart ducking state and local income taxes, a recent article found that Wal-Mart was doing the same in Massachusettes. In addition to paying itself rent to reduce its tax burden, Wal-Mart is also paying a huge sum to lobbyists in the state to fight against laws that would prevent them from running their tax evasion scam. Here's the article from the Huffington Post:
Forget everyday low prices. Wal-Mart has been paying high-priced lobbyists to keep the company from having to pay its fair share of income tax to the Commonwealth of Massachusetts.Wal-Mart paid nearly a quarter of a million dollars last year to a small army of 8 lobbyists to push its agenda with Beacon Hill lawmakers in 2007. The retailer's 'high-priced' lobbying tab for 2007 came to $208,678---five times what the company spent the previous year.
According to research conducted by Sprawl-Busters, a Greenfield, MA-based anti-Wal-Mart clearinghouse, Wal-Mart hired three separate lobbying firms, plus its own Public Affairs Manager, as lobbyists:
· Bay State Strategies Group, LLC of Natick was paid $53,200 by Wal-Mart, which went to 3 of its lobbyists: David Shapiro, Frank Shea, and Robert Bernstein.
· Holland & Knight, LLP of Boston, also had Wal-Mart as a client in 2007. The firm was paid $26,600 by Wal-Mart for the services of the same 3 lobbyists.
· Johnson Haley, LLP of Boston, was the big winner of Wal-Mart payments, receiving a total of $128,503 for the services of 4 lobbyists: Stephanie D. Neal-Johnson, Pierce J. Haley, Andrea Serlin, and Martin Fisher.In addition, Wal-Mart registered its own New England public affairs manager, Christopher Buchanan, of Plymouth, as a lobbyist.
In 2005, Wal-Mart spent only $40,800 on lobbying, and in 2006, only $43,220. But in 2007, the retailer unlocked the corporate treasury. According to Sprawl-Busters, 2008 will again be a record-setting year because of the company's efforts to block legislation that would force it to pay its fair share in state income tax.
Wal-Mart retained at least 8 lobbyists to ply its issues on Beacon Hill, which ranged from legislation regulating the retailer's credit cards, to preventing big box stores from selling gasoline below cost. Wal-Mart weighed in on bills related to electronic identity theft, the use of radio frequency identification devices, and private check cashing services.
But the retailer also paid Bay State Strategies and Holland & Knight to lobby against H. 3756, Governor Deval Patrick's "Act Improving the Fairness of the Tax Laws." The Governor's bill contains a provision that would require Wal-Mart to pay millions of dollars in state income taxes that the retailer has dodged by creating "sham transactions" that it pays to itself.
H. 3756 would close this tax loophole, forcing Wal-Mart to pay at much as $5 million in state taxes that it has previously dodged. Patrick refiled his legislation in January, 2008, saying, "Under the current system, small businesses are at a disadvantage, while larger corporations avoid paying their fair share." One of the main larger corporations not paying its fair share is Wal-Mart. And the corporation is paying big bucks to lobbyists to keep it that way. According to the Governor's office, closing this one loophole would generate another $271 million in revenues for the Commonwealth in FY 2008.On December 28, 2007, the Commonwealth's Study Commission On Corporate Taxation, reported that multi-state corporations like Wal-Mart were allowed to "shift income out of corporations engaged in business in the Commonwealth to affiliates in low-tax jurisdictions, thus reducing Massachusetts taxes paid." The legislation opposed by Wal-Mart eliminates this shifting of income by adopting "combined reporting," under which affiliated corporations engaged in unitary business activities combine their incomes and apportionment factors and file as one entity."
The Study Commission concluded that "combined reporting would modernize the corporate tax structure in the Commonwealth and would reduce opportunities for tax avoidance through transactions among affiliated corporations."
Twenty other states have adopted combined reporting. States that have recently adopted combination include Vermont, New York, and West Virginia, and its adoption has been proposed in Maryland, Michigan, New Mexico, North Carolina, and Pennsylvania. North Carolina recently won a combined reporting tax verdict in state courts that will cost Wal-Mart $33 million. The retailer has appealed that decision.
In Massachusetts, according to Sprawl-Busters estimates, the retailer says it paid nearly $19 million in state and local taxes in 2006. Assuming roughly $11 million of that was state income tax, the retailer also avoided $5.4 million by deducting rent it paid to its Delaware-based REIT as a business expense, lowering its taxable income. The company also cost taxpayers $7.2 million in health care costs for 6,000 Wal-Mart workers and dependents on Medicaid.
Based on a scheme developed by its accounting firm, Ernst & Young, for a "local tax reduction strategy," Wal-Mart's financial self-dealing allows it to pay rent to itself through a maze of eight corporate subsidiaries created in November of 1996, including Real Estate Investment Trusts (REITs). The rent appears as an expense on state tax forms, and is thus deducted from its taxable revenues.
Under the agreement with itself, Wal-Mart pays 2.5% of gross sales monthly as rent to its own REIT, which then wires the money quarterly to Wal-Mart Property Company in the form of a dividend, which is then paid to Wal-Mart Stores as a tax-exempt "dividends received." All of these transactions are handled through a "cash management agreement" between all the parties. Neither the REIT nor the Property Company ever had any employees.
The REITs don't pay taxes, as long as they pay 90% of their income out in dividends to shareholders. In Wal-Mart's case, the REITs are owned by Wal-Mart subsidiaries which are registered in Delaware, a state that has no corporate income tax. Wal-Mart gets the benefit of the rent expense, but also gets the benefit of the non-taxed dividend, on the same monies. The dividends escape taxation, and the original rent that created the dividends is deducted from taxable income in the states where the "expense" is incurred. The rent, in essence, goes from one Wal-Mart pocket, into another.
This is a major loophole that Wal-Mart doesn't want closed. It's more cost-effective for the company to shell out a couple hundred thousand in lobbying fees to protection several million in tax avoidance. But the rest of Massachusetts taxpayers are the ones who pay for Wal-Mart's slack. Because Governor Patrick has included his corporate combined reporting bill as part of his fiscal year 2008 budget, now before the General Court, Wal-Mart is expected to spend a record amount in 2008 to keep its tax loophole open. That's good news for Wal-Mart's lobbyists.
Posted by Taylor - February 4, 2008 01:00 PM - In The News
There are maybe 8 or 9 people who visit this site every day, and you have about 2,000 new supporters since Thanksgiving. Why don't you find something better to do with your sorry lives. You're not going to change Walmart in the next 10,000 years. The real problem is still China.
Posted by Doug - February 5, 2008 08:54 AM
lol i agree
Posted by Viroc - February 5, 2008 11:55 AM
Doug...lets see, you and one other person who seems to disagree with this website have commented so far. I think if 2 people that don't agree with the website take time to put thier comments down, there are hundreds, if not thousands who agree with the website that aren't commenting, and even more that are reading.
Also, you make a mature, well reasoned argument, calling on the folks that run this campaign to "do something better with their sorry lives." I'm sure your life is SOOOO much better than theirs, and that is why you spend a chunk of your time prowling around their blog making snarkey comments.
I, for one, think that they are doing something very important with their lives...they're fighting for the rights of Wal-Mart associates everywhere; they're fighting for millions of foreign laborers working in Wal-Mart sweatshops; they're fighting for healthcare, a living wage, and corporate responsibility.
Lastly, I think they have had an affect on Wal-Mart. Why else would Wal-Mart overhaul their healthcare and spend millions on PR to try and make their company look better? It's because campaigns like this one are having an effect, and Wal-Mart has to respond.
Posted by BackStageLeftist - February 5, 2008 01:57 PM
My life is fine thank you "backstage" I guess yours is too
Posted by Doug - February 6, 2008 08:56 AM
You know what Backstage, my life isn't fine. The reason I visit this site so much is because China put me and about half a million steel workers out of business twice in 11 years. China was the problem in `97 and Clinton had to step in to regulate their steel dumping. Now they're poisoning our kids and you're blaming Walmart.
Posted by Doug - February 6, 2008 09:09 AM
The problem is not Wal-Fart or China separately. (China made toys with led paint Wal-Fart sold them. Who bought them?) The real problem is the whole system. Wal-Fart is just a very large part of it. China is runing out of cheap labor so they are now finding it in Vietnam.
I am sad to hear about what happened to you Doug, I am a Union Pipefitter so I know were you are coming from. I was forced to move from my home town to were the work is, not because of Wal-Fart directly but because they are making the huge profits other companys are looking at how they are doing it and following suit. Please stop fighting amongst eachother. What this sight and all the people inspired by it are doing will help if they can get the word out more. Part of the problem is not enough people are willing to work togeather. The bigest part of the problem is that what Wal-Fart had done is create the need for the "low price" by paying the low wage, and forcing their competitor to do the same or go out of business. (This is economics 101 people) http://www.devvy.com/made_inthe_usa.html
This and many other sights list products made in the U.S.A. This list is way too small. One word describes the reason for the small size. GREED!
Not just of all the giant companies but of the American consumer as well. The person who chooses to or is not motaveted enough to find a better employer is paid a small wage so they have a small buget, this person is bombarded by the media, hollywood, and others by advertising trying to convince them that if they buy whatever good or service they are hawking they will be somehow transformed into a higher class of person, but alas the poor Wal-Fart worker (for one example) can not afford the high priced L.C.D. T.V. made in Japan, China, or whatever other country it is made in. (I know of no T.V. made in the U.S.A.) or the very expensive, shiny, "Pimped out" ride they saw on MTV (I know of no car made 100% in the U.S.A.)
Meanwhile peple on this sight (for one example) are trying to expose the flaws in the Capitalist Society America chose to become and repair them. Please do not missunderstand me here I chose to stay an American, but if something isn't done to repair all of the damage all Americans are causing in the persuit of money America will collapse. The very foundation of America is long gone, crushed by the flaws in human nature of envy and greed.(The same flaws that led to Americas existance.) Wal-Fart is as good a place as any to start. I think that the effort could be better spent on using the free market aginst them. Pick their bigest compition and help that company (Sears and K-mart merged to stay alive,help convince them to merge with Target then they would have the buying power to squash Wal-Fart.) write to the suplyers and demand more Made in America products. Espically write to the Advertisers and the media networks and demand more made in America products. Stop spending money at any store until this happens. Do you really need that mp3 player? or most of the other stuff these stores sell? Only buy the basic necessities and watch the profit margin fall. That is the only way that any change for the better will happen. The self-proclaimed exptert econimists say we arn't in a recession I say lets blow right past recession into depression and see what happens. Even the government sees this people. Why do you think the Economic Stimulus bill is the top priority in the Senate right now?
Posted by Chance - February 7, 2008 11:48 AM
Does the UFCW pay lobbyists? Do they pay taxes?
Posted by Ike - February 14, 2008 01:14 AM