The Bad Boss Tax

Workers at Target, Walmart and McDonald’s need food stamps to survive. Should the companies be taxed accordingly?

Sarah Jaffe July 21, 2014

Cliff Martin, 20, works three low-wage jobs but still relies on public assistance to make ends meet. (Courtesy of Sarah Jaffe)

Can you name the worst job you’ve ever had? For Cliff Mar­tin, that’s not an easy ques­tion. All three of his cur­rent jobs — deliv­er­ing news­pa­pers, deliv­er­ing mag­a­zines and work­ing as a jan­i­tor — are strong con­tenders. Tak­en togeth­er, they pay so poor­ly that the 20-year-old North­field, Min­neso­ta, native relies on MNsure, the state Med­ic­aid plan, for health­care and lives at home with his father to save mon­ey. But what if Martin’s boss­es had to fork over a fee to the state for pay­ing him so bad­ly? That mon­ey, in turn, could be used to help sup­port Mar­tin and his fel­low low-wage work­ers in a vari­ety of ways, from direct sub­si­dies for food and hous­ing to social pro­grams such as Med­ic­aid or pub­lic transportation.

'Walmart is the country's biggest beneficiary of food stamp dollars, and many of those dollars are coming from its own workers, like me.'-Bene't Holmes, 25

Take­Ac­tion Min­neso­ta, a net­work that pro­motes eco­nom­ic and racial jus­tice in the state, wants to make that fee a real­i­ty. It’s devel­op­ing the frame­work for a bill that it hopes will be intro­duced in 2015 by state leg­is­la­tors who have worked with the net­work in the past. As con­ceived, the bad busi­ness fee” leg­is­la­tion would require com­pa­nies to dis­close how many of their employ­ees are receiv­ing pub­lic assis­tance from the state or fed­er­al gov­ern­ment. Com­pa­nies would then pay a fine based on the de fac­to sub­si­dies they receive by exter­nal­iz­ing labor costs onto taxpayers.

Take­Ac­tion Minnesota’s plan is one prong of a larg­er nation­al effort. As pro­gres­sive orga­ni­za­tions grap­ple with how to turn years of pub­lic out­rage over income inequal­i­ty into poli­cies for struc­tur­al change, a net­work of labor and com­mu­ni­ty orga­niz­ing groups has seized upon the bad busi­ness fee as a solu­tion that might take off.

Vam­pire businesses

Just how much mon­ey are low-wage busi­ness­es drain­ing from local, state and fed­er­al cof­fers? A study released in April by Amer­i­cans for Tax Fair­ness, a coali­tion of more than 400 orga­ni­za­tions that advo­cate pro­gres­sive tax reform, esti­mat­ed that Wal­mart alone costs tax­pay­ers $6.2 bil­lion annu­al­ly in pub­lic assis­tance. That report draws from a 2013 study by the Demo­c­ra­t­ic staff of the U.S. House Com­mit­tee on Edu­ca­tion and the Work­force, which esti­mat­ed that Wal­mart cost tax­pay­ers, on aver­age, between $3,015 and $5,815 per work­er. For a hypo­thet­i­cal 300-per­son Wal­mart Super­center in Wis­con­sin, that added up to as much as $1.75 mil­lion in pub­lic sub­si­dies per year. Those tax­pay­er dol­lars come in the form of joint fed­er­al-state pro­grams such as Med­ic­aid and the School Break­fast Pro­gram, as well as fed­er­al ones such as the Nation­al School Lunch Pro­gram, the Sec­tion 8 Hous­ing Pro­gram, the Earned Income Tax, Low Income Home Ener­gy Assis­tance and the Sup­ple­men­tal Nutri­tion Assis­tance Pro­gram (SNAP, also known as food stamps).

Amer­i­cans for Tax Fair­ness used the House Democ­rats’ study to extrap­o­late Walmart’s pub­lic-assis­tance bur­den on each state. In Min­neso­ta, for exam­ple, where Wal­mart has 20,997 employ­ees, the pub­lic bur­den totaled $92.7 mil­lion per year. That’s $92.7 mil­lion Wal­mart isn’t pay­ing in wages or ben­e­fits, but that instead is being borne by tax­pay­ers — tax­pay­ers who, of course, include Wal­mart workers.

The study also notes that Wal­mart prof­its from food stamps on the con­sumer end. Accord­ing to the company’s own esti­mates, Wal­mart cap­tures 18 per­cent of the SNAP mar­ket, some $13.5 bil­lion annu­al­ly. The irony is not lost on Wal­mart work­er Bene’t Holmes, a 25-year-old sin­gle moth­er of a 5‑yearold boy. Recent­ly I was forced to apply for food stamps just so my son and I don’t starve. Wal­mart is the country’s biggest ben­e­fi­cia­ry of food stamp dol­lars, and many of those dol­lars are com­ing from its own work­ers, like me,” she writes in an email to In These Times. I want to raise my son in a nice neigh­bor­hood, but when Wal­mart only pays me $8.75 an hour, I can’t afford it. If it weren’t for my par­ents let­ting us live with them, we’d be on the streets. I shouldn’t have to face the real­i­ty of pover­ty and pub­lic assis­tance work­ing at the country’s largest employ­er, but Wal­mart pays hun­dreds of thou­sands of us so lit­tle we can bare­ly stay afloat.”

Wal­mart isn’t alone; there are thou­sands of oth­er low-wage employ­ers. Accord­ing to a Bureau of Labor Sta­tis­tics report, 1.5 mil­lion hourly work­ers report­ed earn­ing the fed­er­al min­i­mum wage of $7.25 an hour in 2013, and anoth­er 1.8 mil­lion said they earned less than that — which means they’re either legal­ly exclud­ed from min­i­mum-wage laws or ille­gal­ly under­paid. (Those num­bers are like­ly low; they don’t include salaried work­ers and rely on work­ers feel­ing com­fort­able dis­clos­ing their wage data to the cen­sus.) Accord­ing to the lat­est salary data from Glass​door​.com, McDonald’s cashiers make an aver­age of $7.81 an hour; Tar­get team mem­bers, $8.94 an hour; and J. Crew sales asso­ciates, $9.17 an hour. For a part-time job of 30 hours a week, all of those hourly salaries would qual­i­fy those work­ers for SNAP ben­e­fits and fed­er­al Med­ic­aid, even if they didn’t have fam­i­lies to support.

And while con­ser­v­a­tives would argue that the major­i­ty of low-wage earn­ers are teenagers sling­ing burg­ers for pock­et change, the Eco­nom­ic Pol­i­cy Insti­tute (EPI) found that the aver­age age of work­ers who would ben­e­fit from a raise to $10.10 an hour is 35, and 88 per­cent are 20 or old­er. Fifty-six per­cent of them are women, and 28 per­cent have chil­dren. On aver­age, the EPI cal­cu­lates, these low-wage work­ers bring in half of their family’s total income.

Most of those min­i­mum-wage work­ers are in the ser­vice indus­try, par­tic­u­lar­ly in food ser­vice. And not coin­ci­den­tal­ly, tax­pay­ers are also shelling out to prop up food indus­try wages. Stud­ies last year from the Nation­al Employ­ment Law Project and the Uni­ver­si­ty of Cal­i­for­nia, Berke­ley, showed that fast­food com­pa­nies cost tax­pay­ers an addi­tion­al $7 bil­lion per year in pub­lic assis­tance, with McDonald’s account­ing for $1.2 bil­lion. The Berke­ley study notes that fast-food com­pa­nies pay cashiers and oth­er front­line work­ers a medi­an wage of $8.69 an hour, and more than half of those work­ers rely on one or more pub­lic pro­grams, com­pared to 25 per­cent of the work­force as a whole.

These com­pa­nies often drain gov­ern­ment cof­fers in oth­er ways, too. The Amer­i­cans for Tax Fair­ness report notes that Wal­mart avoids about $1 bil­lion per year in fed­er­al tax­es. Pol­i­cy research cen­ter Good Jobs First reports on its Wal­mart Sub­sidy Watch web­site that the com­pa­ny has received more than $1.2 bil­lion in tax breaks, free land, infra­struc­ture assis­tance, low-cost financ­ing and out­right grants from state and local gov­ern­ments around the country.”

Fed­er­al law­mak­ers are tak­ing note. When the UC-Berke­ley report came out, Sen. Tom Harkin (D‑Iowa) released a state­ment say­ing, Any­one con­cerned about the fed­er­al deficit only needs to look at this report to under­stand a major source of the prob­lem: mul­ti-bil­lion dol­lar com­pa­nies that pay pover­ty wages.”

With Wash­ing­ton ground to a halt, get­ting a bad busi­ness fee on the fed­er­al lev­el seems unlike­ly at the moment. But state and local activists aren’t wait­ing for Congress.

A nov­el strategy

The force behind the bad busi­ness fee idea is TakeAction’s par­ent orga­ni­za­tion, Nation­al People’s Action (NPA), a com­mu­ni­ty-orga­niz­ing net­work that advo­cates eco­nom­ic and polit­i­cal reforms to shift pow­er from cor­po­ra­tions to peo­ple, along with the labor orga­ni­za­tion Jobs With Jus­tice (JWJ). They have part­nered with oth­er labor and com­mu­ni­ty groups, such as the Ser­vice Employ­ees Inter­na­tion­al Union and the Mak­ing Change at Wal­mart campaign.

Though the plan is in its infan­cy, NPA and JWJ see the bad busi­ness fee as unique­ly posi­tioned to catch on across the coun­try. To build last­ing change, says NPA’s exec­u­tive direc­tor George Goehl, poli­cies must pro­vide short-term, tan­gi­ble results and have long-term, trans­for­ma­tive poten­tial. He believes the bad busi­ness fee does both.

Mar­tin, a mem­ber of Take­Ac­tion Min­neso­ta and an enthu­si­as­tic sup­port­er of the plan, agrees: My life will be eas­i­er because of this,” he says. It’s also the foun­da­tion of a total­ly new econ­o­my and total­ly new way of think­ing about the way our econ­o­my works, what we are putting our mon­ey into, [and] the true effects of how we’re spend­ing money.”

The bad busi­ness fee has the poten­tial to bring togeth­er an unusu­al set of allies,” accord­ing to Dan McGrath, exec­u­tive direc­tor of Take­Ac­tion Minnesota.

As inequal­i­ty has become a hot-but­ton issue, the solu­tions on offer tend to focus either on tax­ing the extreme­ly wealthy or on rais­ing work­ers’ wages. What makes the bad busi­ness fee par­tic­u­lar­ly attrac­tive is that it does both of those things. It makes the con­nec­tion con­cep­tu­al­ly between the low wages at the bot­tom of the work chain and the out­sized incomes at the top, and sets out both to pun­ish com­pa­nies that keep wages low, and to cre­ate val­ue out of that pun­ish­ment for the peo­ple strug­gling on low incomes.

In that way, the fee is win-win. If com­pa­nies seek to avoid it, they end up doing some­thing just as good for their employ­ees, or even bet­ter. Mar­tin says, For me in par­tic­u­lar, the bet­ter part is my boss may be think­ing, Well, I should just pay my employ­ees bet­ter. I should just pay a liv­ing wage. I should just give Cliff some benefits.’ ”

To Liz Ryan Mur­ray, pol­i­cy direc­tor at NPA, the bad busi­ness fee bridges the issues of work­ers’ rights and tax­pay­ers’ rights. Often con­ver­sa­tions around pub­lic ben­e­fits get mired down in argu­ments about deficits and the cost to the tax­pay­er, ignor­ing the val­ue of the pro­grams to the peo­ple who depend on them and rarely con­ceiv­ing of the tax­pay­er” as a low-wage work­er her­self. But, Mur­ray notes, on this issue there’s no way to split them apart — the tax­pay­er and the work­er have the same inter­est in see­ing big com­pa­nies pay their fair share.

Goehl believes that the pol­i­cy even has the pos­si­bil­i­ty of appeal­ing to con­ser­v­a­tives. I think about my dad in south­ern Indi­ana who, for most of my life, was a fis­cal con­ser­v­a­tive. Hand­outs to cor­po­ra­tions that pay low wages were the kind of stuff that real­ly upset him,” he says. Intro­duc­ing the bad­busi­ness fee in con­ser­v­a­tive places may prove edu­ca­tion­al, Goehl says, in smok­ing out the oppo­si­tion. Wichi­ta would be inter­est­ing because the Koch broth­ers are there, and to see what kind of stops they would roll out would be fas­ci­nat­ing,” Goehl says. It would also be nice to win some­thing in a red­der area to show it’s pos­si­ble everywhere.”

The nuts and bolts

Rather than dic­tat­ing from above, the NPA and JWJ plan to anchor the ini­tia­tive with what JWJ’s direc­tor of cam­paigns, Eri­ca Smi­ley, calls a hub for sup­port, strat­e­gy, devel­op­ment and shared expe­ri­ence, shared lessons,” in which groups inter­est­ed in the pol­i­cy can get help and con­nect with one another.

Beyond that, the details of the pol­i­cy itself are still vague. The coali­tion wants to leave room for local flex­i­bil­i­ty, so that the tax can take dif­fer­ent forms in dif­fer­ent cities and states, depend­ing on the par­tic­u­lar needs and desires of the community.

But there will be some con­stants. The extent to which a company’s employ­ees have to rely on pub­lic assis­tance serves as a mea­sure of whether that com­pa­ny pro­vides jobs that can sus­tain peo­ple, and is thus the most like­ly basis for how the fee would be assessed. The fee might be imple­ment­ed on a per-employ­ee basis — in Cook Coun­ty, Illi­nois, NPA and JWJ part­ners are con­sid­er­ing a $5,000 charge for each employ­ee receiv­ing pub­lic assis­tance— or as a lump sum based on how much an entire sec­tor costs tax­pay­ers, which would then be split up among the employ­ers in that sec­tor. The orga­niz­ers also want to hold big busi­ness­es account­able for their sup­ply chains and fran­chisees. For instance, if McDonald’s Cor­po­ra­tion got slapped with a fee for each restau­rant that under­pays its work­ers, it could be pushed to include high­er wages in its fran­chise con­tracts. Sim­i­lar­ly, if Wal­mart had to pay not just for its retail employ­ees, but the work­ers in its ware­hous­es, it might have an incen­tive to require bet­ter wages from subcontractors.

Though the pol­i­cy is mod­eled to tar­get mega-employ­ers — which, accord­ing to a 2012 Nation­al Employ­ment Law Project report, employ 66 per­cent of the low-wage work­force — Mur­ray hopes that this will have a salu­tary effect on all wages. If the fee encour­ages Wal­mart, Tar­get and McDonald’s to raise their wages, small­er busi­ness­es may have to do the same.

As to where the funds recouped through the bad busi­ness fee will go, it’s impor­tant to the orga­niz­ers that some be used to strength­en safe­tynet pro­grams — such as Med­ic­aid and hous­ing assis­tance — that under­paid work­ers rely on to cov­er basic needs. Those pro­grams have been stretched thin thanks to the years of aus­ter­i­ty fol­low­ing the finan­cial cri­sis. We need a stronger safe­ty net, not a more tat­tered one,” Mur­ray says. How­ev­er, she stress­es that work­ing-class peo­ple should be the ones who decide how the mon­ey is spent in their own communities.

There are plen­ty of options. At a munic­i­pal lev­el, Mur­ray explains, the mon­ey could go to an exist­ing devel­op­ment depart­ment that could man­age and dis­trib­ute the mon­ey. On a statewide lev­el, it could be dis­trib­uted through the rev­enue depart­ment as a tax break for work­ers. There’s also the pos­si­bil­i­ty of dis­trib­ut­ing some of the funds to non­prof­its involved with direct work­er sup­port, child­care or food assistance.

McGrath says the mon­ey could go to bol­ster the pub­lic ser­vices that work­ers rely on, or to hire more peo­ple to enforce wage and hour laws. Min­neso­ta suc­ceed­ed in rais­ing its min­i­mum wage­to $9.50 an hour by 2016 and index­ing it to infla­tion,” he says. But we have a pal­try num­ber of wage and hour inves­ti­ga­tors in our state. How will we know that peo­ple are actu­al­ly being paid the wage that was just won?”

Else­where, oth­er com­mu­ni­ty and labor part­ners are busy brain­storm­ing about what would make sense in their states and cities. In Chica­go, hous­ing sub­si­dies are a pos­si­bil­i­ty; in New York, the mon­ey could be used to off­set the ris­ing costs of pub­lic trans­porta­tion; in San Fran­cis­co, a com­bi­na­tion of hous­ing and trans­porta­tion issues is under con­sid­er­a­tion, as gen­tri­fi­ca­tion has rapid­ly made it hard­er for low-wage work­ers to live near their jobs. In New Mex­i­co, using a bad busi­ness fee to sup­port ear­ly child­hood edu­ca­tion is being discussed.

Cliff Mar­tin would also like to see the mon­ey go to incen­tivize work­er-owned busi­ness­es or co-ops. Putting out sub­si­dies for the econ­o­my I actu­al­ly want to be a part of, and not just pro­grams to keep us bare­ly liv­ing — that would be my pref­er­ence,” he says. In my mind those go hand in hand. Bad busi­ness fee? Good busi­ness incentive.”

The pos­si­bil­i­ties are near­ly end­less— it’s eas­i­er in some ways to say what the mon­ey and the pol­i­cy should not do. Cer­tain­ly we would not be sat­is­fied if the mon­ey just went into some fund to pay off some deficit,” Goehl says.

Struc­tur­al change

Win­ning the bad busi­ness fee will require a del­i­cate bal­ance between argu­ing that jobs should pay a decent wage and argu­ing for stronger, more uni­ver­sal social sup­ports for those not at the top of the eco­nom­ic food chain. Too nar­row, and the pol­i­cy risks demo­niz­ing the very pub­lic wel­fare pro­grams it aims to strength­en; too broad, and it los­es its punch.

But the bad busi­ness fee fits into the broad­er strat­e­gy for struc­tur­al change being laid out by NPA, JWJ and their coali­tion part­ners. The fee is designed to com­ple­ment and encour­age — rather than sup­plant — strug­gles in the work­place and broad­er efforts to raise the min­i­mum wage. Giv­ing local peo­ple the pow­er to decide on where the mon­ey goes can cre­ate infra­struc­ture for oth­er orga­niz­ing, JWJ’s Smi­ley sug­gests. Work­ers at Wal­mart, for exam­ple, could cre­ate neigh­bor­hood com­mit­tees to nego­ti­ate where the mon­ey should be spent, and to inform oth­ers in the com­mu­ni­ty that they might be qual­i­fied to receive some­thing. You could imag­ine [work­ers’] orga­ni­za­tions being able to get to a dif­fer­ent scale in cer­tain com­mu­ni­ties,” she says.

Smi­ley also sees it as part of the enforce­ment mech­a­nism for things like local liv­ing wage ordi­nances — a poten­tial stick rather than the end­less car­rots of tax breaks and sub­si­dies that cor­po­ra­tions receive for so-called job creation.

Instead of cities and states gen­u­flect­ing to big com­pa­nies in the hope of boost­ing local economies, Smi­ley thinks this pol­i­cy could make the needs of res­i­dents come first. We’re try­ing to change the nar­ra­tive as to who is val­ued in our com­mu­ni­ties, what is val­ued in our com­mu­ni­ties, real­ly speak­ing to the val­ue of work­ing peo­ple and their fam­i­lies as the heart of our cities and our neigh­bor­hoods — as opposed to the big cor­po­ra­tions, who are exter­nal­iz­ing their costs but total­ly pri­va­tiz­ing their prof­its,” she says.

The tax is a first step in chang­ing the way we think about cor­po­ra­tions, Goehl says. Cor­po­ra­tions have to apply for a char­ter every year to con­tin­ue to be a cor­po­ra­tion in this coun­try,” he says. We’ve been taught not to think about the fact that cor­po­ra­tions are some­thing we allow to be cre­at­ed. We don’t think, Well, wait, we could be ask­ing for a lot more from them just by the fact that we allow them to exist.’ ” 

McGrath takes it a step fur­ther. We are try­ing to start a con­ver­sa­tion about what is the high­est and best use of gov­ern­ment,” he says. What is the prop­er role for gov­ern­ment in an econ­o­my that is expe­ri­enc­ing such pro­found income inequal­i­ty? Is the role of gov­ern­ment to sub­si­dize major cor­po­ra­tions? [Or] is it to actu­al­ly sup­port the workers?”

Sarah Jaffe is a for­mer staff writer at In These Times and author of Nec­es­sary Trou­ble: Amer­i­cans in Revolt , which Robin D.G. Kel­ley called The most com­pelling social and polit­i­cal por­trait of our age.” You can fol­low her on Twit­ter @sarahljaffe.
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