Taxing companies for 'everyday low' pay packages

By Ed Muir

Wal-Mart is the largest employer in America. But saying even that understates its size. With 1.3 million employees, it has a larger workforce than the U.S. Army. Its annual revenues are $250 billion. And, according to Business Week magazine, just the amount it loses to theft each year is equal to the revenues of a Fortune 1000 company.

Wal-Mart also has a record of poor employment practices. Its “associates” made an average of $13,861 in 2001. At the time, the poverty line for a family of three was $14,630. Wal-Mart workers are half as likely as unionized retail workers to have health coverage. That’s because of high turnover in the workforce and annual premiums that cost a month and a half’s pay. Wal-Mart has a record of litigation on overtime abuses, gender discrimination and child labor. It closed an entire store in Canada because workers won a union election. When meat cutters at one Wal-Mart voted for union representation, every Wal-Mart stopped packaging meat in-house and started purchasing case-ready meat, destroying the bargaining unit.

Why is this issue in a column on taxes and public finance? Because Wal-Mart’s “everyday low prices” are directly and indirectly subsidized by the tax dollars of even those of us who won’t shop there. A recent study by Good Jobs First found that taxpayer dollars had subsidized the creation of more than 90 percent of the company’s distribution centers. All told, direct subsidies and tax breaks for Wal-Mart total more than $1 billion.

The indirect subsidies come from the use Wal-Mart employees have to make of programs that provide income support to low-wage workers. For example, 10,000 of the 166,000 children enrolled in the State Children’s Health Insurance Program in Georgia (SCHIP), were children of Wal-Mart workers. The office of U.S. Rep. George Miller (D.-Calif.) found that Wal-Mart workers were eligible for more than $2,000 a year each in federal assistance, including Title I and free and reduced-price lunches for their children. The Labor Center at Berkeley found that the families of Wal-Mart employees collected $86 million a year in California state assistance, or almost $1,900 per employee. The primary vehicles for this were the state’s earned income tax credit and its Medicaid and SCHIP programs.

And there is evidence that Wal-Mart encourages its employees to pursue these benefits. Such practices put pressure on employers who, by providing proper pay and benefits, are taking the high road. The recent strike of grocery workers in California resulted in part from management wanting to slash healthcare benefits to compete with Wal-Mart.

One response, from the AFL-CIO, is a campaign to require that public welfare agencies collect information about the employers of families applying for benefits. The goal is to disclose the extent to which profitable companies are enhancing their bottom lines by traveling on the low road.

In the Montana Legislature, Sen. Ken Toole has introduced a bill to do something more direct about this. The bill, supported by MEA-MFT, the merged NEA/AFT Montana affiliate, would apply a tax on retail stores that do more than $20 million in business a year. But stores that provide a salary and benefit package worth more than $21,000 to their full-time employees and that have a largely full-time workforce would be exempt. This would be a tax on employers that take the low road. Sen. Toole has said that he hopes no employer will choose to qualify for the tax. If so, Montana would be able to devote fewer tax dollars to Wal-Mart and more to funding adequate services for its children and for clean air and water.

Ed Muir is an assistant director of the AFT research and information services department. This column is intended to demystify public tax structures and spotlight efforts to achieve tax reform—an activity high on the agenda of labor. Send comments to emuir@aft.org.