What is Digg?143 Comments
- gmark13, on 10/12/2007, -21/+142Why is it when a company is smart and plays exactly by the rules
the government says they have to obey do people get upset?
The problem here isn't with Wal-Mart or any other business doing this.
The problem is with an overly complicated tax system! - treelovinhippie, on 10/12/2007, -8/+46It's all just business. When you operate on the margins that Wal-Mart do, you will go after anything to reduce your costs (especially if you can do it legally).
- MagnumVP, on 10/12/2007, -0/+29Can I charge my wife rent and then get a tax break when filing jointly?
- playerslight, on 10/12/2007, -2/+26This appears to highlight more of a problem with REITs than it does with Walmart.
I don't really concern myself much with Walmart anymore, as it really has backed itself into a corner. Its main competitive advantage--the incredibly efficient logistics system that allowed it to undercut basically everyone--does not provide nearly the same relative advantage that it did 10 or 15 years ago as most major retailers are now successfully copying it. They've had to go to really cheap goods outsourced to China in order to keep their costs low, but the resulting low quality damages their customer reputation. They are in a low-cost downward spiral, and there isn't a whole lot of fat left to trim in order for them to maintain market share.
I just hope that more reputable retailers don't follow them into the abyss of low prices, low quality, and crap merchandise. - oOLiquidNightOo, on 10/12/2007, -1/+21walmart hardly pioneered this concept, if i remember correctly it was jc pennys that began this practice 15 or 20 years ago.
- Wireddd, on 10/12/2007, -0/+20ask anyone who own their own buisness and building and has an accountant. and you will find that they do this too.
- AzDraon, on 10/12/2007, -11/+28@Above
This does not apply only to walmart. If you read the article you would see that many smaller businesses are doing this as well. This is not just walmart that it is helping. Dont complain because walmart highers smart accounts. - skipere, on 10/12/2007, -3/+18That is a common practice if you own your business and the property too. It's a must.
- beetyjoose, on 10/12/2007, -1/+14yeah. this isn't really a loophole at all. This is common practice. If you own property and operate a business, this is a must. It doesn't matter who you pay rent to; it is a write off for a business. I know it appears scandalous, because it's walmart and is on a giant scale, but this is as normal as writing off an electric bill.
If you bought printer toner from a store that your family owns, it's still a write off.
I'm surprised this made the front page. - oOLiquidNightOo, on 10/12/2007, -1/+13"This is just sneaky"
you clearly have no idea what you're talking about. this is and has been a completely acceptable practice. if you're a business owner and you're not doing this, you're just not savvy. - dime, on 10/12/2007, -0/+8
A lot of ignorance of tax law in the comments here...
Paying yourself rent is common practice. It doesn't mean you don't pay tax, it means you're shifting the tax burden from a corporate to a personal level.
Example:
I own a fastener supply shop, and I also own the building. I pay myself rent to get a deduction on my corporate 1120 return. However, I need to report that rent as income on my personal Schedule E when I file my 1040. Of course, you choose whichever method results in you paying less taxes.
In the case of WalMart, the dividends may not be taxable at the corporate level, but the income flows through to the shareholders, who in turn have receive a K-1 and have to report that income on their 1040 (and, yeah.. pay tax on it too).
The thing to remember is that the government always gets their money. The state may be missing out on the corporate tax end, but they're getting it on the income tax end. It sounds to me, anyway, that the Goveners of these states are using FUD to change well established accounting practices. - treed, on 10/12/2007, -0/+7That may have been the most insightful comment I've ever read on digg. Well done.
- betterth, on 10/12/2007, -1/+7@dracostimpy
"I'm of the opinion that all taxes are nothing more than theft by legislation. "
I agree with most of post, but I most definitely do not agree with this statement.
Without taxation there is no government. Without government there is anarchy (followed by new governments and forms of taxation).
Taxation is not theft by legislation. Without taxation there'd be no society as we know it. No cars, no computers, no internet, no digg. Etc, etc. - mcspectrum, on 10/12/2007, -1/+6@jarland
See, I think what's shaped America as much as anything is our ability to change and improve our society by identifying problems and finding pragmatic solutions. Rarely is a complex problem like this a black and white "free enterprise or communism" thing. All that attitude does is box one in and stifle ideas that would improve the status quo. - rockforever, on 10/12/2007, -5/+10Saying the alternative is Communism is asinine. There is a middle ground that we can achieve. Also, I dont think to many people here (if anyone) is saying corporations are bad, but I know I'm saying one that wields the power that Wal-Mart does, is bad. It hurts just about everyone involved with them. If they deem something bad, and refuse to sell it, then it will get changed. They have the power to regulate just about any market because of their position in retail. A small example is that Wal-Mart said computer game boxes were too big, now ALL computer games are sold in smaller boxes. I'm not saying that was a bad change, but its scary that Wal-Mart can say jump, and the market will respond with "How high?".
- merreborn, on 10/12/2007, -1/+5"If your business isn't making enough money without having to find loopholes to jump through then I'd say you're in hot water."
Your business is never making enough money. There's always room for more profit. In fact, you're legally bound to maximize profit for your shareholders. - aurrea, on 10/12/2007, -1/+5GEICO does this as well. ex: The San Diego call center office leases it's building which is owned by the corporate headquarters in DC.
- LHopi, on 10/12/2007, -1/+5I sat through about 1 minute of that video and about slit my throat . How could anyone sit and watch those hens?
- appetite, on 10/12/2007, -7/+11Wow, so many corporate apologists in here. Haha--you guys actually think we're supposed to be completely self-interested to make the world work better.
The neo-classical propaganda lives on, despite mounting evidence that self-interested raitonality is a harmful over-simplification.
In this case, I do blame Walmart. They are running smaller companies out of business by hiring lawyers and accountants to find cheesy ways to be competitive. Should they go to jail? No. Should they get my money and respect? Absolutely not. - OSDAgent, on 10/12/2007, -2/+5My uncle does this with all of his companies, my wife's father does that with his, and we are planning to do the same in a couple of years with ours... plenty of companies do this.. it's not cheating if you're playing by the rules.
- monkeysteps, on 10/12/2007, -0/+3Not news....common practice
- jtorkbob, on 10/12/2007, -2/+5@synstar:
Every successful business uses 'loopholes' like these. Businesses have to make tough decisions about renting vs. buying. Commercial property is very expensive, and this is just one more way they are able to optimize their competitiveness, which benefits working class families like mine.
Businesses, particularly small businesses, also make purchases at the end of the year to optimize tax bills, lease cars for their principals, and massage the system to make the most of the rules. It's just a competitive adaptation to an overly complex system. - Hellman109, on 10/12/2007, -0/+3Tas minimisation happens everywhere.
My parents do the same, they own an office and the business pays them rent.
There are 100 other things they do, like make sure any holidays have a business component so they can claim it on tax too, other things like that.
This is in Australia - pauljaroszewski, on 10/12/2007, -2/+5"The point of a business is to make money, not to help the community."
LOL...really?
Walmart likes to counter the argument that small business and wages/jobs get destroyed when they set up a big box store by saying that they contribute even MORE in tax revenue than the small mom and pop shops they force out of business. Combine that with that whole "Good old American, family values oriented business" line of ***** corporate marketing...and you have the reason why I don't shop at Walmart. - proggieus, on 10/12/2007, -0/+3Whats so wrong with me being an entrepreneur, I own three companies, One is a real estate company that happens to own a 12,000 sg ft building, the other two need office space, so i rent my building to my other two company's, At least i know who the tenants are and don't have to worry about that BS. It's not my fault that the real estate company can't seem to make any money. I must have screwed up when i set the rent.
- anamanaman, on 10/12/2007, -15/+18I'd rather walmart keep the money than give it to the government.
Why is it a tragedy the government has less money? They are a hell of a lot more efficient and beneficial to society than state government programs. - synystar, on 10/12/2007, -6/+8If this is all perfectly acceptable and non-exploitative then why would the States be trying to close the loopholes? Because they didn't INTEND for businesses to do this in the first place. From their standpoint this is wrong and tax dollars are being lost. You can argue with me all day long about how this happens all the time and you're not savvy unless your using loopholes like this. It still doesn't make it any less "sneaky". It's a lawyers game and it IS sneaky. If a company wants to rent property to its self that's fine. By all means do so... you don't have to steal money from the people--which is what this loophole allows essentially--along the way.
- WhiteTigerEyes, on 10/12/2007, -0/+2@ synstar
Based on your complaints, I shouldn't accept my income tax refund this year? I should let the state and federal government use that money that they overtook from my paychecks?
What Wal-Mart has done is the same thing tax reps do for all of us "tax-paying" citizens. They try to get the biggest return possible.
The only difference in your eyes is that Wal-Mart is evil because they make so much money that they don't need the tax benefit so they are wrong for taking it.
Is Capitalism not the lifeblood of America? - CrazyWolf, on 10/12/2007, -1/+3The tax break was a tool to motivate corporations to invest money back into itself in that state. If a corporation is not actually investing money back into that state, it does not have a right to that tax write-off. The write-off should be closed and all the money that walmart should have paid should be demanded back.
If the money isn't demanded back, then companies will have a motivation to find and exploit more loopholes in the future.
Some people complain that the true problem is an overly complicated tax code, but the task of writing a tax code that includes all the motivational tax write-offs we want included and no loopholes at all is a monumental one. - synystar, on 10/12/2007, -2/+4So it goes like this:
Government: Hello. I'm here to collect the taxes. Let's see, that property there...you owe us...
Corporation: Wait, hold on a minute... I don't own that property. I rent it, so therefore I shouldn't have to pay this much in taxes this year.
Government: Oh, I see...so yeah, umm... wait! It says here that you actually own that company too.
Corporation: Yeah, yeah, it's very complicated...but you see, clearly I'm losing money on rent for this property so I shouldn't have to pay this much in...
Government: ..but .. you aren't losing money. You own that company. You should still have to pay taxes like your neighbor over there.
Corporation: Oh, I own that property too... poor bastard pays a fortune. Anyway, again clearly I'm losing money and shouldn't have to pay taxes. - LloydDobbler, on 10/12/2007, -0/+2Thank you, someone, for mentioning the FairTax. The thing is, in a free-market system (which I believe is the best system), companies are going to do what they can to keep their costs down and to offer the lowest cost to their customers (in order to compete with their competitors). That includes tryingto find ways to pay less taxes.
Don't forget - yes, a company is looking for profit, sure, but it also has to think about keeping its customers. Which means keeping margins low, or finding ways to convince people they need to pay more ("this is 'designer' stuff we sell...that kind of argument"). Bottom line is:
1) Competition is king.
2) If you're a business owner and there are legal loopholes (in taxes or whatever), if you don't find a way to exploit them, someone else will.
3) If you don't take that opportunity, someone else can afford to sell their stuff for less, because their expenses are less due to the loophole. By selling for less, they'll ultimately sell more, if they do things right.
So ultimately, since it's a free market economy (for the most part, though it's becoming less- and less-so thanks to government intervention...), and since people will compete to drive their costs down and maximize the amount they need to grow their business and its profits, the problem lies in
a) the government not enforcing the laws on the books, and
b) the laws on the books being too complex as it is.
John Locke pointed out in his Second Treatise of Government that a citizen cannot be expected to obey laws he/she cannot understand. And how can any of us understand the ridiculously complex slate of the legal code these days? I'm probably breaking about 20 laws by typing this. So if someone has the ingenuity to try and understand the tangled web of tax laws, to work within the cumbersome system to legally get around things, well...I say the system is to blame. If the tax laws were simpler to begin with, the word "loophole" wouldn't even apply, anyway. - Ystig, on 10/12/2007, -1/+3For savvy businesses, it's not a question of *whether* you scam the tax system. It's a question of *how much* you scam the tax system. A matter of degrees, and varying approaches. Granted, Walmart isn't the only one cooking the books. And the most egregious cases when it comes to this sort of thing are smaller businesses, whose flirtations with tax fraud are less likely to be noticed. But that doesn't mean we can say "oh well, everyone's scamming the government, so it's A-Okay!"
- mcspectrum, on 10/12/2007, -0/+2Player hater? I never said I hated Walmart, and I'm not blind to the fact that to stay on top of the competition in the corporate world you have to do a lot of things that are ethically questionable. But I also don't think this is the way things should be, and that we should be identifying the problems and doing what we can to build solutions. How can you disagree with that and exonerate people who take advantage of things that are obviously unethical?
If the politicians, who you paint as the bad guys, made slavery legal again, would you be saying it's unamerican to not take advantage of this profit booster, and anyone who disagreed is a communist? No? Well then where do you draw the line? I personally don't think it's ethically ok to rob money from this country by taking advantage of obvious loopholes in the tax system. I think that if you are the leader of a corporation, and you see your competitors using unethical tactics, then you use your lobbyists and influence to help get the loopholes fixed, thus becoming part of the solution instead of part of the problem. - phil.busch, on 10/12/2007, -1/+3This made the front page because everyone loves to hate whoever is on top.
Think about it. No one likes Wal-Mart even though they are one of the most efficient businesses in the world. No one likes Microsoft even though they put out a solid product that is pretty easy to use.
If you are on top, the people below you attack you. That, unfortunately, is just how it is. - johndi, on 10/12/2007, -0/+2I stand corrected. Politicians doing the same things on the backs of the people they are supposed to be working for is what really pisses me off.
I agree with you 100% on the marketing bit. Most people have no idea how much goes into marketing, or the dirty tricks they use to cram products down our throats. I took a job in sales and I quit after the second day of sales training. It opened my eyes the way they shameless taught how to manipulate people. It made me sick. - gallagherFTW, on 10/12/2007, -1/+3this is a good thing people. it allows more to expand, hire more people and pass the savings onto the customer. taxes are retarded anyways.
- NSResponder, on 10/12/2007, -0/+2I've seen this argument made many times, but you are naive if you expect the government to follow the law. The fact of the matter is, the IRS has the *power* to take all you've got, whether or not the law is on their side. If you want that to change, put your energy into abolishing the income tax, not into arguing that doesn't exist.
-jcr - appetite, on 10/12/2007, -0/+2no, actually i make a good amount of money. i give to charity and don't whine over taxes that pay for roads, libraries, museums... i love when my money goes to people's food, education, and basic necessities. i love the fact that i can use my skills for the good of people who didn't win the birth lottery like i did.
what sucks is when verizon stacks its lawyers against me to give me ***** service so rich people can buy $30 drinks at a stuffed up bar in LA, or when oil companies play with the market like a gumball machine, or the brand vandalism that goes into every town and city. mcdonald's, starbucks, starbucks, burger king, taco bell, tgifriday's. and everyone works 60 hour weeks these days to pay for what?--what's so good about American lifestyle these days? our culture consists of $10 trips to see ***** remade movies or my chemical romance on the radio 24/7. our television is surreal life all-stars. nice life, kid. - OriginalLucid1, on 10/12/2007, -1/+3Remember the good old days when the best way to get to the front page was to mention Ubunti or Apple? Now its Bash Wal-Mart, and boom, right to the top.
- Uberdork, on 10/12/2007, -2/+4While I generally despise Wal*mart, SCOTUS has ruled that it's lawful to circumvent taxes through legal loopholes.
- Oxygen, on 10/12/2007, -0/+1This is why it pays to have a good accountant. Major corporations aren't the only ones who can benefit off of these types of loop holes. There are plenty of opportunities for regular people to utilize these types of "tricks" themselves, all of which are perfectly legal. You just need to know about them.
- Cyphase, on 10/12/2007, -1/+2@gmark13
While I partially agree that the problem is an overly complicated tax system, I would go further and say that the problem is a tax system at all. I don't have the energy right now to defend my position, but there it is. - Screwy1138, on 10/12/2007, -0/+1can I run a minimally operated business out of my home and pay rent to myself?
- poornbroken, on 10/12/2007, -3/+4um.. how is it CRIMINAL when you're following the laws?
and... if the law was so bad, we could change it. i mean, that's why we have representatives. have you gotten in touch with your representative lately? - graberc, on 10/12/2007, -2/+3uh, this is not a 'loop hole" its been in place for years. One man's loop hole is another man's incentive for businesses. Plus - lets keep in mind the wal-mart consumer, who benefits from these tax savings indirectly.
- ridgelawrence, on 10/12/2007, -0/+1Try reading the article next time.
- Vandango, on 10/12/2007, -1/+2 What Walmart loses on a tight spread, they make up in volume. The only retailers that are going out of business are those trying to catch up to Walmart. Why should a consumer shop elsewhere that has low margins on some items while Walmart has low margins on almost all its items? By the time other companies in their space try to do what Walmart does, it's too late. Walmart already has the stores and infrastructure in place. Chasing tight spreads isn't the way to go. Other competitors need to differentiate their business, a "why shop at Walmart for a 20 dollar chair when you can buy a Phillip Starck chair for 30 bucks" (Target). But a majority of people who just need a chair, for the lowest price, will still go to Walmart.
- shannonxj, on 01/03/2008, -0/+1Thats what you called a business strategy. it also stated in their online store http://www.rollingpricesback.com
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