Money for schools or for Wal-Mart?

Allison Lack

Money for schools or for Wal-Mart?

There are many (not so smiley) faces to Wal-Mart’s drain on the public coffers.

Some are less direct – such as publicly subsidized health care for the many Wal-Mart employees who don’t receive coverage through work. Others are much more explicit – like the company paying rent to itself so it can take state income tax deductions. And as Good Jobs First initially documented in a 2004 report and has since updated, Wal-Mart has saved more than $1.2 billion in state and local government funds under subsidy deals. A new Good Jobs First report demonstrates yet another way Wal-Mart undermines the tax base of the communities it claims to support: by continuously and aggressively challenging its property tax assessments.

The report, Rolling Back Property Tax Payments: How Wal-Mart Short-Changes Schools and Other Public Services by Challenging Its Property Tax Assessments, found that the giant retailer has appealed assessments at more than one-third of its U.S. stores and distribution centers. Many facilities had multiple appeals, and there were a number that had appeals even though they were already receiving property tax abatements under subsidy deals. Information on stores receiving both subsidies and appeals, as well as information on hidden taxpayer costs for health care, can be found at www.walmartsubsidywatch.org.

Good Jobs First’s findings in “Rolling Back Property Tax Payments,” including the fact that decisions to appeal assessments are made at the corporate level rather than by individual store managers, strongly suggest that the appeals are systematic and result from centralized policy, rather than from occasional disagreements with particular valuations. The report points out the hypocritical nature of such a policy: In claiming that its facilities are worth less and its property values have decreased, Wal-Mart contradicts its own assertions that it brings economic benefits to communities, since economic benefits would generally be reflected in higher property values.

The good news is that, despite the high number of appeals, it seems many public officials have refused to lower assessments and are making Wal-Mart pay its full share. The company succeeds in its property tax protests slightly less than half the time. But even in cases where local governments prevail, communities sometimes incur substantial costs. In the course of its research, Good Jobs First learned of local governments that spent tens of thousands of dollars in legal battles to fight Wal-Mart’s assessment appeals – a cost much easier for the country’s largest corporation to bear than for many communities.

When Wal-Mart does succeed in its persistent efforts to avoid paying its full share of property taxes, this can affect communities in two ways, usually both happen: 1) the tax burden is shifted to smaller businesses or residents, and 2) services need to be cut. Given the high share of school budgets that come from local property taxes in most communities, schools are especially vulnerable to Wal-Mart’s property tax avoidance. Other essential public services provided at the local level, such as police and fire protection, are also endangered.

Of course, Wal-Mart isn’t the only company guilty of trying to lower its property tax payments. But given that it is the world’s largest retailer, and is much bigger than its closest US competitor, this behavior affects more communities and more people than do similar actions by other companies.

Wal-Mart’s new slogan is, “Save Money, Live better.” But what appears to be the company’s systematic policy of challenging its property tax assessments, resulting in decreased local funds for schools and other public services, is another way Wal-Mart saves money, we live worse. Public officials who want to bring a Wal-Mart into their communities need to keep this in mind when they consider whether the benefits the company promises to bring will actually be realized.