7 Key Facts to Keep in Mind about Walmart’s “U.S. Manufacturing Summit.”

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It’s been two and a half years since Walmart announced its so-called “U.S. manufacturing initiative”, which means it’s time for another PR-heavy, Walmart manufacturing “summit,” this one in Bentonville, Arkansas on July 7th and 8th.  Undoubtedly, Walmart will use the summit to deliver feel-good talking points to the media, so this seems like a good time to review some facts about Walmart’s impact on the U.S. manufacturing sector, past, present and future.

Here are seven things we hope you’ll keep in mind when reporting on Walmart and American manufacturing:

  1. We should be skeptical about “Assembled in the USA” claims from Walmart and their suppliers.

 Just last week, the non-profit Truth in Advertising released a report which found more than 100 instances “of false and deceptive made in the USA representations” on Walmart’s website.

“It’s incredibly disingenuous for Walmart to be promoting their initiative to stock $250 billion American-made products while at the same time they are in violation of FTC labeling standards for what qualifies as made in the USA,” said Michelle Amazeen, assistant professor of advertising at New Jersey’s Rider University.

And it doesn’t just come down to issues of mislabeling on Walmart’s website. Last year, the Alliance for American manufacturing complained to the Federal Trade Commission in response to Walmart selling almost entirely Chinese-made TVs in stores labeled “Assembled in America.”

The complaint alleges that “the Chinese-made TVs arrive to Element’s South Carolina assembly line in boxes adorned with a waving American flag and the slogan ‘America Matters’ on the front and the phrase ’Assembled in the USA’ on top. Element’s employees unscrew a plastic panel, install a Chinese-made motherboard, close the panel, and return the TVs to their patriotic packaging.”

The Pittsburg Post-Gazette reported that the FTC agreed not to pursue an investigation “after Element changed its website to distinguish U.S.-assembled TVs, which featured screen shots of patriotic images likethe Statue of Liberty, from those made elsewhere.”[1]

  1. Walmart helped destroy America’s manufacturing sector to begin with. 

A 2007 study by the Economic Policy Institute found that Walmart’s imports to the US from China alone led to the elimination of nearly 200,000 US jobs, primarily in the manufacturing sector.  Duke Professor Gary Gereffi has described Walmart and China as “a joint venture. And both are determined to dominate the U.S. economy as much as they can.”[2]

As the world’s largest retailer, Walmart puts enormous pressure on suppliers to cut costs.  This has often meant moving to China.  As Demos reported, “companies that used to manufacture products in the United States, from Levi’s jeans to Master Lock, were pressured to shut their U.S. factories and moved manufacturing abroad to meet Walmart’s demand for low prices.”  In turn, Walmart’s business model accelerated the use of offshore suppliers by its competitors, contributing to a greater loss of American manufacturing jobs.[3]

  1. Walmart’s purported commitment to increase purchasing from U.S. manufacturers is negligible.

Walmart has said that they would purchase an additional $250 billion in US sourced goods as a result of the initiative.  And, this certainly sounds like a large increase.  But, according to analysis on Sourcewatch, this increase could simply be the result of the company’s continued growth, with no substantial change in sourcing practices.

According to the analysis on Sourcewatch:

Combined sales at Walmart US and Sam’s Club have grown at just below 2.9% over the past three years, and the company has said that two-thirds of its purchasing currently goes to American goods. If both of those factors as well as the company’s gross margin remain the same over the next decade, Walmart would be expected to spend approximately $262 billion more on American goods anyway, so this new “commitment” should actually be considered a baseline on top of which any additional domestic sourcing should be added.

The chart below is from Sourcewatch:

Chart for Manufacturing Post

The company had touted a study (never made public) that projected that Walmart’s commitment would create 1 million US jobs over ten years.  Two and half years after the company’s announcement, it appears that only a tiny fraction of this number has actually been realized.[4]

  1. Walmart is the nation’s largest importer again and imports are up significantly.

Last month, the Journal of Commerce released a new list of America’s top importers and you-know-who tops the list once again.

Walmart is #1 by a longshot.  With almost 50% more imports than the number two company on the list—Target—Walmart even managed to increase its imports from last year.  In fact, Walmart’s imports have increased by more than 6% since last year.  This is the largest single year increase in Walmart imports since 2005. By comparison, Target’s imports increased less than 2%.  This should be a little embarrassing for a company that has talked as much as it has about bringing manufacturing back to the United States.

Walmart does its best to limit what the public knows about its imports by petitioning the U.S. Customs service to conceal information about the company’s shipments.  As a result, it’s very likely that the Journal of Commerce actually undercounts imports tied to Walmart.  This is also likely because many of the other top importers on the Journal of Commerce list (from Samsung Electronics to Dole Foods) send many of their imports straight to Walmart stores.

  1. Walmart is using its manufacturing initiative to distract from the quality of its retail jobs.

One reason Walmart likely launched this new manufacturing initiative is that the company needs a break from the regular stream of bad PR it gets for being one of the nation’s largest low-wage employers.  Despite the company’s recently announced wage increases, Americans for Tax Fairness recently found that hundreds of thousands of Walmart employees are likely to earn so little that they will continue to qualify for public assistance programs.

Black Friday used to be an annual highlight for Walmart, but has instead become a national day of protest thanks to Walmart workers.  With another Black Friday approaching, it’s no wonder that Walmart would prefer to focus public attention on a questionable initiative about improving jobs in a sector that some polls show Americans believe is “the most important job sector, in terms of strengthening the economy.”

  1. Taxpayers are often forced to subsidize the manufacturing projects touted by Walmart.

In addition to the myriad other ways in which taxpayers subsidize Walmart, many of the projects that Walmart touts as Made in the USA success stories impose significant costs on taxpayers.

Element Electronics, with its factory in South Carolina, is one of Walmart’s poster-children for re-shoring.  The Element factory opened with a large, taxpayer-funded incentive deal from the state and county, including corporate income tax credits, job training, and property tax rebates. According to a cost benefit analysis prepared for the county, the Element incentives cost taxpayers $14.8 million over 15 years.

Singapore-based Walmart supplier Giti Tires received an estimated $40 million in tax incentives for opening a tire plant in South Carolina.  Other Walmart poster-children, including Kent bikes and Ferrara Candy also received subsidies for expanding production in the United States.

  1. Walmart could start with on-shoring some tax haven money.

Unfortunately, manufacturing jobs aren’t the only thing Walmart is shipping overseas.

Walmart has built a vast, undisclosed network of 78 subsidiaries and branches in 15 overseas tax havens, which may be used to minimize foreign taxes where it has retail operations and to avoid U.S. tax on those foreign earnings, according to a report released last month by Americans for Tax Fairness.  These secretive subsidiaries have remained largely invisible, in part because Walmart fails to list them in its annual 10-K filings with the U.S. Securities and Exchange Commission (SEC).

The company’s preferred tax haven is Luxembourg, dubbed a “magical fairyland” for corporations looking to shelter profits from taxation.

 

———————————–

FOOTNOTES

[1] Len Boselovic, Walmart Imports Still Far Exceed U.S. Goods. Pittsburgh Post-Gazette, June 15, 2015.

[2] Hedrick Smith and Rick Young, “Is Walmart Good for America?,” PBS Frontline, air date, November 16, 2004.

[3] Amy Traub, “Not Made in America: Top 10 Ways Walmart Destroys U.S. Manufacturing Jobs,” Demos, July 2, 2012.

[4] http://cdn.corporate.walmart.com/9d/1d/b3cf7afd438886a9a18b20257864/us-manufacturing-announcements-list.pdf

As New Report Exposes Walmart Subsidiaries in Tax Havens, We Look Back at the Company’s Domestic Tax Avoidance Schemes

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Today, Americans for Tax Fairness (ATF) released a new report entitled The Walmart Web: How the World’s Biggest Corporation Secretly Uses Tax Havens to Dodge Taxes.  The report  details Walmart’s previously unreported use of subsidiaries in tax havens to avoid paying taxes.

Among other things, the ATF report reveals that Walmart uses complex corporate structures and inter-company transactions in order to shift income from relatively high- to low- or no-tax jurisdictions.

That sounds a lot like what Walmart has been caught doing in the United States in the past. So, we thought a brief review of domestic tax planning schemes by Walmart might provide useful context for this new information.

“Ideas for State and Local Tax ETR Reduction”

In May 2001, Walmart’s Senior Director for Income Tax, Wyman K. Atwell, sent a letter to major accounting firms requesting proposals to provide tax advice and strategies for “minimization of state income taxes ” in Arizona, California, Florida, Illinois, Indiana, Michigan, Minnesota and Pennsylvania.[i]  In August 2002, Walmart’s present-day auditor and tax consultant, Ernst & Young, provided Walmart with a memo marked “Confidential” and titled “Ideas for State and Local Tax ETR [Effective Tax Rate] Reduction.”[ii]  This document summarized more than 15 different strategies for state-level tax avoidance.

Many of the strategies outlined in the Ernst & Young memo bear a strong resemblance to the international strategies discussed in the ATF report. Most importantly, the state-level strategies tend to rely on the use of paper companies to shift profits away from states in which they were earned and into states where the profits will face much lower tax rates.

Whereas Walmart’s international tax avoidance schemes rely heavily on foreign tax havens, Walmart’s state-level tax dodging has been organized primarily through Delaware, which the New York Times calls a “freewheeling offshore haven, right on America’s shores.”[iii]

The tax schemes vary in complexity and legality from state to state, but the underlying results are the same: to cut Walmart’s taxes by hundreds of millions of dollars and deprive state governments of revenues they need to support the public infrastructures and services that Walmart uses to conduct its highly profitable business.

Here are a few examples of how Walmart has used aggressive strategies to make income effectively disappear for the purposes of state-level tax returns.

Scheme: Intangible Holdings Company

For the first half of the 1990’s, Walmart used what the Wall Street Journal called an “intangible holdings company structure” to avoid taxes. Under the plan, Walmart transferred valuable trademarks to a company subsidiary called WNR Inc, based in Delaware, which does not tax income from subsidiaries that exclusively hold intangible assets.[iv] The company then paid its own subsidiary for use of the brands and deducted those payments from its income in certain states, thereby reducing its tax bill.

Ultimately, several states, including Louisiana[v] and New Mexico[vi], challenged this strategy in court and won.  WNR and Walmart merged in 1997.[vii]

Scheme: The Captive REIT

Around the time Walmart was apparently winding down its intangible holdings company strategy, the Company adopted another tax avoidance strategy, the “captive REIT.” Using the captive Real Estate Investment Trust, Walmart essentially paid rent to itself, and deducted the rent payments from its state taxes.[viii]

Walmart Cut Taxes by Paying Rent to Itself HeadlineThese payments were accounting maneuvers, rather than actual transactions between separate parties, as the The Wall Street Journal explained: “Underscoring that the rental payments were cashless Wal-Mart accounting moves, an affidavit filed in North Carolina by the company’s former controller, James A. Walker Jr., states that the payments were made by simply debiting the account of one subsidiary and then crediting the account of the other.”[ix]

Since REITs are legally required to have 100 shareholders, Walmart gave 114 Walmart executives a minimal amount of non-voting stock.  The same Walmart executive was listed as both “landlord” and “tenant” on the lease.

Walmart’s tax advisor and auditor, Ernst & Young, acknowledged in internal documents that the captive REIT’s primary purpose was to avoid taxes.[x]

The Wall Street Journal, in consultation with tax experts, estimated that the company saved roughly $230 million in taxes over a four year period as a result of the captive REIT strategy alone..

After the North Carolina Department of Revenue sued Walmart, the court ordered that the state had the authority to combine affiliated entities tax returns for purposes of calculating state tax liability.[xi]

SIDEBAR: BACKGROUND ON COMBINED REPORTING

In order to thwart efforts by companies like Walmart to dodge state income taxes, more than half of US states have adopted a reform called “combined reporting.” The objective is to prevent companies from shifting their income to low-tax states in order to avoid paying taxes in the states where the income was actually earned.

Combined reporting states require multi-state corporations to report the profits of all subsidiaries, in all states, on their state tax filing. The companies are required to pay tax on the share of their total income that is attributed to the state, which is usually determined using a formula based on the share of the company’s total revenues, assets, and employment accounted for by the state.

Prior to the widespread adoption of combined reporting, abusive state-level profit-shifting by corporations cost states billions of dollars in lost revenues.

Sources: Institute for Local Self Reliance, Closing State Corporate Tax Loopholes: Combined Reporting, June 2, 2010; Institute for Taxation and Economic Policy, Combined Reporting of State Income Taxes: A Primer, August, 2011

Scheme: The 80/20 Company
In December 2001, Walmart opened an office in Florence, Italy for a new subsidiary named WMGS Services LLC (“WMGS”), which would be central to a new effort to save millions in state taxes each year.

Wal-Mart made WMGS the only operating unit of a real-estate subsidiary that controls billions of dollars of the retailer’s property in Illinois and other states. Technically, however, the subsidiary’s only employees are based in Italy. This allowed the real-estate unit to claim that its operations are foreign, and therefore exempt from Illinois corporate income taxes.

The strategy used by Walmart in this case is known as an “80/20 company,” signifying that a domestic subsidiary conducts at least 80% of its business overseas. Since states don’t typically tax foreign income, this structure helps to shield foreign operations from state taxation. The strategy helps companies like Walmart avoid taxes, even in combined reporting states like Illinois that make it more difficult for companies to avoid taxes simply by shifting income to other states.

In 2007, the State of Illinois demanded $26.4 million in back taxes and penalties, after objecting to the company’s effort to avoid these taxes.   Walmart paid the State, but appealed the decision in Illinois Circuit Court.  The Director of the State Department of Revenue called the type of strategy employed by Walmart “shocking to the conscience.”[xii]

ENDNOTES

[i] See, http://online.wsj.com/public/resources/documents/wsj071023-walmart-proposal.pdf
[ii] See, http://online.wsj.com/public/resources/documents/wsj071023-walmart-tax_reduction.pdf
[iii] Leslie Wayne, “How Delaware Thrives as a Corporate Tax Haven” The New York Times (June 30, 2012)    http://nyti.ms/LomrX5
[iv] http://www.delawareonline.com/story/opinion/contributors/2014/07/12/delaware-tax-haven-maybe/12551227/
[v] Jesse Drucker, “Walmart Cuts Taxes By Paying Rent to Itself.”   Wall Street Journal, Feb. 1, 2007

[vi] WAL-MART STORES, INC. (Successor to No. 06-07 WMR, Inc.); ID No. 02-344332-00 4 ASSESSMENT NOS. 2219795 & 2219796   Available at:  http://www.transferpricing.com/usstate_files/New%20Mexico%20Walmart%20Income%20Tax%20Ruling%202006.pdf
[vii] Ibid
[viii] Jesse Drucker, “Walmart Cuts Taxes By Paying Rent to Itself.”   Wall Street Journal, Feb. 1, 2007

[ix] Ibid
[x] Jesse Drucker, “Walmart Cuts Taxes By Paying Rent to Itself.”   Wall Street Journal, Feb. 1, 2007
[xi] Charles B. Neely Jr., Nancy S. Rendleman & Robert W. Shaw, Walmart Stores East, Inc, v. Hinton, Tax Assessments, January 2010, Available at: http://www.williamsmullen.com/sites/default/files/wm-url-files/Neely-Rendleman-Shaw-Tax-Assessments-01-2010.pdf
[xii]  Jesse Drucker, “Why Wal-Mart Set Up Shop in Italy.” Wall Street Journal, November 14, 2007  Available at: http://www.wsj.com/articles/SB119500263189892128

This Just In: Walmart is #1 Importer, AGAIN. Where are those American manufacturing jobs?

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We’ve written before on this site about the farce that is Walmart’s “US manufacturing” initiative.  Now, as Walmart prepares for its next US manufacturing summit in Bentonville, AR, the Journal of Commerce has released a new list of America’s top importers and you-know-who tops the list once again.

Walmart is #1 on the list by a long shot! With almost 50% more imports than the number two company on the list—Target—Walmart even managed to increase its imports from last year.  In fact, Walmart’s imports have increased by more than 6% since last year.  This is the largest single year increase in Walmart imports since 2005. By comparison, Target’s imports increased less than 2%.

This should be a little embarrassing for a company that has talked as much as it has about bringing manufacturing back to the United States.  But, the Walmart public relations staff is used to having to do their best to explain away facts.

Walmart does its best to limit what the public does know about their imports by petitioning the U.S. Customs service to conceal information about the company’s shipments.  As a result, it’s very likely that the Journal of Commerce actually undercounts imports tied to Walmart.  This is also likely because many of the other top importers on the Journal of Commerce list (from Samsung Electronics to Dole Foods) have many of their imports sent straight to Walmart stores.

Even when Walmart does sell things that are “manufactured in the USA”, consumers and the public have good reason to be skeptical.  Last year, the Alliance for American manufacturing complained to the Federal Trade Commission in response to Walmart selling almost entirely Chinese-made TVs in stores labeled “Assembled in America.”  Eight months later, we can’t even find the American flags that used to emblazon Element TV’s website. What’s next in Walmart’s empty PR about reviving the American manufacturing industry that they themselves helped destroy?  Stay tuned!

6 Facts About Walmart and SB 202:  How Walmart is “Worse Than Silent” on LGBT Issues   

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Update, February 23, 2015:  Today, as the bill became law, Walmart finally broke it’s silence and said that it opposes SB 202.    Unfortunately, as you will read below, this comes after pouring money into those who supported the bill, including Gov. Hutchinson who allowed the bill to become law.    We think it is worth noting that, if the company really wanted to help stop the law, they could have spoken out before the day the bill became law and encouraged their political and business allies to do the same.     

 

This week, SB 202 reached the desk of Arkansas Governor Asa Hutchinson. The bill would “limit cities and counties from passing nondiscrimination ordinances that would protect LGBT people in employment, housing and public accommodations,” according to the Human Rights Campaign.    The Arkansas business community, led by retail giant Walmart, has been widely criticized for its silence on this issue.

LGBT workplace advocacy group Freedom to Work recently released a statement on this issue which read, in part:

“Wal-Mart has recently been given high praise and high scores from the LGBT advocates who publicly rate corporate responsibility,” said Tico Almeida, founder of Freedom to Work. “As the largest private employer in Arkansas, Wal-Mart should publicly call for a veto of this bigoted legislation and lobby the Governor to stand on the right side of history. If Wal-Mart remains silent, I hope the corporate giant will be downgraded in the eyes of LGBT consumers and LGBT organizations alike.”

Here are six facts about Walmart and the Waltons’ failure to strengthen civil rights protections for the LGBT community in Arkansas so far:

  1. Late last year, in Fayetteville, AR (near Walmart’s global headquarters), the City Council passed an anti-LGBT discrimination law in August, 2014. The Chamber of Commerce unanimously adopted a resolution calling for the recall of the a law. The Chamber of Commerce Board includes a Walmart representative and the Ex-Offico Board includes a representative of Arvest Bank, which is owned and run by Walmart owner and Board Member Jim Walton. Sam’s Club and Arvest are also sponsors of the Chamber.
  2. Since 2006, Walmart and the Waltons have given $30,000 to Arkansas Governor Asa Hutchinson who is refusing to veto SB 202.
  3. Walmart and the Waltons have given more than $450,000 to Republican candidates for State Senate and State Assembly in Arkansas since 2000.    More than $100,000 of this was in 2014 alone.
  4. Since 2000, Walmart and the Waltons have given more than $355,000 to the Arkansas Republican Party and the Arkansas Republican House Leadership Committee.   More than $136,000 of this total came from Jim Walton, who previously donated heavily to an Arkansas initiative to outlaw adoption by same-sex couples.
  5. The sponsor of SB 202, Bart Hester, received a contribution from the Arvest Bank PAC in 2012.   Arvest Bank is owned by the Walton family and Walmart Board Member Jim Walton is the CEO.
  6. The Arkansas Chamber of Commerce has been criticized for their silence on this issue.    A Walmart representative, Gerard Dehrmann, is a Vice-Chairman of the organization and Walmart is one of only 3 “Apex members” of the State Chamber (the highest level of membership).

Will Walmart and the Walton family speak out for equality or continue to side with those who want to deny LGBT citizens their rights?

Are Walton/Walmart Ties Hurting Teach for America’s Reputation?

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It looks like the Walmart heirs’ multi-milion dollar investment in Teach for America is causing some young teachers-to-be to think twice about the group and its agenda.    In Friday’s New York Times, Motoko Rich writes that Teach for America has experienced a 10% drop in applications over the prior year, breaking a 15 year growth trend for the organization.   Among the reasons cited for the drop are increasing criticism of TfA, it’s funders, and its close alliance with the charter school movement.

In fact, the article quotes one college student who was originally interested in applying for Teach for America:

But as she learned more about the organization, Ms. Duncan lost faith in its short training and grew skeptical of its ties to certain donors, including the Walton Family Foundation, a philanthropic group governed by the family that founded Walmart.

gregpenner

Greg Penner, grandson-in-law of Walmart founder Sam Walton

The Walton Family Foundation has contributed more than $50 million to Teach for America since 2009.[1]   Walton family member (and Walmart Vice Chairman) Greg Penner is a member of the Teach for America Board of Directors.   Another TfA Board Member is Jose Villarreal, a close associate of Walmart and the Waltons, having served on the Walmart board from 1998-2006 and the Walton-owned First Solar board from 2005 to 2013.[2]

In many ways, Teach for America has become the Walmart model of education – low cost, low-wage and according to many critics, low quality.  Teach for America trains well-meaning, high-achieving college graduates for just five weeks before sending them to serve out a two-year commitment by teaching in high-needs schools – in districts such as Newark, Philadelphia and Chicago, where thousands of experienced educators and support staff are being laid off and traditional public schools are being closed.[3]

As Teach for America alumnus Alex Caputo-Pearl has written, “This leads to clustering of less-prepared teachers disproportionately at schools serving our most vulnerable children, which has been shown to have detrimental effect on students.”[4] Education researcher Julian Vasquez Heilig found that more than 80 percent of TFA recruits leave teaching before their fourth year.[5] According to Heilig, “Sadly, Teach for America is a revolving door of inexperienced teachers for the students who most need a highly qualified one.”

waltonsTFA

But, criticisms of TFA’s model aside, perhaps the most important take-away from the New York Times piece is that, as the devastating impact of the Walmart economy on our nation becomes clearer, many are increasingly suspicious of the role of the company’s ruling family’s ideological agenda and the impact it may have in our schools and beyond.

As criticism of Walmart and the Walton family grows, organizations may increasingly wonder whether, in the long-run, contributions from the Walton family, are do more harm than good.

 

[1] The Walton Family Foundation, IRS Form 990 (Various Years)

[2] http://www.forbes.com/fdc/welcome_mjx.shtml

[3] Bob Braun, “Newark: 700 teachers may be laid off, many replaced by TFA,” Bob Braun’;s Ledger (February 23, 2014). http://bobbraunsledger.com/newark-700-teachers-may-be-laid-off-many-replaced-by-tfa/ ; Greg Toppo, “Teach for America: Elite corps or costing older teachers jobs?,” USA Today (July 29, 2009). http://usatoday30.usatoday.com/news/education/2009-07-29-teach-for-america_N.htm; Camika Royal, “I Won’t Say ‘Don’t Join Teach For America’ (Yet)” Good (November 26, 2013). http://magazine.good.is/articles/i-won-t-say-don-t-join-teach-for-america-yet

[4] Alex Caputo-Pearl, “Teach for America Shows the Downside of Quick Fixes to Education,” The New York Times(Room for Debate) (August 30, 2012). http://www.nytimes.com/roomfordebate/2012/08/30/is-teach-for-america-working/teach-for-america-shows-the-downside-of-quick-fixes-to-education

[5] Julian Vasquez Heilig, “Teach for America Is a Glorified Temp Agency,” The New York Times (Room for Debate). (August 31, 2012). http://www.nytimes.com/roomfordebate/2012/08/30/is-teach-for-america-working/teach-for-america-is-a-glorified-temp-agency

The Waltons are the Secret Stars of the 2015 State Of The Union

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The Waltons – who became the richest family in the world by inheriting Wal-Mart – are going to make a stealth appearance in the State Of The Union tonight when President Obama discusses his proposals to close tax loopholes that unfairly benefit the ultra-rich.

For starters, the President is going to propose ending the so-called “trust fund loophole.” According to the Administration, this loophole allows hundreds of billions of dollars to avoid capital gains taxes each year by letting the wealthy pass appreciated assets to their heirs tax-free (details here).

That reform is potentially significant to the Waltons, who hold most of their wealth in Wal-Mart stock that has appreciated greatly over the years and is currently worth more than $142 Billion.[1] The Waltons would undoubtedly like to pass that $142 billion in Wal-Mart stock to their heirs tax free.

After all, it’s no secret that the Waltons have lobbied for permanent repeal of the estate tax and are the undisputed masters of avoiding taxes on inherited wealth. As Bloomberg reporter Zachary R. Mider put it:

America’s richest family… has exploited a variety of legal loopholes to avoid the estate tax, according to court records and Internal Revenue Service filings obtained through public-records requests. The Waltons’ example highlights how billionaires deftly bypass a tax intended to make sure that the nation’s wealthiest contribute their share to government rather than perpetuate dynastic wealth, a notion of fairness voiced by supporters of the estate tax like Warren Buffett and William Gates Sr.

Americans for Tax Fairness estimates that the Waltons have avoided $3 Billion in estate taxes by using special tax trusts and could potentially avoid tens of billions more down the line using these same techniques.

It’s not just estate taxes that the Waltons use loopholes to avoid.

Americans for Tax Fairness estimates that the Waltons avoid about $1.66 Million per day in taxes due to the preferential 20% tax rate on capital gains and dividends.[2] Last year, the Waltons raked in about $3.16 Billion in Wal-Mart dividends but they paid less in taxes on those dividends, percentage-wise, than a typical working stiff on their wage and salary income.

The President’s proposal would cut into the Waltons’ tax avoidance a bit by increasing the top rate on capital gains and dividends to 28% (still lower than the top rate for wage and salary income).

How will this all sit with the Waltons – the unheralded stars of the State Of The Union?

We imagine that Wal-Mart’s reigning family will be displeased. But, given that the Waltons are among the 80 families in the entire world that own more wealth than 50% of humanity combined, it seems like maybe they could afford to pay their fair share.

 

[1] Based on our analysis of Walton family share ownership and Wal-Mart’s stock price as of January 20, 2015 at 2PM. For share ownership, see http://www.sec.gov/Archives/edgar/data/104169/000130817914000196/lwmt2014_def14a.htm; For stock price, see http://stock.walmart.com/stock-information/

[2] According to Americans for Tax Fairness, the Waltons save $607 million annually on their dividend income because it is taxed at the preferential rate of 20% as opposed to the 39.6% top rate on wage and salary income. See, http://www.americansfortaxfairness.org/files/Walmart-on-Tax-Day-Americans-for-Tax-Fairness-1.pdf

How a Small Change at Walmart Could Send 9 Million Students to College

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Is it a good idea for America to send qualified, yet underprivileged and lower-income students, to college? The answer is indisputable: yes.

President Obama’s new proposal, America’s College Promise, which would cover the cost of the first two years of community college for as many as 9 million students, however, has met criticism that there is no such thing as a free college and the national deficit is already too high. The Administration estimates that the program will cost approximately $60 billion over ten years.

As part of the important public discussion on how to help our students and communities succeed in a 21st century economy, it is important to look at these figures in context.

More than 1.3 million Americans work at Walmart, the nation’s largest employer. While experts agree that the retailer has exerted downward pressure on wages throughout the broader economy, the majority of Walmart workers are paid less than $25,000 a year. Workers have been speaking out for better wages and consistent, full-time hours that would allow them to provide for their families without relying on public assistance programs like food stamps.

Walmart’s practices not only impact workers, but American taxpayers as well. If Walmart was a better employer, like Costco for example, Americans would save a substantial sum. If Walmart improved its wages and hours, taxpayers could save $6.2 billion dollars a year, according to a recent report by Americans for Tax Fairness.

America could save at least $62 billion over ten years, which more than exceeds the price tag of America’s College Promise. And this wouldn’t hurt shareholder value. According to Steven Gandel, Walmart could offer its workers a 50% raise without impacting the company’s profits.

College is already prohibitively expensive in the U.S; student debt stands at more than $1 trillion. America’s middle class today is facing an unprecedented level of income inequality that puts the American Dream out of reach, something with which even Republican Governor Jeb Bush agrees. A college education is not only too expensive—many American workers are not paid enough to make one a remote possibility.

Walmart alone could send nine million people to community college for two years if it simply provided decent jobs. America could take one small step forward in stopping the cycle of poverty and inequality.

Walmart’s wage and benefit policies are what cost taxpayers too much: billions of dollars per year. New federal programs like America’s College Promise are urgent interventions to improve lives and the skills of our workforce in America. Walmart’s low-wage business model is bad for America and must be changed.

How Walmart Destroyed U.S. Manufacturing

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By Molly McGrath and Brad Markell

Walmart and Element ElectronicsWalmart has spent millions of dollars in the past two years on public relations promotions, advertising and conferences, trying to convince us that it, well, cares about America. From championing hiring veterans (which is noble, yes, but veterans deserve better than poverty wage jobs, and Walmart receives a substantial tax break for hiring them) to promoting “U.S. manufacturing,” the company has tried to evade the common sense of real, hardworking Americans by helping them forget Walmart was responsible for our manufacturing sector’s demise in the first place.

That’s why the Alliance for American Manufacturing’s petition to the Federal Trade Commission (FTC), which has exposed the false claims by Walmart’s supplier, Element Electronics, that its TVs are “Assembled in America” is so important. There isn’t enough work being performed on Element’s TVs once they arrive in the United States from China in their boxes (already covered in American flags), to meet the standard prescribed by the FTC for “Assembled in America.” To meet it, the FTC says, a products’ “principal assembly takes place in the U.S. and the assembly is substantial.”

On the surface, with the help of slick public relations firms, Walmart’s U.S. Manufacturing Initiative seems patriotic and good for the country, but it does not live up to the hype. Here are five reasons why:

1. Walmart drove these jobs away in the first place.

Walmart’s commercials touting Element’s “Assembled in the USA” TVs show America’s workers in Winnsboro, S.C., who are grateful for having jobs, and job creation should be applauded. But don’t forget, Walmart played the central, if not the defining, role in the off-shoring of high-quality U.S. manufacturing jobs over the past 25 years. Companies that used to manufacture products in the United States, from Levi’s jeans to Master Lock, were pressured to shut their U.S. factories and move manufacturing abroad to meet Walmart’s demand for low prices. In fact, Element Electronics is now housed in a Perry Ellis plant that closed in 2008.

2. Walmart is the nation’s largest importer.

Walmart holds the champion title as the nation’s largest importer. This is no small feat. According to trade data published by the Journal of Commerce, Walmart continues to be the largest importer of goods to the United States in 2013. And company imports have increased by 2.5 times since 2002. Meanwhile, many of Walmart’s chosen U.S. suppliers, like Element Electronics and Kent International, will continue to import the majority of their televisions and bicycles, respectively, sold in the United States; and for their “American-made or assembled” products, they will import the majority, if not all, of the products’ components.

To really rebuild U.S. manufacturing, Americans need actual manufacturing—not just assembly—jobs.

3. Wages are just too low.

Wages are at the crux of Walmart’s attempt to fool consumers. Wages at many of these suppliers in Walmart’s U.S. Manufacturing Initiative are considerably lower than average. This is because Walmart requires extremely low labor costs for any Walmart U.S. manufacturing deal. At Element Electronics, a worker averages about $12.50 per hour. According to the federal Bureau of Labor Statistics, the average median wage for a manufacturing worker in October 2014 is $19.64. Walmart put American workers’ jobs in harm’s way by driving off-shoring and job loss in its hunt for ever lower prices. In bringing them back, they should be held to a higher standard.

4. Taxpayers are on the hook for these bad jobs.

To top it all off, Walmart and its partner U.S. suppliers are taking full advantage of the American taxpayer by getting big state and local incentive packages to subsidize the creation of the small amount of jobs Walmart and its partners are creating. Element Electronics takes the cake. The factory in Winnsboro was opened with a large incentive deal from the state and county—including corporate income tax credits, job training and property tax rebates. Combined, according to a cost benefit analysis that was part of the county’s impact analysis, the package would cost an estimated $14.8 million to the public over 15 years. The county also purchased the building and has leased it to Element; in three years, it can simply transfer the title.

Walmart should be responsible for a greater part of its own U.S. Manufacturing Initiative, not U.S. taxpayers.

5. We love “Made in America,” and Walmart knows you will pay more for it.

Walmart exists to sell more stuff and at a higher profit margin. It’s a retailer. But Americans will pay more to keep their fellow citizens employed, according to a widely cited Boston Consulting Group survey, more than 80% of Americans are willing to pay more for American-made or assembled products, almost all of whom say because they want to keep jobs in the United States. Walmart, doing what it does best, follows with the red, white and blue-splattered packaging. Stephen Quinn, Walmart’s chief marketing officer said at Walmart’s Manufacturing Summit in August, “We know that customers prefer products made in the USA, and so it follows that if it’s going to change customers’ minds, they really have to know about it. And that starts with the silent salesmen: your packaging. It’s critically important that your packaging clearly communicate that your product supports American jobs.”

And that brings us back to this week’s FTC petition accusing Walmart supplier Element Electronics of false advertising. As Walmart’s Stephen Quinn was telling the crowd about the importance of patriotic packaging, pictures of Element’s red, white and blue, “Assembled in the USA”-emblazoned boxes flashed on the screen behind him. It seems Walmart will do anything to avoid actually creating good, middle-class jobs in its stores or with its suppliers.

This post originally appeared on AFL-CIO Now.

More Companies Withdraw From ALEC…But not the Walton Family

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The list of companies and organizations who have publicly committed to leaving extreme right-wing American Legislative Exchange Council (ALEC) continues to grow, with Google, Yelp and Yahoo! all announcing in the last week that they would sever ties with the organization.alec climate change

Meanwhile, the Walton Family Foundation, the not-so-charitable organization run by the heirs to the Walmart fortune, has ignored calls to publicly distance themselves from ALEC.      In 2011, Walmart and the Walton Family Foundation were listed side by side as chairmen-level sponsors of ALEC’s national meeting.    Since then, Walmart has publicly withdrawn from ALEC, but the Waltons have remained silent.

But, the Waltons’ ties to ALEC and their ideological allies run deep.   In 2012, while many were distancing themselves from ALEC, the Walton Family Foundation hired Lori Drummer Armistead, the former director of ALEC’s education task force.   And, though ALEC’s membership lists are not public, we do know that the Waltons continue to support close ideological allies of ALEC.   A prime example is the Cato Institute, a supporter of the controversial stand-your-ground laws that ALEC, with Walmart’s support, pushed nationwide.

Even after Walmart, the nation’s largest seller of guns and ammunition, distanced itself from ALEC, the Waltons have continued to support the right-wing Cato Institute, one of the most vocal supporters of stand-your-ground laws.

Several of the companies who withdrew from ALEC this week, cited the organization’s continued climate change denial.    Google CEO Eric Schmidt said:

“Everyone understands climate change is occurring and the people who oppose it are really hurting our children and our grandchildren and making the world a much worse place,” he said. “And so we should not be aligned with such people — they’re just, they’re just literally lying.” 

But, the Waltons’ self-professed commitment to the environmental is contradicted by the fact that the Institute for Local Self Reliance has called the company “one of the biggest and fastest growing climate polluters in the country.”   And, perhaps not surprisingly, the Waltons have remained silent on ALEC.   Instead, the WFF funds climate change deniers like the American Enterprise Institute (which calls legislation to help address climate change “disingenuous environmentalism run amok” and Americans for Prosperity (who has found “no evidence that global warming is either man made or likely to be harmful.”)and the Waltons disproportionately fund political candidates who vote against the environment.

If the Waltons truly support action on climate change, the repeal of stand-your-ground laws, and an end to racist voter-ID laws supported by ALEC, they should join the growing list of companies and organizations that have publicly ended their ties with the organization.

Walmart Heirs Among Forbes’ Top 10 Billionaires but Lagging on Charity

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The new Forbes 400 list of the richest people in America is out today and the four Walton heirs who own Walmart are all in the top ten once again.

It’s no surprise. Last July, the Waltons appeared at the top of Forbes’ list of the richest families in America. In fact, Forbes declared them the richest family on earth.

But there’s one list the Waltons won’t be making – the list of America’s most charitable billionaires.

An analysis we released earlier this month revealed that, when it comes to charitable giving, the Waltons lag well behind their peers at the top of the Forbes 400.

That analysis builds on a June report showing that the Waltons give almost none of their own wealth to the family foundation they control.

Table. Waltons: America's Least Generous Billionaires

Source: http://walmart1percent.org/phonyphilanthropy2

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