Walmart’s taxing experience in Puerto Rico

As the New York Times recently reported, a Federal judge has ruled the tax that Puerto Rico levied on Walmart was unlawful. Walmart argued that the tax totaled more than 100 percent of its profits.

From the article:

The judge, José Antonio Fusté of the United States District Court in Puerto Rico, said in his opinion on Monday that it gave him no pleasure to throw out the tax, considering the commonwealth’s dire financial condition. But he said it was unlawful and that Puerto Rico’s crisis was not an excuse “to take revenue that it’s not entitled to, to pay for essential services.”

The new tax was more than triple the old rate, he said, “designed to capture Walmart Puerto Rico, the biggest fish in the pond.”

It also gives me no pleasure to at least partially concur Walmart’s side in this dispute. It’s unrealistic to take the entirety of a business’s profits and expect them to continue operating in your jurisdiction. Puerto Rico is kind of an unusual case: it’s a US territory, but not an actual US state, at least not yet. I don’t know if it’s accurate to say it’s somewhat like a country within a country, but that’s the best description I can come up with. (It does have its own Internet TLD of .pr if that says anything.)

I am no fan of Walmart. I don’t shop there at all, even when the alternative is doing without until another retailer opens up shortly after daybreak. To me, their reputation is a store that sells “cheap crap” and on top of this, pays their employees poverty wages that the rest of us wind up subsidizing with our taxes. As I have blogged previously, the obscene pay their CEO gets doesn’t exactly help their case in my eyes, either.

But the alternative to Walmart prevailing in this lawsuit is even worse. It would basically give Puerto Rico’s government free reign to raise taxes at will, even to the extent of taking over 100% of a company’s profits. That’s a recipe for disaster; Puerto Rico would be shooting itself in the foot by doing this.

So, I applaud the judge for ruling in Walmart’s favor. It was the only sane thing to do.

Walmart: A curse on the American dream

ABC News recently reported on an artifact of a meeting of city aldermen in Chicago. In the middle of a quest to get higher hourly wages for Walmart’s future employees, one of the aldermen, a man named Ed Smith, did the math on Walmart CEO Michael Duke’s salary, and found out that recalculated as an hourly wage and assuming a 40-hour week, it is more per hour than most rank-and-file Walmart employees make all year. That’s pretty much the definition of what I’ll refer to here as “[beep] you money.” (No, I still don’t swear in my blog posts.)

I do understand that a CEO should be compensated for his/her effort leading a company.  There comes a point, however, where a company’s performance and reputation should reflect back on the CEO. I think the alderman said it best:

“How can you go to bed at night and sleep knowing you make this kind of money and the people working for you can hardly buy a package of beans and rice?” [alderman Ed Smith] asked in an interview with ABCNews.com.

Indeed, Walmart is known for treating its employees terribly. A documentary about the retail behemoth, Wal-Mart: The High Cost of Low Price (which for lack of a better abbreviation, I’ll simply refer to as “the movie” for the rest of this post), tells many stories of abuse by the company and its management. In particular at about 36:30 into the movie, a Walmart manager relates the story of another manager telling him how to cheat on payroll and deny workers of overtime. Later, at about 38:00 into the movie there’s an anonymous Walmart worker referring to only 19 hours per week, and saying “you can’t pay bills with that… it’s not right at all.”

In just about any other company, the union would be all over this and causing all kinds of hell for Walmart. However, Walmart is also known as one of the most egregious union-busting companies in the US, and its stores as crime magnets. In at least one case Walmart installed security cameras not to protect its shoppers or even for direct loss prevention, but for the surveillance of employees attempting to organize a union! At about 1:23:30 into the movie, former Walmart loss prevention manager Stan Fortune explains this as it relates to the surveillance footage related to the murder of Megan Holden.

But it gets even worse; about a minute later there’s a big long list of crimes occuring on or near Walmart property during the first half of 2005 (the year the movie was made). Of particular note are four that I noticed in the Houston area, including one in Sugar Land (a purse snatching), a suburb known for its low crime rate!

If you haven’t seen the movie yet, you should; DVDs are still for sale at the movie’s website.

This response from Walmart’s public relations guy to ABC News is quite chilling:

“I don’t think Mike Duke needs, as the CEO of a Fortune 1 company, needs me to defend his compensation package,” said Walmart director of community affairs Steven Restivo, referring to Walmart’s status as the largest company on the planet.

Not surprisingly, I disagree; there’s no way even the most skilled public relations practitioners could defend with any credibility this kind of obscene salary for a company with Walmart’s track record. As a public relations consultant myself, it’s certainly not a job I could ethically accept, nor is it one I would want.

My challenge to Walmart is this: first pay the rank-and-file workers a fair, living wage, and treat them like human beings, then worry about your CEO paying up all of his yacht club memberships and keeping his entire fleet of luxury cars and private jet fueled (or whatever the hell he does with such an obscene amount of money).

Another thing Walmart needs to fix: this pattern of flatly crushing local businesses and then on the eve of tax exemption expiration, moving just outside of city limits, leaving behind an empty store building that no other retailer is large enough to fill. (Also documented in the movie.) In general, Walmart is a nightmare for many local businesses, and plans to construct a new Walmart in the Houston Heights area sparked a petition against it, spread by many people including a group called SLGT (Support Local, Grow Together). I agree in principle with the mission of SLGT and hope their effort to keep Walmart out of the Houston Heights is successful.

(Some opponents of the Heights Walmart point to another Walmart store going up at Fulton and Crosstimbers, in the shadow of the Northline shopping center. Unfortunately I didn’t hear about that one until it had already been halfway built, especially since it’s much closer to me than the Heights store would be; we don’t need that Walmart, and we we certainly don’t need two Walmart stores that close to each other.)