New Analysis of Maryland’s ‘Wal-Mart Tax’
March 9, 2006
We’ve released a new “Fiscal Fact” analyzing Maryland’s so-called “Wal-Mart tax,” which mandates increased health benefits for Wal-Mart employees. Various groups are working to introduce similar bills in over 30 states, hoping that Maryland’s enactment will lead to a cascade of similar bills elsewhere. Here’s an excerpt from the analysis:
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.