Big Box Stores’ Other Shoe Drops
Lowe’s is a parasite that is killing its host
Since the start of this century, small- and mid-sized towns have courted big box stores, using tax revenues to fund expensive road, sewer, and electric expansions to lure large corporate chains to town.
These companies promised jobs and tax revenues, and, technically speaking, they delivered both, but only if you do some very funny math. National chains pay little or no federal income tax, and often secure state tax abatements.
This gives them a 30–40% advantage over small, homegrown businesses operated by locals who can’t afford the huge sums needed to pay corrupt tax-experts to establish fictional headquarters on offshore financial secrecy havens.
Large national chains also have commanding bargaining power when they negotiate with suppliers, which means they pay less for their merchandise than locally owned businesses.
Given the tax and purchasing advantages, the arrival of a big box store doesn’t really create jobs. Sure, they hire locals to work in their stores, but at the cost of a boarded-up main street where the only businesses that survive are dollar stores.
When a local government spends public funds to lure in a big box store, they actually cost the town net jobs, and the funds they spend to kill those jobs come from the workers whose jobs were lost and the businesses that provided those jobs.
But at least big boxes pay local taxes, right?
Well…
In Michigan, Lowe’s pioneered an aggressive tactic of lowering its tax bills. It’s called the “dark store” gambit, and it’s so successful that towns are refunding millions to big box stores.
https://ilsr.org/dark-store-tax-tactic-makes-big-box-stores-terrible-deal-for-cities/
In her breakdown for ILSR, Olivia LaVecchia explains how the “dark store” hustle works. First, a big box store files an appeal on its tax assessment, arguing that the town or county has overvalued its property.
Instead of opting for the usual assessment formula (building costs minus depreciation), they demand assessment based on the sale price of “comparable” properties.
Then, they argue that the relevant “comparable” properties are shuttered, abandoned big box stores.
Big box stores are built to order, heavily customized to the retailer’s specific requirements. They are designed to be fast to erect and disposable, and when they are put up for sale, restrictive covenants are added to the deed to block a competitor from moving in.
These restrictions are incredibly specific (and restrictive), listing individual items that may never be sold by anyone who buys the property, for the rest of time.
Unsurprisingly, the resale value of a cheaply built, white-elephant structure that can’t be used to sell common items is very, very low. Lowe’s argues that the taxes on its property should reflect this incredibly low valuation.
That’s how the Lowe’s in Marquette, MI retroactively slashed the assessed value of the store it built for $10m from $5.2m to $2.4m (in 2010), $2m (in 2011), and $1.5m (in 2012).
Based on the new assessment, Marquette was on the hook to refund $755,828 to Lowe’s, a company with $50b in net annual sales.
To pay for the refund, Marquette slashed its library, police, and fire-department budgets.
Lowe’s is a trailblazer. After a corporate-friendly state tax tribunal and supreme court sided with Lowe’s 12 more big box stores in Marquette appealed their historical tax assessments, seeking comparable refunds from the city.
Marquette isn’t an outlier. Ottawa County, MI is on the hook to refund $14.8m to its big box parasites. Statewide, the “dark store” gambit has netted $47m, so far — and it’s spreading to Indiana, with Meijer hitting Marion County, IN for $2.4m.
Indiana is projecting a $120m tax shortfall for towns and counties as “dark store” reassessments sweep the state. Big box stores already destroy local businesses and jobs and erode the local tax-base, but it’s about to get much worse.
Thanks to the sky-high costs they impose on local governments, big box stores already cost municipalities $0.44/sqft/year ($80K/year for a Walmart Supercenter). That’s before dark-store reassessment.
https://ilsr.org/key-studies-why-local-matters/#7
The myth of big box prosperity sent money gushing out of the public spigots: by 2014, big boxes had sucked up more than $2.4b in direct subsidies from local governments.
https://www.goodjobsfirst.org/taxbreaksandinequality
The dark-store hustle has all the hallmarks of a long con. In a long con, the crook lets the mark win a little money at first, as a convincer. Then, having lulled the mark into complacency, the crook takes them for everything.
Local governments were able to pretend that somehow these big boxes would make up for the costs they imposed and the losses they triggered, because of the local tax bills they paid. That kept the subsidies and favors flowing.
Now that local governments are on their last legs, battered by the Covid-19 slump and anti-tax extremists in state government that cut spending, the fraudsters pull their switch, clawing back all the taxes they paid as convincers and setting themselves up for a tax-free future.
Image:
City of Westminster Archives Centre (modified)
https://commons.wikimedia.org/wiki/File:Hallam_Street_Blitz_Bomb_Damage.JPG
CC BY-SA:
https://creativecommons.org/licenses/by-sa/3.0/deed.en
Image:
Mike Mozart (modified)
https://www.flickr.com/photos/jeepersmedia/13656574134
Cory Doctorow (craphound.com) is a science fiction author, activist, and blogger. He has a podcast, a newsletter, a Twitter feed, a Mastodon feed, and a Tumblr feed. He was born in Canada, became a British citizen and now lives in Burbank, California. His latest nonfiction book is How to Destroy Surveillance Capitalism. His latest novel for adults is Attack Surface. His latest short story collection is Radicalized. His latest picture book is Poesy the Monster Slayer. His latest YA novel is Pirate Cinema. His latest graphic novel is In Real Life. His forthcoming books include The Shakedown (with Rebecca Giblin), a book about artistic labor market and excessive buyer power; Red Team Blues, a noir thriller about cryptocurrency, corruption and money-laundering; and The Lost Cause, a utopian post-GND novel about truth and reconciliation with white nationalist militias.
