Chip Taylor

The Wal-Mart subsidy study

The New York Times reports a study conducted by Good Jobs First that claims Wal-Mart has been the recipient of over a billion dollars in government subsidies.

In the companies defense, Wal-Mart spokeswoman, Mona Williams said:

...if $1 billion is correct, Wal-Mart could make good use of the figure in its advertising. In the last 10 years, she said, Wal-Mart has collected more than $52 billion in sales taxes, paid $4 billion in local property taxes, and paid $192 million in income and unemployment taxes to local governments.

"It looks like offering tax incentives to Wal-Mart is a jackpot investment for local governments," she said.

Kevin at Always Low Prices notes that is sloppy analysis on the part of Wal-Mart:

That's an incorrect comparison. The question is whether, absent WM, the government tax revenue would have been the same--but without the subsidy.

Absolutely. Ms. Williams is definitely inflating the fiscal benefits to the subsidizing communities.

For what it's worth, I think Good Jobs First has inflated the cost of some of the subsidies they have identified.

First, they note in a correction to the report:

Good Jobs First has just learned that the subsidy listed for one of the Wal-Mart facilities mentioned in our report is incorrect. The report states that the distribution center in Olney, Illinois received a property tax abatement of $46 million. Actually, the $46 million figure was the cumulative land value over ten years on which taxes were to be abated. The actual abatement will be worth $2.5 million, so that the total of the various subsidies given to the facility should be stated as $4.6 million. We regret the error.

So there is one instance in which they inflated the value of a subsidy by a factor of 18. There could be others. That's not to be overly critical; these subsidy values are hard to dig out. It's not like either the businesses being subsidized or the public officials subsidizing them have an interest in making the costs easy to obtain. There is no central database.

But other errors in the report are harder to excuse. From the executive summary:

We supplemented the approaches described above with searches in a database
covering the one type of subsidy—industrial revenue bonds—for which some
centralized information is available. This enabled us to identify another 69
stores that received low-cost financing of approximately $138 million. This
brought the total number of subsidy deals we identified to 244. The total value
of all the subsidies was $1.008 billion.

GJF adds the $138 million in IRBs to the other subsidies they listed. But in the case of IRBs the subsidy isn't the total amount financed; it's the reduction in interest paid. IRBs didn't save Wal-Mart $138 million, nor did they cost the local governments $138 million. If the IRBs knocked two percentage points (to grab a number out of thin air) off of Wal-Marts financing costs over a period of ten years (to grab another number), they saved something on the order of $20 million. That's not chicken feed, but it's not $138 million either.

This isn't to defend the subsidies, just to add to Kevin's argument that there is a lot of sloppy analysis coming from both sides this argument.