Just because you can do something doesn't mean you should. Have these people no shame?
Wal-Mart, the nation's largest employer and the world's biggest retailer, is regularly paying itself rent and using the transaction to decrease the taxes it pays to state governments, according to a report in this morning's Wall Street Journal.
The article by Jesse Drucker shows that Wal-Mart has saved hundreds of millions of dollars in taxes in 25 states, and may not be the only company using the practice. Drucker shows that state governments are finally getting wise and working to close a complicated tax loophole that the federal government discontinued years ago.Wal-Mart is using a tax loophole involving "real-estate investment trusts" to call "rent" it pays to itself a tax-deductible business expense, Drucker explains. A Wal-Mart subsidary will pay rent to a real-estate investment trust, which is owned by another Wal-Mart subsidiary. The trust hands the rent to the second subsidiary in the form of a dividend, which cannot be taxed. Additionally, Wal-Mart counts the initial rental payment as a business expense, which is deducted from taxes in the state where the store is located. In one four-year period, Wal-Mart avoided $350 million in taxes using this strategy, which was developed by the accounting firm Ernst & Young LLP.
The loophole is getting attention in state governments. Newly installed New York Governor Elliot Spitzer said he would close the loophole in the hopes of adding $83 million to New York's state budget, and North Carolina is suing Wal-Mart for back taxes. Smaller companies using the same loophole, like Autozone and Fleet Funding, are also receiving more scrutiny.
Watch what Gov. Spitzer is doing in NY closely. If he is successful, not only will it have significant implications for state policy nationwide, it may very well also launch him towards the White House. Just one more example of the party the Democratic Party is becoming...
Mr. Spitzer wants to throw out the state’s arcane formula for providing school aid — a formula that is jealously protected by Senate Republicans because it benefits suburban school systems. He wants to redirect health care spending so that it benefits patients, and not, he claims, hospitals and unions — which have many allies in the Legislature.The new governor is taking on one of those unions — 1199 S.E.I.U. — one of the most politically potent unions in the state, with his call for cutting a health care recruitment and retention program the union created; 1199, which is the state’s largest health care union, has been known to use multimillion-dollar advertising campaigns in the past to humble governors who cross them.
Mr. Spitzer’s budget also calls for collecting up to $200 million in sales taxes that the state says it is owed by Indian tribes for businesses on their reservations. Those efforts were abandoned after some tribal members shut down part of the New York Thruway and clashed with state troopers during protests in 1997.
The political skirmishes and policy battles that play out over the coming months will offer the first real test of the brash, sometimes confrontational style of Mr. Spitzer.
The man took on Wall St. I think he'll be able to handle Albany just fine...
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