Posted on 02/01/2007 1:04:37 PM PST by MinorityRepublican
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.
The arrangement takes advantage of a tax loophole that the federal government plugged decades ago, but which many states have been slower to catch. Here's how it works: One Wal-Mart subsidiary pays the rent to a real-estate investment trust, or REIT, which is entitled to a tax break if it pays its profits out in dividends. The REIT is 99%-owned by another Wal-Mart subsidiary, which receives the REIT's dividends tax-free. Wal-Mart gets to deduct the rent from state taxes as business expense, even though the money has stayed within the company.
Partly thanks to sophisticated financial strategies like these, states' tax collections from companies have been plummeting. On average, Wal-Mart has paid only about half of the statutory state tax rates for the past decade, according to Standard & Poor's Compustat, which collects data from SEC filings. The so-called "captive REIT" strategy alone cut Wal-Mart's state taxes by about 20% over one four-year period. Now several state regulators are trying to crack down on the strategy, used largely by retailers and banks, and some other states have changed their laws to try to end the practice. Yesterday, New York Gov. Eliot Spitzer included elimination of the loophole as part of his proposed budget, a fix he said would bring the state $83 million a year.
(Excerpt) Read more at online.wsj.com ...
There is a reason Boeing moved a couple of offices to Chicago, and Microsoft licensing is NOT in Washington.
Yeah, but even if they collect the same amount from locals, walmart wont tack their costs on, so there is a little savings there.
The Young Werther REIT was designed for just this type of activity. I'll collect the rent, keep my 5% fee for services and payout the remainder to WalMart Investment services.
Win! Win!
My 5% commission can fund Freeper Land, my taste for fast cars and fast women, with alittle left over for....
Any suggestions?
Good, indeed. Business tax is really a consumer tax. Property taxes themselves are one of the worst evils and breakdowns of our human rights since the Founding of our nation.
The power to tax a man off his property is the power to destroy, indeed.
Whenever I talk to a liberal who wants to tax rich businesses more or complains that they get away with not paying enough, I casually mention that any tax on business is a consumer tax. They just pass on the cost. This always flummoxes the lefty or liberal. They can't quite believe it's true. Yet, how to deny it?
Why not? The Clintons have done that at their NY spiders' nest since they bought the place. And they use OUR money to do it.
If I buy a new plasma TV for $1200 instead of $1300 (for example), then I have saved $100. If instead Wal mart did not have savings to pass along, I would've paid $1300.
Your assertion (unless I've misundertaken you) is that irrespective of wal mart's tax burden, I'll still pay that "extra" $100 in taxes because government will collect the needed aggregate no matter what.
While I agree that government will collect what they choose to collect no matter what, that does not indicate that the plasma TV purchaser will pay the same.
Indeed, there will be many more individuals from whom to collect the $100 shortage than just me. In the end, I may not save $100, but I reckon it would be mighty close to that.
Real estate taxes are just the government's way of claiming ownership of all property. The tax we pay is nothing more than rent.
Johnmark7, there is an entire segment of FReepers who deny this. Really.
This particular segment asserts that "prices are not related to costs in any way". I "kid you not". There's even one who chooses to assert that "taxes are not a cost of production, so taxes do not affect prices".
While I respect the experience of said individual, his motives for such foolishness are dubious.
Only if you believe the money WalMart earns belongs to the Government first, and after the Government takes what it wants, then the rest belongs to WalMart.
There is a "little savings there" for only those people who shop at Walmart. If Walmart paid the tax, then Walmart would pass the cost on to its customers in the form of higher prices. By avoiding the tax, Walmart effectively shifts the tax burden away from its customers to society as a whole. If Walmart was a Democrat, most of us would accuse it of attempting to redistribute our wealth, which is exactly what it has done. Again, I don't fault Walmart for taking advantage of a legal loophole. But please don't try to convince me that Walmart is some sort of conservative icon.
Where the hell did that come from?
And if Target, Kohl's, Kroger, K-Mart, and the rest aren't doing the same thing they're stupid.
If Wal-Mart isn't the only one doing this, then it's just another hatchet job article.
Actually, you won't pay that "extra" $100 in taxes, because Walmart has shifted the tax burden to all taxpayers, including those taxpayers who would never step foot in a Walmart. What Walmart has really done is redistributed wealth by shifting the tax burden from Walmart Customers to the larger pool of taxpayers, and as a result, the Walmart shopper has more money in his or her pocket to spend at -- Walmart.
Put the company in a holdings trust with you as beneficiary...
then it, and your moolah, is sheilded....
I have no problem with Walmart (or other businesses) taking advantage of any legal tax shelter. And I have no problem with states closing that loophole either.
Corporations do this. I work as a route salesman for a major home delivery frozen food company. The depot pays rent to the corporation, and pays the corporation for each truck on the lot, even after they long since depreciated and paid for themselves..
its a common corporate practice...
For sure! We can use that website that Sean touts for makeing a will. They also specialize in LLCs.
This was precisely my point. I must have misunderstood your post
On the Internet, that's called "trolling". Those who do it are "trolls".
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