About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline

LOG IN
LOG IN


1 Chris Atkins & Joseph Henchman, Maryland's Wal-Mart Tax Likely to Hurt Wal-Mart's Workers 1 (2006)

handle is hein.taxfoundation/fffcxz0001 and id is 1 raw text is: r:OuUNNDAT10N. March 9, 2006 Maryland's Wal-Mart Tax Likely to Hurt Wal-Mart's Workers by Chris Atkins and Joseph Henchman I. Introduction In January, 2006, the Maryland General Assembly voted to override Governor Ehrlich's veto of the Maryland Fair Share Health Care Fund Act (better known as the Wal-Mart tax). The bill is designed to make Wal-Mart pay its fair share of employee health expenses and provide higher wages to its employees. The bill's proponents believe that Wal-Mart is purposely paying its employees low wages and low health benefits due to the availability of Medicaid, and that this constitutes a taxpayer subsidy of Wal-Mart's business model. Union activists want to introduce a similar bill in at least 30 states.1 Maryland 's Wal-Mart tax violates the principle of tax neutrality. According to that principle, tax laws should apply broadly throughout the economy, with no intention of manipulating the behavior of firms but merely of raising revenue for necessary government functions. The Wal-Mart tax is the antithesis of such a principled tax. By manipulating the language of the statute in arbitrary ways, the legislature cynically targeted the law so narrowly that only one firm will be hit by the tax. By setting an arbitrary standard for health care expenses, the tax will lead to lower wages for Wal-Mart employees in Maryland and/or higher prices for consumers or lower dividends for shareholders. By applying only to corporations with more than 10,000 employees, the tax will distort Wal-Mart's investment in capital versus labor and depress hiring and wages in the short and long term. Finally, by mandating that Wal-Mart provide a certain level of benefits for its employees, the tax might run afoul of federal law on state regulation of benefits. In the long term, Maryland lawmakers will undoubtedly be tempted to tweak the law's thresholds to bring in more revenue from other businesses or force them to overspend on health care. In fact, less than two months after passage of the Fair Share Act, a bill was introduced in the Maryland General Assembly to require employers with less than 10,000 employees to pay at least 4.5 percent of their wages in health care costs.2 Bills introduced in other states-like Washington -will also apply to corporations other than Wal-Mart. While it would undoubtedly be more fair to Wal-Mart if the tax applied more broadly, this would not mask the fact that the tax is poorly designed and will harm, not help, workers.