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Walmart’s Top-to-Bottom Taxpayer Subsidies

Walmart executives get big bonuses as employees and taxpayers suffer.

Jobs with Justice Rally against Walmart's low wages in Loveland, CO. Near-poverty wages and part-time schedules at Walmart have forced the company's own employees to rely on $6.2 billion worth of food stamps and other taxpayer-funded benefits per year. (Photo: Josh Noble / Flickr)

Low-income families weren’t the only ones hurt by cuts to food stamps last fall. Top Walmart executives also took a hit.

The cutbacks ate into the discount giant’s sales because so many of its low-income customers rely on this public assistance program to help pay for their groceries. And that made it tough for the company’s top brass to meet their bonus targets.

But that wave of anxiety didn’t last long. Walmart’s board simply rejiggered bonus criteria so that executives could still reap “performance” payouts, The New York Times reported.

Why are most corporate boards determined to maintain sky-high pay for executives even when they perform poorly? The most common explanation is that board members are often overpaid corporate leaders themselves. The last thing they want to do is provoke scrutiny of their own fat paychecks.

Another, lesser-known reason is that corporations actually have a perverse incentive for overpaying top-level executives. This is due to a tax loophole that allows corporations to deduct unlimited amounts from their federal income taxes for the cost of so-called “performance pay” for executives. The more corporations pay top officers, the less they pay Uncle Sam.

Guess who makes up the difference? Taxpayers.

A new report we co-authored for the Institute for Policy Studies and Americans for Tax Fairness calculates just how much this bonus loophole benefits Walmart. For example, we found that Mike Duke, the big box retailer’s recently retired CEO, pocketed nearly $116 million in exercised stock options and other “performance pay” between 2009 and 2014. That translates into a taxpayer subsidy for Walmart of more than $40 million.

By lowering the performance bar for Walmart’s executives, the company’s board has kept the bosses happy and secured a nice big tax break. Consider the tradeoff here: This $40 million subsidy could have covered the average cost of food stamps for 4,200 people over that six-year period.

Congress should end this subsidy for bonuses at the top of Walmart and other publicly held U.S. corporations, which costs $50 billion over 10 years, by simply eliminating the “performance pay” loophole.

Meanwhile, the government is continuing to gut food stamp benefits. As part of a Farm Bill compromise this year, lawmakers agreed to reduce the program’s benefits by an average of $90 a month for 850,000 families.

Walmart’s low-wage workers are likely to be among those affected. Near-poverty wages and part-time schedules have forced the company’s own employees to rely on $6.2 billion worth of food stamps and other taxpayer-funded benefits per year, Americans for Tax Fairness estimates.

For a company that hauled in $16 billion in profits last year, this is shameful.

Walmart’s workers are speaking out more than ever before. In the past two years, about 1,000 Walmart stores have faced strikes or rallies for better pay and working conditions. In January 2014, the National Labor Relations Board charged the corporation with illegally disciplining and firing workers who participated in these actions.

Barbara Collins, a single mother from Placerville, California, wrote in Salon about her decision to join strike actions after struggling for years to make ends meet while earning $12.05 an hour as a Walmart stocker. For years, she was never guaranteed a 40-hour workweek. During some weeks she worked as few as eight hours. Following a confrontation with a Walmart board member about the company’s poor pay and working conditions, she got fired.

Despite the intimidation, Walmart workers and their allies are organizing a new round of strikes that began before the corporation’s June 6 annual shareholder meeting

Taxpayers should support these workers by demanding an end to subsidies for Walmart’s inexcusable pay practices — at both the bottom and the top.

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