Big corps try to skirt state tax laws

Why Wal-Mart Set Up Shop in Italy

By JESSE DRUCKER , Wall Street Journal

More than 4,500 miles separate a small Wal-Mart Stores Inc. office in Florence, Italy, from the company's dozens of Illinois retail outlets. But thanks to a convoluted tax arrangement, court records show, Wal-Mart's Italian operation has helped the giant retailer cut its state tax bill in Illinois by millions of dollars a year.

Wal-Mart set its affairs so that its Italian outpost is the only operating unit of a real-estate subsidiary that controls billions of dollars of the retailer's property in Illinois and other states. Because technically its only employees are based in Italy, the real-estate unit claims its operations are foreign, exempt from Illinois corporate income taxes.

Earlier this year, the Illinois Department of Revenue objected to the Italian tax maneuver, demanding $26.4 million in back taxes, interest and penalties. Wal-Mart paid the amount in dispute and then sued the state for a refund, according to a complaint filed in May in Illinois Circuit Court in Springfield, Ill.

A Wal-Mart spokesman declined to comment beyond a prepared statement: "We have a disagreement with the state of Illinois over our tax liability last year, and we've asked a judge to resolve that for us." He declined to explain why Italy was chosen as the home of this particular foreign operation or whether Wal-Mart has other such arrangements.

The article is here. Fortunately, Wal-Mart's attempts to get around state tax laws have recently been rebuffed. See:

Judge Rules Against Wal-Mart Over Its Tax-Shelter Dispute

A North Carolina state-court judge ruled against Wal-Mart Stores Inc. in a closely watched tax-shelter case involving an arrangement in which the retailer essentially paid rent to itself and then deducted the amount from its taxes.

In an attachment to an order filed Friday, but signed on Dec. 31, Emergency Special Judge of Superior Court Clarence E. Horton Jr. wrote that Wal-Mart’s structure had no “real economic substance” other than cutting taxes. The judge dismissed Wal-Mart’s suit, in which it sought a refund of $33.5 million in taxes, interest and penalties that it paid after state tax authorities determined it had underpaid by that amount.

The rest is here. Thanks to Minnesota Central for the heads up.

Progressive Ponderings: Owners of the World

by Joe Mayer

A couple of previous Ponderings used the phrase "owners of the world" in reference to power. A new study by the Helsinki-based World Institute of Development Economics Research of the United Nations University contains these facts:

• The richest 1% of adults owned 40% of global assets in the year 2000.
• The richest 2% of adults owned more than 50% of global assets in 2000.
• The richest 10% of adults owned more than 85% of global assets in 2000.
• In contrast, the assets of the lowest half of the world's adults account for barely 1% of global wealth.
• The average American owned nearly $144,000 worth of global assets.

Historically wealth always transfers to power. Consider recent examples:

• Enron brought California to its financial knees as Enron traders drove up energy costs beyond Californians' ability to sustain themselves.
• Using California's crippled condition, one wealthy man was able to promote the recall of Governor Gray Davis.
• The "swift boat" lies and preposterous suggestion that John Kerry didn't earn his war medals was initially funded by two wealthy Texans.
• The Rev. Sun Myung Moon (Moonies), whose shady financial background included an 18-month prison term for tax fraud, launched the right-wing Washington Times in 1982. He may spread more money to right-wing causes than any other individual.
• John McCain was the leading GOP presidential contender seven years ago until George Bush entered the race having already raised $50 million from the "owners of the world."

Each year, Forbes magazine publishes the names and wealth total of America's richest. This year five Waltons (Wal-Mart) were among the top ten, each with a net worth of more than $15 billion. How much is $15 Billion? My home city of Rochester, MN, has a population of slightly under 100,000. Multiplying 100,000 people times the average American net worth mentioned above – $144,000 – equals $14.4 billion. We have this wealth-promoted myth that our economy rewards people by paying them what they "earn." Using the above figures this myth holds that each of the Waltons "earned" more than all the people of Rochester combined.

At different times in American history racism, sexism, and other divisive issues have been the subject of the political agenda. One item not seen on this agenda is classism – the dangerous and growing divide in America and the world between the rich and the poor. Those who bring this subject to the fore will be accused of envy, divisiveness, jealousy, hatred, anti-capitalism and pro-communism. It's a case of blaming the messenger rather than the cause for divisive class structure. If John Edwards gains momentum with his "two Americas" campaign, expect big money to "swift boat" him in some manner.

Extreme wealth and growing inequality is incompatible with democracy. The United States witnessed this at the time of the "robber barons" and we are witnessing it today. That our governing officials are purchased through huge campaign donations and nourished by lobbyists for wealthy interests is undeniable. Wealth keeps the political machinery well oiled through media ownership, idealistic think tanks, and fabricated "news" and research.

Is extreme disparity in wealth and income immoral? Scripture (I use this source since we claim ourselves to be a Christian nation) speaks of the misuse of wealth and power at least ten times for every time it mentions sex, according to some scripture scholars. Present day icons – Jesus, Gandhi, Day, King – rarely mentioned sex but concentrated their message with the use of wealth and power. Can religious leaders speak to this issue or are they too dependent and compromised by religion's association with wealth?

The world cries for justice, yet many modern governments exist to serve wealth. No wonder the wealthy see perpetual war.