While Walmart customers suffer from government belt-tightening, Walmart executives thrive on government tax breaks. It's good to be rich.
Over the past six years, Walmart has cut its tax bill by $104 million thanks to a loophole in the corporate tax code that lets companies deduct the cost of performance-based pay for executives. That's according to a report released Wednesday by Americans for Tax Fairness and the Institute for Policy Studies, a think tank opposed to "concentrated wealth" and "corporate influence."
During that time, executives took home $298 million in performance-based pay, the study shows.
Some of that pay came despite dubious performance: Walmart's U.S. same-store sales, a key measure of retail health, have dropped for five quarters in a row. And Walmart executives have blamed at least some of the bad performance on cuts to government assistance to its low-income customers.
Corporate-governance groups are urging shareholders to vote against the company’s proposed pay plan at its shareholder meeting on Friday.
They argue that, in calculating performance-based pay for executives, Walmart's board improperly ignored negative factors that were within executives' control, or were at least foreseeable. Those included the impact of government food-stamp cuts in the U.S. and store closures in Brazil and China.
Sarah Anderson, the co-author of the report, said that, by tweaking metrics to make sure executives reap a lot in performance-based pay, Walmart is both “rejiggering and lowering the performance bar" and "also ensuring they get their tax deductions.”
Brooke Buchanan, a Walmart spokeswoman, called the report "flawed," saying that it "isn't based on facts, but on promoting their agenda." She noted that, "unlike many companies here in the U.S.," Walmart pays billions of dollars a year in federal, state and local taxes.
"Our executive compensation program has been developed in the same way as other companies across America, and we comply with federal tax laws," Buchanan said.
The performance-pay loophole is perfectly legal, though politicians from both sides of the aisle are looking for ways to close it. Ironically, the tax break actually arose from lawmakers’ attempt to curb executive pay. Congress passed a law in 1993 capping the amount of executive pay companies could deduct from their tax bill at $1 million per executive, but they made an exception for performance-based pay.
Since then, there’s been “an explosion of tax-advantaged compensation,” such as stock options, the report notes. Indeed, Walmart is not the only company taking advantage of this loophole. The practice is relatively widespread in the tech industry, where executives are often compensated largely in stock, Anderson said.
IPS targeted the fast-food industry's use of the loophole earlier this year. Walmart and fast-food companies have come under heavy fire for paying workers low wages, a practice that studies show also costs taxpayers when their workers rely on public assistance.
“There are some guys out there who are even bigger examples” of companies that take advantage of this loophole, Anderson said. “Walmart is still up there towards the top, and we wanted to focus in on them because of the extreme [pay] disparity within the company [between executives and workers] and to point out this double burden on taxpayers.”
Walmart's income disparity extends to customers suffering from food-stamp cuts. Instead of raising the pay of low-income workers, many of whom are likely Walmart customers, the company boosted the pay of its executives.
With more than 1 million U.S. employees, "Walmart uniquely has the ability to directly impact the standard of living of a great many Americans," Richard Clayton, research director at CTW Investment Group, one of the corporate-governance groups criticizing Walmart’s pay plan, told HuffPost last week.
This article has been updated to note that Americans for Tax Fairness was also involved with the report.