Oped on Maryland health care tax on WMT

[Controlled Chaos]

Agreed.  If it's 8% of payroll, then reduce payroll when possible.  Of course, given their business model, Walmart is probably already pretty lean on personnel, since they would see that as a cost center.

Lean on personnel?? They have a f***in person at the front of the store saying hi and handing you a cart.

[NorthSideSox72]

Lean on personnel??  They have a f***in person at the front of the store saying hi and handing you a cart.

 

And never anyone in the aisles to answer a question, in my experience.

 

But you could be right. I was just guessing that, since Walmart is highly cost-conscious, they'd likely not be staffed at a level higher than necessary. But if that's not the case, and they have room to cut, then this 8% thing will make them do that.

[southsider2k5]

And never anyone in the aisles to answer a question, in my experience.

 

But you could be right.  I was just guessing that, since Walmart is highly cost-conscious, they'd likely not be staffed at a level higher than necessary.  But if that's not the case, and they have room to cut, then this 8% thing will make them do that.

 

A few things

 

#1 I know WMT is the nations largest grocer, and I have read before that the margins for a typical grocer are less than 1%.

 

#2 I don't know what their consumables profit margins look like, but WMT specializes in loss leaders to bring people into the store, so I doubt there is much fat there either.

 

#3 I also know that their payroll is kept pretty lean as well, and the added costs of operating in big cities pay enviornments is what has kept WMT out of urban areas for the most part. The great majority of their locations are in rural areas where they have little to no competition for labor, and they can keep the prices low.

 

#4 It isn't that any one WMT makes a lot of money, it is the fact that their business model has a ton of stores making a steady solid small profit, which adds up to huge profits at the end of the day. I really don't think adding 8% to their single biggest expense (payroll) is going to be good for many individual stores bottoms lines, and I think WMT with their history of playing tough will resort to store closings in many cases sooner than letting their profits get ate up by this law. I think they will recognize that they can invest their capital into more corporate friendly areas and shutdown stores that aren't profiting as much as other areas could be.

[Rex Kickass]

You know what? I don't see this as a problem. Wal-Mart can play by the rules or the void they leave can be filled by other companies that are willing to play fair by their employees and offer them decent health care coverage (e.g. Costco) or we might actually start to see the beginning of local stores opening up and keeping the money they make in the local economy rather than have most of it funnel back to Bentonville.

 

I think the U.S. has one of the most business friendly environments around the world today. And I think that this isn't going to bankrupt Wal-Mart. If anything, its going to make them improve their benefits. Especially with a dozen other states considering their own measures.

 

Wal-Mart doesn't allow its employees a seat at the bargaining table. It doesn't give its employees a voice in the kind of health care coverage that it needs and wants. So many Wal-Mart employees go without coverage. Rely on charity care treatment, or state aid to insure themselves or their families. Especially since in many of those cases, they are superior to the care that Wal-Mart offers.

[Balta1701]

#4 It isn't that any one WMT makes a lot of money, it is the fact that their business model has a ton of stores making a steady solid small profit, which adds up to huge profits at the end of the day.  I really don't think adding 8% to their single biggest expense (payroll) is going to be good for many individual stores bottoms lines, and I think WMT with their history of playing tough will resort to store closings in many cases sooner than letting their profits get ate up by this law.  I think they will recognize that they can invest their capital into more corporate friendly areas and shutdown stores that aren't profiting as much as other areas could be.

Well here's the question though...can Wal-Mart stand up to a serious challenge of this sort? Let's say WM decided that in response they were going to close any store in MD which fell below a certain level of profitability. What happens when another state enacts this law? Then another? What happens when California does?

 

Wal Mart is able to function in large part because of their size. They can go to their manufacturers and tell them that they have to give WalMart a discount because they're so big that manufacturers desperately want their products sold in WM (thus forcing the manufacturers to employ cheap Chinese labor). But if this becomes more than a 1-state phenomenon...Walmart can't exactly just pull out of California, for example, if they hope to be able to maintain that strength over their manufacturers.

[southsider2k5]

Who knows how this will happen. All I know is that a companies shareholders are a lot more likely to hold a companies CEO to the fire for not declining share price, than the citizens of Maryland are to vote out their legislators for passing that law. Consequentally I think it more likely that WMT would have to play hardball as they know that their jobs are on the line. Also I think if other states are considering these laws that it forces WMT to respond quickly to scare other states into not passing similar laws if they know WMT is willing to fire people and shutdown stores.

 

Also I am not sure if it will get that far, as I am not convinced that MDs law is legal in their own state as it only targets one group, which would have definately been legal if WMT had been mentioned by name. Instead they used a thinly vieled "employer of 10k employees or more" discription, which is only fit by WMT.

[Rex Kickass]

Actually, there are four or five companies in that description. The only one who currently does not meet the 8% threshhold is Wal-Mart.

[southsider2k5]

Actually, there are four or five companies in that description. The only one who currently does not meet the 8% threshhold is Wal-Mart.

 

Ergo, the law was passed with one company in mind.

[Rex Kickass]

Yes. Perhaps because that one company isn't acting as a good corporate neighbor.

 

Laws get passed all the time with one person or one business in mind. My town adopted an ordinance just so the one person who kept his junk cars on the street on blocks couldn't do it anymore. If it serves the public good to have a general law created that will, at least at first, have the immediate effect of changing the behavior of one "problem" neighbor, what's the harm?

[southsider2k5]

Yes. Perhaps because that one company isn't acting as a good corporate neighbor.

 

Laws get passed all the time with one person or one business in mind. My town adopted an ordinance just so the one person who kept his junk cars on the street on blocks couldn't do it anymore. If it serves the public good to have a general law created that will, at least at first, have the immediate effect of changing the behavior of one "problem" neighbor, what's the harm?

 

Because it is unconsititutional?

 

You're probably wondering how a state could single out just one company for such a tax. Indeed, Article I, Section 9 of the U.S. Constitution forbids "bills of attainder" — laws aimed at single individuals.

[Balta1701]

Because it is unconsititutional?

If the Terry Schaivo bill didn't cross that line, this certainly won't either.

[NorthSideSox72]

If the Terry Schaivo bill didn't cross that line, this certainly won't either.

 

I for one think both bills are/were assinine.

[southsider2k5]

If the Terry Schaivo bill didn't cross that line, this certainly won't either.

 

I'm sure this will end up in court and we will find out once and for all.

[Rex Kickass]

Fine. Then as far as I'm concerned, make the threshhold lower.

[YASNY]

Hey folks! I just want to congratulate everyone on a great thread! When we keep the partisan bulls*** to minimum and discuss the issues, there is a lot to be learned. I was thinking, that I might not be learning a lot of definitive answers, but I'm learning some very good questions.

 

Maybe we (me included) should make an effort to discuss more than we snipe. It might be beneficial to all and it would most certainly be beneficial to Soxtalk.

[Cknolls]

By my count, there are at least 23 Wal-Marts in the state of Maryland (and I forgot to search for Sam's Clubs), so I doubt that they're leave the state.  Maryland may be a small state, but it isn't that small.  For someone who lives in, say, Glen Ellyn (chosen at random, BTW), you can probably get to Indiana or Wisconsin just as quickly than someone who lives in Towson MD can get to another state.  I sure wouldn't make the drive.  I'd just go to Target or Costco.

 

The danger to Wal-Mart is if a great deal of states start jumping on the bandwagon, which they probably will.  I doubt many votes are lost on taking on Wal-Mart.  Don't know for sure, just a hunch.

 

They could decide not to build the distribution wharehouse under consideration.

[Balta1701]

They could decide not to build the distribution wharehouse under consideration.

That assumes there's an alternate spot that would work as effectively for distribution where WalMart could just easily move it around in order to punish Maryland. There are lots of other issues that decide where you're going to put one of those other than revenge:

 

Labor costs of workers at the facility, availability of workers there, education of workers in the area, land value, access to transportation, quality of transportation, tax rates in that state, distance from stores which will be supplied by that facility, distance between that facility and other distribution centers, etc. It's not that easy to just decide not to build a facility in Maryland to punish MD...it's in fact quite likely that if they did that, they'd wind up spending a lot more on the facility itself.

[southsider2k5]

That assumes there's an alternate spot that would work as effectively for distribution where WalMart could just easily move it around in order to punish Maryland.  There are lots of other issues that decide where you're going to put one of those other than revenge:

 

Labor costs of workers at the facility, availability of workers there, education of workers in the area, land value, access to transportation, quality of transportation, tax rates in that state, distance from stores which will be supplied by that facility, distance between that facility and other distribution centers, etc.  It's not that easy to just decide not to build a facility in Maryland to punish MD...it's in fact quite likely that if they did that, they'd wind up spending a lot more on the facility itself.

 

Well instantly MD made two of those just more expensive for WMT.

[Balta1701]

Well instantly MD made two of those just more expensive for WMT.

That's assuming that they'd employ the workers at a distribution center for the same minimum-wage no-health-care numbers that they do for the workers at their stores. In fact, it's probably a lot more likely that if anyone in Wal-Mart is being paid well, it's the folks who run those facilities, since they would likely be higher skilled positions (manning machines, physical labor) and would probably involve more injuries as well, possibly justifying the expenses on health care.

 

Edit: That all said, I think it's highly probable that they won't build it there. If their history with shutting down stores to punish workers who unionize is any history, Wal-Mart has been more than willing to sacrifice immediate profits in order to work towards long-term political challenges. They're willing to shut down profitable stores to fight unions, there's no reason to expect that they wouldn't move that thing in order to fight a political battle in MD, even if it does cost more elsewhere.

Edited January 18, 2006 by Balta1701

[Rex Kickass]

I see this whole thing as one of those "values" things and how we see the world.

 

I see a corporation that is the largest private employer in the country. They use predatory pricing tactics that (intentionally or not) have devastating effects on small town local businesses. They offer low prices by having low labor costs. This includes health care costs.

 

As a result, a lot of the people that work for Wal-Mart have a difficult time affording the cost of Wal-Mart's health insurance plan - if they even qualify for health care coverage to begin with. Those that do often can't afford the treatment even with the coverage. Many of these workers then have to rely on the state to cover the medical bills.

 

Why should every taxpayer have to help shoulder the healthcare cost of the Wal-Mart worker when the average Costco or Target employee doesn't leave a burden like the average Wal-Mart worker does? Our government does a lot of favors for businesses and corporations - why when they ask for help in return, it's suddenly an affront to our values?

[EvilMonkey]

I see this whole thing as one of those "values" things and how we see the world.

 

I see a corporation that is the largest private employer in the country. They use predatory pricing tactics that (intentionally or not) have devastating effects on small town local businesses. They offer low prices by having low labor costs. This includes health care costs.

 

As a result, a lot of the people that work for Wal-Mart have a difficult time affording the cost of Wal-Mart's health insurance plan - if they even qualify for health care coverage to begin with. Those that do often can't afford the treatment even with the coverage. Many of these workers then have to rely on the state to cover the medical bills.

 

Why should every taxpayer have to help shoulder the healthcare cost of the Wal-Mart worker when the average Costco or Target employee doesn't leave a burden like the average Wal-Mart worker does? Our government does a lot of favors for businesses and corporations - why when they ask for help in return, it's suddenly an affront to our values?

Last I heard, Target was not union either, and while they don't have the scandals that Walmart does, they also don't pay a 'living wage'. And to take your question one step further, why should Walmart help to shoulder the burden of healthcare? Seriously, how many companies do in todays world? I don't offer it for my employees, I couldn't afford to do it. The one plan I did offer was a catastrophic plan for my salesguy, and even that one cost me almost $200 per month.

[NUKE_CLEVELAND]

I see this whole thing as one of those "values" things and how we see the world.

 

I see a corporation that is the largest private employer in the country. They use predatory pricing tactics that (intentionally or not) have devastating effects on small town local businesses. They offer low prices by having low labor costs. This includes health care costs.

 

As a result, a lot of the people that work for Wal-Mart have a difficult time affording the cost of Wal-Mart's health insurance plan - if they even qualify for health care coverage to begin with. Those that do often can't afford the treatment even with the coverage. Many of these workers then have to rely on the state to cover the medical bills.

 

Why should every taxpayer have to help shoulder the healthcare cost of the Wal-Mart worker when the average Costco or Target employee doesn't leave a burden like the average Wal-Mart worker does? Our government does a lot of favors for businesses and corporations - why when they ask for help in return, it's suddenly an affront to our values?

 

 

Those "predatory" tactics include such economic basics as economies of scale and just in time inventories. This allows them to have a lower price than their competitors.

 

This is America my friend, not the Soviet Union. The government has no business telling corporations what benefits to offer and it defenitely has no business telling corporations how to run their operations. If people need medical coverage then I suggest they get a better job than stocking shelves or fetching carts from the parking lot.

[Rex Kickass]

That's fine. If we don't have a right to ask corporations to follow specific guidelines, than maybe we shouldn't give them every tax break and abatement in the world.

[Balta1701]

Last I heard, Target was not union either, and while they don't have the scandals that Walmart does, they also don't pay a 'living wage'.  And to take your question one step further, why should Walmart help to shoulder the burden of healthcare?  Seriously, how many companies do in todays world? I don't offer it for my employees, I couldn't afford to do it.  The one plan I did offer was a catastrophic plan for my salesguy, and even that one cost me almost $200 per month.

See, again, that's the problem...if employers are going to stop offering healthcare, as they have for the past many decades, due to the increasing price of health care, the only people left offering it will be private insurers or the government.

 

The problem with private insurers remains the spiral one...when employers don't offer health care...the only people who really need to find health insurance are the people who really need health care...i.e. the expensive ones. Lots of people could make use of it, but with me for example, even with 2 bad knee injuries in 2 years, the insurance companies are making a lot of money because my employer provides good health coverage which I use very sparingly.

 

We end up with the problem I've described before...because employers aren't providing coverage, the only people seeking out coverage are those who cost the insurers the most. By reducing the pool of people paying into the insurance pool, costs have to go up. This drives more and more people away from insurance because eventually the insurance becomes too expensive, and people basically are left hoping they don't get sick or die. Eventually, at this rate, insurance could very well become too expensive for a large majority of the American people.

 

If the employer-provided health care system is collapsing because of rising health care costs, there are 3 options...1. "You're on your own" - we just let the system collapse, let the people who can't afford treatment sit on their couches and suffer, and hope it doesn't kill too many peoploe. 2. Forceably lower health care costs so that employer provided insurance again becomes practical, or 3. Let the government take over.

[Controlled Chaos]

Robbing Wal-Mart

Jan 19, 2006

by George Will ( bio | archive | contact )

 

Email to a friend Print this page Text size: A A WASHINGTON -- In 1786 the Annapolis Convention, requested by Virginia and attended by only four other states, called for a second gathering to revise the Articles of Confederation in order to strengthen the federal government. Some revision: The second meeting became the Constitutional Convention. It scrapped the Articles, partly because the Founders were alarmed by states legislating relief of debtors at the expense of creditors, often in ways not easily distinguished from theft.

 

Something not easily distinguished from theft recently occurred in Annapolis. In legislation ostensibly concerned with any company with 10,000 employees but pertaining only to one, Maryland has said Wal-Mart must spend 8 percent of its payroll on health care, or must give the difference to the state.

 

The Constitution's foremost framer, James Madison, understood the perils of democracy at the state rather than the national level of an "extensive republic'': State legislatures have fewer factions competing for favors than compete for Congress' favors. States, being smaller than the nation, have legislatures more easily captured by overbearing majorities. Madison would have understood what Maryland has done.

 

 

Organized labor, having mightily tried and miserably failed to unionize even one of Wal-Mart's 3,250 American stores, has turned to organizing state legislators. Maryland was a natural place to begin because it has lopsided Democratic majorities in both houses of its legislature.

 

Labor's allies include the "progressives'' who have made Wal-Mart the left's devil du jour. Wal-Mart's supposed sin is this: One way it holds down prices (when it enters a market, retail prices decline 5 percent to 8 percent; nationally, it saves consumers $16 billion annually) is by not being a welfare state. That is, by not offering higher wages and benefits than the labor market requires. Labor's other allies are Wal-Mart's unionized competitors, such as, in Maryland, Giant Food, a grocery chain. These allies are engaging in what economists call rent-seeking -- using government to impose disadvantages on competitors with whom they are competing and losing.

 

Wal-Mart's enemies say Maryland is justified in expropriating some of the company's revenues because the company's pay and medical benefits are insufficient to prevent some employees from being eligible for Medicaid. Well.

 

Eighty-six percent of Wal-Mart employees have health insurance, more than half through the company, which offers 18 plans, one with $11 monthly premiums and another with $3 co-payments. Wal-Mart employees are only slightly more likely to collect Medicaid than the average among the nation's large retailers, who hire many entry-level and part-time workers. In the last 12 months, Wal-Mart, the largest private employer in the nation and in 25 states, estimates it has paid its 1.3 million employees $4.7 billion in benefits. That sum is almost half as large as the company's profits, which last fiscal year were $10.3 billion -- just 3.6 percent -- on revenues of $285 billion. Wal-Mart earns just $6,000 per employee, one-third below the national average. Anyway, Wal-Mart's pay and benefits are sufficient to attract hordes of job applicants whenever it opens a new American store, which it does once every three days.

 

Maryland's new law is, The Washington Post says, "a legislative mugging masquerading as an act of benevolent social engineering.'' And the mugging of profitable businesses may be just beginning. The threshold of 10,000 employees can be lowered by knocking off a zero. Then two. The 8 percent requirement can be raised. It might be raised in Maryland, if, as is possible, Wal-Mart's current policies almost reach it.

 

This is part of the tawdry drama of state politics as governments grasp for novel sources of money. Forty-eight states are to varying degrees dependent on revenues from gambling. Forty-six states are addicted to their cut, to be paid out over decades, from the $246 billion coerced from the tobacco industry by using the specious argument that smoking costs their governments huge sums. As a result, 46 states have a stake in the long-term profitability of tobacco companies.

 

Maryland's grasping for Wal-Mart's revenues opens a new chapter in the degeneracy of state governments that are eager to spend more money than they have the nerve to collect straightforwardly in taxes. Fortunately, as labor unions and allied rent-seekers in 30 or so other states contemplate mimicking Maryland, Wal-Mart can contemplate an advantage of federalism.

 

States engage in "entrepreneurial federalism,'' competing to be especially attractive to businesses. A Wal-Mart distribution center, creating at least 800 jobs, that has been planned for Maryland could be located instead in more hospitable Delaware.

 

Meanwhile, people who are disgusted -- and properly so -- about corruption inside Washington's Beltway should ask themselves this: Is it really worse than the kind of rent-seeking, and theft tarted up as compassion, just witnessed 20 miles east of the Beltway, in Annapolis?