Blue Mass Group

Reality-based commentary on politics.

Massachusetts taxpayers actually lost money on the 45 Wal-Mart stores in their state

By

Hear is a prime example of lack of action between our Governor and Legislators.

In February of 2007, the Wall Street Journal ran a story revealing that Wal-Mart pays billions of dollars a year in rent for its stores, but in 25 states — most of them east of the Mississippi — it has been paying most of that rent to itself, and then deducting that amount from its state taxes. By so doing, Wal-Mart has avoided paying several hundred million dollars in state taxes.

The actual outcome to Massachusetts tax payers has been

A number of other states, like Massachusetts, are considering “combined reporting” tax reform, which requires corporations to report all their revenues in one state, ending the ability to assign costs to other states and escape taxation. All related companies would have to file one income tax return. In Massachusetts, Wal-Mart 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. The net result is that Massachusetts taxpayers actually lost money on the 45 Wal-Mart stores in their state. Massachusetts Governor Deval Patrick has drafted legislation that would close Wal-Mart’s loophole in the Commonwealth, but the Massachusetts General Court has not taken up the bill.

Add it up that is 12 million plus lost due to the fact this is not getting done.

I am sure that would help reduce property taxes put cops on our street and make BIG BUSINESS pay their fair share of taxes.

We need as a community to put pressure on our elected officials to get it done!

Please share widely!
fb-share-icon
Tweet
0

Comments

  1. The other advantage of the combined reporting plan is that by raising more revenue from the large corporations such as Wal-Mart, it potentially provides relief not only to residential property owners, but to small businesses as well (whom represent the backbone of the MA economy). Municipalities with split tax rates have provided a form of property tax “relief” to homeowners by shifting more of the burden to commercial properties (and small biz). So the combined reporting plan, by raising revenue from sources outside heavier burdens on commercial property, may actually have some direct benefits for the broader economy as well.

  2. I’m on board with combined reporting, but to add in Medicaid costs to the already egregious $5.4 seems misleading, unless the only reason the 6,000 are on Medicaid is due to their employment at Wal Mart.  Take the 45 stores away, and how many are still on Medicaid?  

    <

    p>My guess would be roughly 6,000.

    • I think it is perfectly reasonable to include the cost of providing insurance to people who work for a company in the cost of allowing that company to exist in this state. At least it makes sense as long as we have employer-provided health care as the standard.

      <

      p>If Massachusetts forced all the Walmarts to close, those 6,000 people would probably work in other stores that can’t compete with Walmart. They would probably be getting health care through the retailers that Walmart is displacing.

      <

      p>This provides a good estimate of what the employer mandate should be. Providing health care to 6,000 people costs the state $5.4million, so the cost per person is $900. If the state wants to penalize people for not having health insurance, the penalty should be $900/person (whether it is paid by the person or their employer is a separate matter). This may only apply to people who are eligible for federal funding for Medicaid.

  3. It is a mistake to count avoiding taxes as an expense to the state. The claim is that Walmart paid $11million in taxes, avoided $5.4million, and cost $7.2million in Medicaid. Net revenue to the state is 11-7.2=$3.8million. If Walmart was not avoiding its taxes, it would be paying $16.4million. The state has $12.6million less money that it would have if Walmart didn’t avoid taxes and provided health care to its employees. But it has $3.8million more than it would if Walmart and all Walmart employees did not exist (ignoring second-order effects). So the state is not losing money, it is just ending up with less money than it would have if Walmart paid a fair share.

    • plus Wal*Mart paid local taxes in MA too.

      <

      p>There are other costs too.  What about any costs cities and towns have borne due to extra traffic at that intersection?  What about environmental costs to their big box store?  What about local economy trouble when they abandon their big box to move into another one a few miles down the road?

  4. In addition to pressure on the legislature, we should also seek to put in new legislators who support this sort of progressive fiscal policy. Union organizer and MPA supporter Jim McCabe, for instance, is challenging the anti-MPA rep Pat Donato in the 35th Middlesex. In addition, Jason Lewis, the 31st Middlesex challenger, is a strong MPA and loophole closing supporter.

  5. most notably the “mom & pop” businesses.  Plus their treatment of their employees…a long history of disgraceful proportions.  The very well-done documentary film, Wal*Mart:  The High Cost  of Low Pricing, if one can rent or buy the DVD, is a very well-done film that points out what is being discussed here on this thread…plus more.  

    <

    p>Bill Quinn’s book, How Wal*Mart is Destroying America (and the World), is an excellent book that, imo, is worth reading, and also a very revealing book that will scare your socks off,  but, imo, it’s worth reading, anyway.

  6. I cringe whenever I hear combined reporting referred to as “closing loopholes.”  Combined Reporting is an entirely different and more accurate way to measure the MA income of a multistate corporation than the current separate entity reporting system.  Determining the amount of a multistate corporation’s total income that should be sourced to any one state has been described as trying to slice a shadow.  Under Combined Reporting some multistate corporations will actually see their MA income decrease.  More will see their MA income increase.  All will see their MA income measured more accurately.

    <

    p>The legislature has closed loopholes (see the add-back statutes in ch. 63 sec. 31I and 31J).  Combined Reporting is NOT merely closing loopholes.  I wish that Combined Reporting could be seen as a better and more accurate system to measure a multistate corporation’s income rather than merely “closing loopholes.”

  7. Believe it or not I too take all the tax benefits allowed to me by the laws of State and Nation.  I suspect the good BMGers do too.  Don’t blame the Corporation for following bad laws if it is in their favor to do so.  Also, for an entity to deduct an expense as business related, it MUST be counted as revenue by the party receiving the payment.  I understand that in this case the entities are in different states, and that is what causes the inequities discussed, but how is this the fault of evil Walmart? Blame the weak politicians, not WalMart.

Archives