As the world’s biggest retailer, Wal-Mart Stores Inc. pays billions of dollars a year in rent for its stores. Luckily for Wal-Mart, in about 25 states it has been paying most of that rent to itself — and then deducting that amount from its state taxes.
The strategy is complex, but the bottom line is simple: It has saved Wal-Mart from paying several hundred million dollars in taxes, according to court records and a person familiar with the matter. And Wal-Mart is far from alone.
Below is the press release we recieved from Local 1500 and UNITE HERE outlining Governor Spitzers reaction to the Loophole and how he plans on eliminating it….
For Immediate Release:
February 2, 2007
UNIONS AND ADVOCATES URGE
LEGISLATURE TO JOIN SPITZER IN CLOSING “WAL-MART” TAX LOOPHOLE
New York, NY – Unions and advocates praised Governor Spitzer today for standing up to Wal-Mart and other companies that exploit a little-known tax loophole that lets them pay rent to themselves and then deduct that rent from their taxes. Governor Spitzer proposed closing that loophole in his Executive Budget released on Wednesday, saving the state $83 million per year.
“It’s ridiculous that a company can get away with paying rent to itself and deducting that rent from its taxes,” said Bruce Raynor, General President of UNITE HERE. “But if companies are going to find a way to avoid paying every penny they ought to pay, you can be sure that Wal-Mart will be one of them.”
According to a front-page Wall Street Journal article on Thursday, Wal-Mart has avoided
paying several hundred million dollars in taxes by using a complex scheme. The loophole was plugged by the Federal government many years ago, but many states have not followed suit. New York was one of those states, until now. Governor Eliot Spitzer’s Executive Budget would close the loophole, saving the state $83 million a year. “Hard-working New Yorkers pay their fair share of taxes,” said Paul Blank of Wake Up Wal-Mart. “It’s time that companies like Wal-Mart do the same.”
According to Thursday’s Wall Street Journal article, tax-saving schemes like these have led to an increased percentage of state taxes being paid by individuals. As companies find new ways to lower the amount of taxes they pay, states increasingly rely on individuals and working families to make up the difference. “We’re glad that Governor Spitzer has decided to stand up to businesses that manipulate the tax system to shirk their responsibility to pay what they ought to pay in taxes,” said
Bruce Both, President of United Food and Commercial Workers Local 1500. “We hope the Legislature will join him in standing up for individuals and small businesses, who can’t take advantage of these ridiculous gimmicks.”
Michael Rabinowitz, UNITE HERE, 646.342.3469
Patrick Purcell, UFCW Local 1500, 973.583.9651