October 23, 2007

Inside Wal-Mart's Bid to Slash State Taxes - Our Political Class at Work

&Jesse Drucker:

About a decade ago, Wal-Mart adopted another approach, following advice from Ernst & Young. Wal-Mart transferred ownership of its stores to various in-house real-estate investment trusts. REITs pay no corporate income tax as long as they pay out at least 90% of their income to shareholders as dividends, which are usually taxed. Wal-Mart paid tax-deductible rent to those REITs. For one four-year period, the setup saved the retailer an estimated $230 million on its tax bill, even though the rent payments never left the company.

That strategy was the focus of a Wall Street Journal article in February. Since then, at least six states, including New York, Illinois, Maryland and Rhode Island, have passed laws attempting to prohibit the maneuver, which also has been used by banks and other retailers such as AutoZone Inc. The practice is being challenged by tax authorities in at least four other states, court records show.

Legislative sausage supported by our elected officials only makes these "loopholes" worse. Here's an example that both Russ Feingold and Herb Kohl supported - a 5.25% offshore earnings tax rate for major corporations. More here. Another example of special interest legislation.

Posted by James Zellmer at October 23, 2007 4:25 PM | Subscribe to this site via RSS:
Posted to Politics | Taxes