Retail tax breaks criticized

Two speakers at the National Conference of State Legislatures who spoke Thursday about the changing job market had differing opinions on several topics, but they agreed that retail operations should not be subsidized with taxpayer dollars.

Greg LeRoy, director of research organization Good Jobs First, and Brink Lindsey, senior fellow and director of the Center for Trade Policy Studies at the Cato Institute, both said tax money could be used in better ways.

LeRoy said tax money should never be used for the "low road or things that would happen anyway."

"It's not economic development," he said of retail in general. "The job quality is so low, the ripple effects are really poor compared to other economic activity. Especially if it's a retail company that specializes in acquiring sourcing from offshore, the ripple effects are even worse."

He said incentives are not needed "unless an area is demonstrably underserved."

Good Jobs First in May published a study of how it says Wal-Mart is using taxpayer subsidies to finance its growth. The Utah Technology Industry Council has suggested that perhaps the state tax code should be revised to eliminate local incentives to attract retail businesses over technology businesses.

LeRoy said many state incentive programs already exclude retail, but "it could be more broadly cast."

Lindsey disagreed that Wal-Mart's growth is primarily because of subsidies.

"As far as Wal-Mart is concerned, my impression is that the reason it's spreading like mushrooms across the country isn't because it's soaking up development incentives," he said. "It's because it has revolutionized retailing and offers goods people want to buy and at very cheap prices. And the subsidies may be icing on the cake, but the cake is a revolution in business models, and one that has helped millions and millions of Americans make ends meet in a way they couldn't have done without Wal-Mart."

Lindsey acknowledged that the growth has hurt local retailers, "but this is an old, old story in America." At various points in U.S. history, local retailers complained about unfair competition from urban department stores, mail-order tactics of Montgomery Ward and Sears and the chain retailing of A&P.

"And all of these go down in the annals of futile lost battles. We still have department stories, we still have mail order, we still have chain stores and now we've got Wal-Mart," he said.

"I think, without a doubt, we shouldn't be subsidizing water that's running downhill, but the idea that you're going to stop it, and that you should stop it, I think, is one you need to examine carefully."

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