Walmart, which already is profiting mightily from federal, taxpayer paid corporate welfarein the form of food stamps subsidizing its workers’ low wages, as well as billions in direct profits from buyers shopping with food stamps, also takes advantage of tax laws that help it avoid paying federal tax.
Thanks for Shopping at Walmart, Suckers
American taxpayers subsidize much of the cost of Walmart’s executive pay. Walmart (and other large companies) uses a loophole in a tax law created by Congress in 1993 (Section 162(m) of the tax code) that allows it to deduct unlimited amounts from corporate income taxes. All Walmart has to do is deduct the cost of executive compensation if it is paid in the form of stock options and other so-called “performance pay” instead of straight salaries. Congress wrote the law to apply only to actual salaries.
– Ka-Ching! $104 MILLION: Walmart reduced its federal tax bills by an estimated $104 million over the past six years by paying its top eight executives $298 million in “performance pay” that was fully tax deductible. The tax revenues lost would have been enough to cover the cost of free school lunches for 33,000 children for those six years.
– Ka-Ching! $40 MILLION: Michael Duke, Walmart’s recently retired President & CEO and currently Chairman of the Executive Committee of the Board of Directors, pocketed nearly $116 million in exercised stock options and other “performance pay” during the period 2009-2014. That translates into a taxpayer subsidy for Walmart of more than $40 million— enough to cover the average cost of food stamps for 4,200 people for those six years. FYI: Duke’s total compensation for 2013 was $27.6 million, all wrung out of those everyday low prices.
– Ka-Ching! $50 BILLION: Taxpayers would save $50 billion over 10 years, according to the Joint Committee on Taxation, if Congress changed this tax law, even if the new law allowed a generous tax deduction of one million dollars for each employee’s total compensation, with no exceptions for performance pay, as originally intended when the law was first created in 1993.
– Ka-Ching! $14 BILLION: And about those tax-payer funded food stamps. Overall, 18 percent of all food benefits money is spent at Wal-Mart. That’s about $14 billion.
– Ka-Ching! $7.8 BILLION: Taxpayers spend $7.8 billion a year subsidizing Walmart through public assistance to the company’s low paid employees.
– Ka-Ching! $3 BILLION: The four members of the Walton family, who control almost all of Walmart, shelter signficant amounts of their money from taxes by placing the cash into trusts, allowed by the tax code. To avoid taxes on the dividends generated out of these trusts, those monies are donated to the Walton Family Foundation, a registered charity. When the trusts expire upon the deaths of the elder Waltons, however, their underlying assets, along with any income earned above the amount required to go to the Foundation, will revert to the trusts’ non-charitable beneﬁciaries, the second or third tier Walmart heirs-in-waiting. The non-charitable beneﬁciaries of the trusts will likely receive these trust assets entirely free of estate taxes. Cost to taxpayers is estimated at $3 billion in lost tax revenues.
What it Means
There are some important takeaways, besides the obvious. The first concerns the minimum wage. It is clear that Walmart could easily pare off a sliver of the billions its owners take in to raise wages without raising prices. They just don’t want to. Even if prices went up, savings in food stamps that would not have to be paid to starving workers would be substantial.
The other thing to consider is the conservative argument that business growth is critical to broader economic and societal growth. Maybe in some ways, but as shown with Walmart, certainly it does not lead to larger tax revenues; quite the opposite. Somebody has to pay for all those food stamps and trust fund loopholes. That’s you.
It is important to remember that companies have been enjoying these taxpayer subsidies for their executive compensation since 1993, plus the economic benefits of food stamps to subsidize their profits and low wages. That they exist today, at the phenomenal costs to regular Americans noted above, is no secret.
So draw your own conclusions from that as to how Congress views all this corporate welfare.
Photo courtesy Walmart under Creative Commons license