Wal-Mart Captures More than $1 Billion in Subsidies

Date: 5 Aug 2004 | posted in: Retail | 0 Facebooktwitterredditmail

A new study documents more than $1 billion in state and local development subsidies that have flowed to Wal-Mart, and that figure likely represents only the tip of the iceberg.

“Shopping for Subsidies: How Wal-Mart Uses Taxpayer Money to Finance Its Never-Ending Growth,” produced by Good Jobs First, a Washington, D.C.-based research organization, identifies 244 Wal-Mart stores and distribution centers in 35 states that have received subsidies totaling just over $1 billion.

“Wal-Mart presents itself as an entrepreneurial success story, yet it has made extensive use of tax breaks and public assistance,? said Philip Mattera, principal author of the study.

The subsidies took many forms, including property tax rebates, free or reduced-priced land, and funding of site preparation and on-site infrastructure. Tax increment financing (TIF) ranked as one of the most common mechanisms used by local governments to underwrite Wal-Mart’s growth.

The study is the first attempt to provide a comprehensive national analysis of subsidies received by Wal-Mart. A complete picture, however, is virtually impossible. In most states, local governments and state agencies are not required to report subsidies, and there is no centralized record or database. Good Jobs First relied primarily on the online archives of local newspapers to assemble the list of subsidy deals, the details of which were confirmed by interviews with local officials.

The total value of public giveaways to Wal-Mart is undoubtedly much higher than the $1 billion documented by the report. According to a Wal-Mart official, the company commonly requests tax breaks or other subsidies for about one-third of its projects, which could mean as many as 1,000 Wal-Mart stores have been publicly funded.

Good Jobs First was not able to individually assess all 3,000 Wal-Mart stores operating in the U.S. to identify those that had received subsidies, but it did opt to take this approach with the retailer’s 91 distribution centers. Of these, it found that more than 90 percent had received government subsidies.

Subsidizing chain retail development is rarely, if at all, warranted. Big box stores do not produce any net gain in employment. Studies have found that they typically destroy as many jobs as they create by forcing existing businesses to downsize or close. Superstore jobs are mostly low-wage and lacking in benefits, and the stores themselves generate significant environmental and community costs.

Perhaps the only areas where subsidies for retail development might serve a legitimate public purpose, according to Good Jobs First, are poor neighborhoods suffering from blight—defined as those in which the rate of unemployment is at least two percentage points above the state average or in which the poverty rate is 30 percent or more—and a demonstrable lack of retail services.

Good Jobs First recommends that states adopt legislation barring subsidies for retailers in all other circumstances. The study further advises that states establish wage standards. “A suitable requirement would be that any jobs created by the subsidized facility pay a wage that allows workers to achieve economic self sufficiency,” the study concludes. “We suggest this be defined as a wage equal to at least 115 percent of the local average for non-managerial workers.” An appendix in the report includes model state legislation.


Avatar photo
Follow Stacy Mitchell:
Stacy Mitchell

Stacy Mitchell is co-director of the Institute for Local Self-Reliance and directs its Independent Business Initiative, which produces research and designs policy to counter concentrated corporate power and strengthen local economies.