Tackling the Tyranny of Wal-Mart
March 9, 2005
By Joel S. Hirschhorn
its cancerous growth, Wal-Mart has exploited cheap foreign and domestic
labor and is now a metaphor for the export of American jobs and
prosperity to other nations. Some say Americans have a love-hate
relationship with Wal-Mart. Maybe - but the more you know, the more
you hate. Some bargains are not what they seem to be.
No other company has faced so much passionate grassroots opposition
to its expansion across America. It has been painted as evil incarnate
for its destruction of open space, exploitation of workers here
and abroad, destruction of domestic manufacturing and its jobs,
and ruination of small town America and small, locally owned businesses.
Its huge imports have exported our prosperity and given China and
other nations some control over our future. Its focus on providing
low prices has shaped Wal-Mart's defense: we just give consumers
what they want, don't blame us for being better at offering low
prices than everyone else.
The logical way to challenge this defense is to invoke what economists
call externalization of costs. Wal-Mart shifts health care and other
costs to all taxpayers, who subsidize Wal-Mart and its customers,
yet receive no benefits. Call it the Wal-Mart tax.
Consider these examples: in Iowa, for example, 845 Wal-Mart workers
or members of their families are on Medicaid. In Connecticut, 1,028
Wal-Mart employees are in the state's medical care assistance program,
or 11.3 percent of its workers in the state. In Alabama, Wal-Mart
employees had 3,864 children on Medicaid. In Georgia, Wal-Mart employees
had 10,261 children receiving state medical care assistance. In
Tennessee, Wal-Mart had 9,617 employees receiving state health care
assistance, nearly 25 percent of the company's entire workforce
in the state. Both state and federal taxpayer money is being spent
to assist Wal-Mart employees and their families.
Yet it is inconceivable that Wal-Mart can be legally prohibited
from continuing its practices. Nor can imports be directly prohibited
because of international trade agreements. It is on the consumer
demand side that some solution is possible.
Consider this thought experiment. Competitors to Wal-Mart buy products
made in the U.S., and give their employees decent wages and good
enough benefits to keep them from needing government assistance.
American manufacturers also offer good jobs with decent wages and
benefits. Competitors offer the same type products, but at higher
Then, consider offsetting Wal-Mart's unfair low cost, low price
advantage by taxing sales at Wal-Mart by the cost differential to
level the retail playing field. The "offset sales tax"
can be split between local and state governments to supplement various
social service programs, pay for infrastructure costs, such as more
roads and police, required for stores, and assist start-up costs
for new decent-wage retail and manufacturing enterprises.
For millions of low income Americans, their survival need for low
Wal-Mart prices cannot be ignored. So the social equity question
becomes: How to help those Americans who truly require and depend
on Wal-Mart's low prices? Only those consumers, not the ones who
like those low prices, but can afford higher, unsubsidized prices.
Local or state government can provide to those requesting and
qualifying for it a special offset sales tax exemption identification
card. Low income individuals or families would present some type
of evidence of their status. By using the tax exemption cards at
checkout they would still take advantage of the low prices, while
others would not. To determine the tax, government authorities could
estimate from current databases what fraction of customers would
likely qualify, including those receiving Medicaid, food stamps,
welfare, unemployment insurance, or supplemental social security
benefits. A great many Wal-Mart employees would qualify.
Wal-Mart's unfair competitive advantage would diminish. Over time,
those low income people currently in desperate need of low Wal-Mart
prices would find more employment opportunities as competitors and
their domestic suppliers expanded their operations.
Naturally, it sounds complicated, but this approach does not impose
legal restrictions on Wal-Mart, yet serves the greater public interest
by not causing taxpayers in general to pay the price for Wal-Mart's
low prices. Other retailers would also be put in the same category,
based on a determination of their dependence on imports and whether
their wage/benefit structure places burdens on government programs.
Special sales taxes have always been used, such as luxury and cigarette
sales taxes. The "offset sales tax" would be applied to
overall sales, not specific products, and not just Wal-Mart. Interestingly,
a bill to levy a special sales tax on Wal-Mart and similar chains
has recently been introduced in Montana, exactly for the purpose
of offsetting welfare costs for low-paid employees.
Connecticut's House Majority Leader Christopher Donovan said:
"Here is the richest retail company in the world, and we, the taxpayers,
are subsidizing their [medical] coverage. I think people aren't
aware of the extent that we're subsidizing the biggest, richest,
most powerful companies. Wal-Mart shoppers need to know there's
an extra cost of doing business."
Most Americans know that something needs to be done about the
Wal-Martization of our nation and the exporting of our prosperity
that is destroying our middle class. Wal-Mart has wiped out the
heart and soul of U.S. manufacturing, which in turn has steadily
destroyed good jobs here. Nothing illegal, but not patriotic. Not
when you understand that what Wal-Mart has itself done, and compelled
other retailers to do, has created more demand for its low priced
goods by creating more low income Americans. Call it the Wal-Mart
Wal-Mart is pouring money into political pockets to protect itself
from government action, which Americans must demand. It is not effective
to fight Wal-Mart one store expansion at a time, because many more
new stores are built than are blocked. Wal-Mart's prosperity is
not America's prosperity. Neither is China's prosperity. What's
good for Wal-Mart is not good for America, and we do not have to
say "in the long run," because the long run has already
Joel S. Hirschhorn was formerly with the National Governors
Association; his current book is Sprawl Kills Ė How Blandburbs
Steal Your Time, Health and Money. He can be reached through