May 24—Wal-Mart, the nation’s largest retailer, scored a $9 billion profit last year while creating mostly poverty-wage jobs, killing small businesses that provide good middle-class jobs and fostering sprawl. At the same time, the corporate giant has devoured more than $1 billion in economic development subsidies—that’s taxpayer dollars—to build its stores and warehouses, according to a new report from Good Jobs First (GJF), a nonprofit research group.
Released today, Shopping for Subsidies: How Wal-Mart Uses Taxpayer Money to Finance Its Never-Ending Growth, is the first study to shine a light on deals in which state and local officials subsidize Wal-Mart through sales tax rebates and property tax abatements. Beginning in the early 1980s, researchers found that taxpayers helped finance 84 Wal-Mart distribution centers—more than 90 percent of the company’s national warehouse network—at an average subsidy of $7.4 million. An additional 160 Wal-Mart retail stores received an average $2.8 million in subsidies, with the largest scoring a whopping $12.3 million in subsidies for a “supercenter” that sells groceries and general merchandise, set to open next year in Country Club Hills, Ill.
Yet even those figures likely are low because disclosure of economic development subsidies is poor in most states, according to GJF Research Director Philip Mattera. In a March 30, 2001, Dubuque (Iowa) Telegraph Herald opinion piece, B. John Bisio—identified as a Wal-Mart community affairs manager—writes “it is common” for the company to request subsidies “in about one-third of all [retail] projects.” This statement suggests, the GJF report finds, “that more than 1,000 Wal-Mart stores may have been subsidized, far more than the 160 we found from public sources.”
Economic Devastation for a Southern California City
One of the deals the report examined was made more than a decade ago in Cathedral City, a working-class town south of Los Angeles. Elected leaders there gave Wal-Mart approximately $1.8 million in sales tax rebates as part of a deal for a new Wal-Mart and a Sam’s Club store. City leaders presumed the subsidy eventually would be paid off and the city would get not only new jobs, but much-needed sales tax benefits.
Last year, however, just as the city started receiving the $800 million in annual sales taxes from Wal-Mart that would help plug its $3 million deficit, the retailer announced it was closing the stores in 2005 and opening a supercenter in a nearby town. Now Cathedral City lacks the dollars to fill critical police and paramedic positions, not to mention funding to water its parks, which have died along with small businesses that couldn’t compete with the behemoth retailer and its low-wage jobs.
Wal-Mart is “not a good neighbor” and its “low-wage jobs have no health care,” Cathedral City Mayor Pro Tem Greg Pettis says today. Subsidizing it, he says, is “the biggest mistake” community leaders can make with taxpayer dollars.
According to Mattera, many elected officials take a shortsighted view of Wal-Mart’s demands for taxpayer funds. “Wal-Mart may wine and dine these officials and make all kinds of promises, and they think it’s what the public wants and it’s hard for them to say no,” he says. “Later on, a lot of them realize this wasn’t such a great deal, but by then it’s too late.”
In a speech this month, Vice President Dick Cheney praised Wal-Mart, saying, “The story of Wal-Mart exemplifies some of the very best qualities in our country.”
Inglewood, Calif., Voters Reject Wal-Mart Subsidies
The vast majority of taxpayer-financed subsidies for such big-box retailers as Wal-Mart are simply “dumb deals,” says Good Jobs First Executive Director Greg LeRoy. Retail is not economic development, he says, unless it’s in a truly depressed inner-city neighborhood. In most cases, the “upstream effect” of such deals promotes sweatshops abroad and squeezes suppliers, while the “downstream effect” creates jobs that don’t give workers the purchasing power we need to buy homes and cars and otherwise recycle dollars into our communities. “It’s an overwhelming argument to get taxpayer dollars out of retail,” he says.
In April, a coalition of union, religious and neighborhood leaders in Inglewood, Calif., soundly rejected Wal-Mart’s efforts to build a store in the working-class city outside Los Angeles. More than 60 percent of the mostly African American and Latino voters rejected a ballot measure brought by Wal-Mart to approve a supercenter the size of 17 football fields.
The Coalition for a Better Inglewood, a diverse group of community- and faith-based groups, elected officials, union activists and small business owners, says it recognized Wal-Mart’s measure for what it was—an end run around a likely ban by city council members, who included a recently elected United Food and Commercial Workers business agent.
In other cities and counties, Wal-Mart had previously mounted ballot measures, typically asking voters to reverse ordinances banning big-box stores. This was the first that asked voters to support a specific project.
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