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Amazon Plays Hardball on Tax Avoidance in Texas

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The following is excerpted from “Lines Blur as Texas Gives Industries a Bonanza,” part of a series on corporate tax incentives in the New York Times. Published December 3, 2012 

Tarik Carlton gathered with other workers in February 2011 to hear the bad news: Amazon was shutting its distribution center in Irving, where he loaded trucks for $12.75 an hour.

Business had been strong, but the online retailer did not want to pay a $269 million tax bill from the state comptroller. A standoff with the state ensued, and Amazon laid off the workers. “They didn’t have our interests in heart, truth be told,” Mr. Carlton said.

Amazon opened the distribution facility in 2005 in Irving, near Dallas-Fort Worth International Airport, and local officials awarded the company tax breaks on its inventory.

Positions at the warehouse included product pickers, dock crews and truck loaders. The employees were typically on the young side, and some had served in the military. The warehouse churned through workers because many could not meet the quota of products they were supposed to move each day, according to Frankie Lloyd, who helped Amazon find temporary workers to fill many of the jobs.

“It’s all about what you can do physically,” Ms. Lloyd said. “Like manufacturing, but without the great pay.”

The distribution business grew as manufacturing moved overseas and online shopping boomed. It is big in the Dallas area because two main train lines run here from Long Beach, Calif., where goods arrive from Asia.

The work is highly physical. One Amazon worker wore a step counter that logged five miles during one shift, according to Mr. Carlton, who only recently found a new job. He was among 12 former Amazon workers, including two warehouse managers, who agreed to be interviewed.

There was no air-conditioning in the warehouse, and Mr. Carlton and others said the temperature could reach 115 degrees. They said it was difficult to take breaks given the production quotas.

The pay was typically $11 to $15 an hour, Ms. Lloyd said. Amazon gave out small shares of stock and some bonuses, but the amounts were minimal, she said.

Amazon said it had been working to upgrade its warehouses, which it calls fulfillment centers. The company has installed air-conditioning in all its centers over the past year, said Dave Clark, the vice president for global customer fulfillment.

Mr. Clark said workers always received breaks, and sometimes free ice cream when the facilities did not have air-conditioning. He said the quotas were akin to “expectations that go along with every job, mine included.”

“I really do think these jobs get a bad rap,” Mr. Clark said. “They’re great jobs. They’re safe jobs.”

Mr. Carlton said he had no idea the company was being partly subsidized. “If you give them money, I think more should be expected,” he said, adding that Amazon should have been required to hire more people to handle the heavy workload.

John Bonnot, the director of business recruitment for the Irving Chamber of Commerce, said the city did not impose wage or benefit requirements on companies that received incentives. Irving had required that Amazon create only 10 jobs to receive the tax break.

Mr. Bonnot said Amazon “would have nothing but praise” for the original assistance from the state and the city, which outsources its economic development to the local chamber.

Things began to slide downhill in late 2010 when the state comptroller, Ms. Combs, demanded that Amazon pay the $269 million sales tax bill. The retailer had never charged its Texas customers the tax, giving it an advantage over on-the-ground competitors.

The company hired three powerful advocates with ties to the governor, according to state lobbyist disclosure records. One, Luis Saenz, had been the director of Mr. Perry’s political operation. Days after the warehouse closed, Mr. Perry said he disagreed with the comptroller’s decision to demand the taxes.

“I was the last person besides the site leader and the administrative assistant to leave the building. It was sad for me because I had gotten my family, my grown kids, to move to Dallas with me, and I didn’t want to transfer back and leave them.”

As it was battling with the comptroller, Amazon began negotiating with the Legislature, which was debating whether online businesses should be required to charge sales tax. The company told lawmakers that it would create up to 6,000 jobs in exchange for delaying sales tax collections, similar to a compromise it had struck in states like South Carolina and Tennessee.

The lawmaker with the most power in the decision was John Otto, a Republican member of the Texas House of Representatives. Like all Texas legislators, Mr. Otto’s government job is part time. He also works at Ryan LLC — a job that is not disclosed on his legislative Web site.

Mr. Otto drafted legislation that said online retailers like Amazon would not have to charge sales tax as long as it did not have distribution facilities in Texas. By then, the company had already shut the Irving warehouse.

Mr. Otto and Mr. Saenz declined to comment about the legislation. Amazon would not comment on its negotiations with Texas.

In July, Amazon began collecting sales tax from customers in Texas after the comptroller agreed to release the company from most of its $269 million bill. The company has also promised to open new distribution facilities and hire 2,500 workers. Amazon will owe the state a $1 million penalty if it fails to deliver.

[pullquote] For Texas to give up more than $250 million in tax revenues in exchange for 2,500 jobs amounts to about $100,000 per job.[/pullquote]

The math on the new deal angers former Amazon workers, especially those who are still unemployed. For Texas to give up more than $250 million in tax revenues in exchange for 2,500 jobs amounts to about $100,000 per job. Most distribution workers are paid $20,000 to $30,000 a year. The rest benefits the company’s bottom line, which generally increases executive bonuses and shareholder returns.

King White, a consultant who helps Amazon choose locations, would not comment on the online retailer but said that companies in general had come to view incentives as entitlements. “Everybody thinks they deserve something,” Mr. White said. “ ‘If I’m creating jobs, what’s in it for me?’ ”

The deal on the sales tax did not require Amazon to reopen the Irving facility. That touched off the latest state competition to win over Amazon.

Last month, the city of Schertz beat out neighboring San Antonio for one of Amazon’s warehouses. The company is currently in negotiations with Coppell, outside of Dallas, about an additional center. Like Schertz, Coppell has offered Amazon a deal to keep a part of the sales tax it collects there, among other incentives.

If Amazon accepts, it will be located near Irving and many of its former workers. Sharon Sylvas, 47, had moved from Kansas seven years ago to help Amazon set up the Irving facility. She lives nearby in a one-bedroom apartment with her partner, daughter and two grandchildren.

After Amazon closed, she was out of a job for over a year. With limited options, Ms. Sylvas took a temporary position in October at another company’s distribution center. It is a tougher job than the one at Amazon, and it pays less. For $11 an hour, Ms. Sylvas moves heavy inventory and other items.

She said that if Amazon returned to the area, she would work there again, despite the rigors of warehouse jobs. “It’s real miserable,” Ms. Sylvas said. “But you do it to make a living.”

Image courtesy of John Stich via Diesel.

See also
Amazon Bolts Texas (Columbia Journalism Review)
Amazon Picks U.S. State Sales-Tax Winners (Business Week)
Amazon’s Physical Presence in U.S. and the Sales Tax Battle (American Independent Business Alliance)

Walmart CEO Memo on Meeting with Obama “Equal Parts Arrogance and Ignorance”

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By Al Norman
Published November 19, 2012

Was it Bill Clinton who inserted Walmart on President Obama’s short list for Fiscal Cliff discussions at the White House recently?

Clinton promotes Walmart CEO Mike Duke like the late Sam Walton used to push Moon Pies. But it’s hard to imagine Barack Obama suffering through a meeting with Duke, who personifies the 1% corporate power-broker, and whose store managers warned Walmart “associates” in 2008 that a Senator Obama in the White House would favor the unions. Ironically, now its Duke who is in the White House.

After meeting with the President, Walmart’s CEO issued a 216-word statement that was equal parts arrogance and ignorance. The Walmart Statement on Fiscal Cliff Meeting with President Obama included the following dictums:

“In many ways, Walmart’s customers are at the center of this debate.” Why? Because there are 19 million of them every day? Discount shoppers represent no social movement or coherent vision of America—but because they are the only people who can move Walmart’s stock price–they are the focus of everything Walmart says.

“Walmart Moms tell us their confidence in the economy is shaped by whether they believe Washington is working for them.” Walmart loves it that political pollsters have created this demographic that bears the retailer’s name. But everydemographic group in the country thinks that more Congressional gridlock is intolerable, and that the government is not “working for them.” But ask these same people if the Walton Family is working for them?

Walmart Moms might not be pleased to learn that according to the Economic Policy Institute, the U.S. trade deficit with China, between 2001 and 2006, eliminated 1.8 million U.S. jobs—and Walmart’s trade deficit with China alone eliminated nearly 200,000 U.S. jobs. Walmart was responsible for 11% of the growth in the U.S. trade deficit during this period.

“Our customers are working hard to adapt to the ‘new normal,’ but their confidence is still very fragile. They are shopping for Christmas now and they don’t need uncertainty over a tax increase.” In other words, don’t ruin the holiday spirit for our shoppers with all this talk about falling off a Cliff. Sure, customers are “fragile,” because many have had to trade down a decent-paying job for a Walton Job. A recent study by the Investigative Reporting Workshop notes that U.S. factory jobs dropped by 44% from 21 million jobs in 1979, to 11.7 million manufacturing jobs in 2011.

Walton Jobs lock hundreds of thousands of workers at the poverty level. Walmart needs an underclass of workers who are financially desperate enough to work part-time for $8.90 an hour. These people aren’t worried about the Fiscal Cliff—they have already gone over it by working at Walmart.

A 2011 research brief by the Center for Labor Research and Education at UC Berkeley concluded that “jobs created by Walmart in metropolitan areas pay less and are less likely to offer benefits than those they replace…Walmart workers earn an estimated 12.4% less than retail workers as a whole, and 14.5% less than workers in large retail.”

The same report concluded that if Walmart paid its workers $12 per hour and passed on the entire cost of that wage increase to customers, the average Walmart shopper would pay 46 cents more per shopping trip. The workers would receive as much as $6,500 in an average annual pay increase–which they would no doubt spend in their local economy to pay their rent, food and utility bills.

Part of the ‘new normal’ in a Walmart economy is that fewer people are working, and they are working for less. The National Bureau of Economic Research found that a Walmart store opening reduces county-level retail employment by about 150 workers, and each Walmart worker replaces approximately 1.4 retail workers at other merchants.

“We encourage the White House and Congress to work together on an approach that includes additional revenue, comprehensive tax reform, and spending cuts, including entitlement reforms, to get our fiscal house in order while creating economic growth.” Keep in mind that the man writing this was paid $18.1 million by Walmart in 2011, not counting the use of a company plane—a perk valued at around a $100,000.

What kind of “entitlement reforms” would Walmart want? They certainly don’t want to shrink Medicaid, because in states that have published data on corporate use of Medicaid, Walmart consistently places at the very top of private companies with the most employees and dependents who rely on taxpayer-supported Medicaid health care. Similarly, cutting Medicare and forcing elders to pay more out-of-pocket for health care is going to reduce their discretionary spending at Walmart.

Social Security should not be on Walmart’s entitlement reform list, because it’s a Trust Fund. That distinction is likely to be lost on Mike Duke, who, because of the cap on Social Security wages subject to the payroll tax, contributes based on only 2.6% of his $4.18 million in base salary and cash performance bonus. His $13.1 million in stock awards is not subject at all to the payroll tax. Duke pays the same FICA tax as someone earning $110,100. In the first 10 days of the year, Mike Duke hits the cap on Social Security taxable income—the rest of his work year is tax free. So any “reforms” on Social Security should start with people like Mr. Duke (and the much richer Waltons, whose unearned income is not taxed by Social Security) paying their fair share to help today’s retired workers.

“Washington needs to find an agreement to avoid the fiscal cliff.” Walmart could help that agreement by changing its business model from one of rampant exploitation of its workers and vendors, to one that keeps product sourcing and jobs in America, offers a liveable wage to its workers, and calls upon families like the Waltons to pay their fair share in taxes.

If America goes over the Fiscal Cliff, we will find Walmart waiting or us at the bottom with a check-out register.

Al Norman has been helping communities fight big box sprawl for 19 years. He is the founder of Sprawl-Busters. His most recent book is Occupy Walmart. You can follow him on Twitter: @SprawlBusters.

Three Sponsors Dump the Presidential Debates While Citizen Groups Call for Disclosure of Agreement

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October 1, 2012

Reclaim Democracy is among 18 groups that called on the Commission on Presidential Debates (CPD) to release the secret debate contract negotiated between the Republican and Democratic presidential candidates.

Spearheaded by Open Debates, the call also is endorsed by Common Cause, Judicial Watch, FairVote, Demos, League of Rural Voters, Rock the Vote and others.

In a press release, Open Debates reported: “Robert F. Bauer of the Obama campaign and Benjamin L. Ginsberg of the Romney campaign negotiated a detailed contract that dictates many of the terms of the 2012 presidential debates, including how the format will be structured. The Commission on Presidential Debates, a private corporation created by and for the Republican and Democratic parties, agreed to implement the debate contract. In order to shield the major party candidates from criticism, the Commission on Presidential Debates is concealing the contract from the public and the press.”

The contract still may be under negotiation.

Philips Electronics recently became the third entity to drop sponsorship of the debates in the face of criticism for its deliberate exclusion of all but Democratic and Republican candidates and its ongoing neglect of critical issues — especially those on which the
two dominant parties are united (at least in their disinterest to address the topic).

The YWCA and BBH New York (an ad firm) also recently dropped their sponsorship, meaning the CPD has lost 30% of its sponsors before the first debate. The remaining sponsors are Anheuser-Busch Companies, The Howard G. Buffet Foundation, Sheldon S. Cohen, Esq., Crowell & Moring LLP, International Bottled Water Association (IBWA), The Kovler Fund, and Southwest Airlines.

Mark A. Stephenson, the head of corporate communications at Philips North America, said, “We respect all points of view and, as a result, want to ensure that Philips doesn’t provide even the slightest appearance of supporting partisan politics. As such, no company funds have been or will be used to support the Commission on Presidential Debates.”

The news was applauded by advocates of independent, non-partisan debates and by former New Mexico Governor, Gary Johnson, the Libertarian candidate for President. Johnson, the highest polling “third party” candidate thus far in 2012,  recently sued the CPD for what his campaign calls illegal election activity.

Green Party presidential candidate Jill Stein also appears on enough state ballots to win the electoral college votes necessary to win the election, but the CPD creates qualification criteria that has excluded all third party or independent candidates from the debates since 1996.

This year, the CPD provided candidates a list of debate topics ahead of time — an unprecedented step that ensures even less opportunity for voters to see candidates thinking and responding, as opposed to recalling and reciting.

Voters of every ideology lose when our choices are dictated by the two dominant parties. Reclaim Democracy has long called for ousting the bi-partisan CPD in favor of a non-partisan and independent Citizens Debate Commission. For a more detailed account of the problems with the CPD and the need for democratic debates, see our past commentaries, such as Replace Bi-partisan Shows With Real Debates or visit the Open Debates website.

Update, October 1

Please help persuade more sponsors to withdraw their support of the CPD.  Contact one or more of following companies and foundations and express your desire for them to withdraw sponsorship.

Crowell & Moring LLP
The Chairman is Kent A. Gardiner: kgardiner@crowell.com

Anheuser-Busch, Inc., St. Louis, MO
800-342-5283
E-mail Contact Form: http://contactus.anheuser-busch.com/Contactus/email.asp

Southwest Airlines, Dallas, TX
Contact form: https://www.southwest.com/contact-us/contact-us.html

The Howard G. Buffet Foundation, Omaha, NE
Contact form: http://thehowardgbuffettfoundation.org/media/media-relations
Since the Buffet Foundation says its primary mission is to improve the standard of living and quality of life for the world’s most impoverished and marginalized populations, you might ask them to consider this chart.

Sheldon S. Cohen, Esq. at the firm of Farr, Miller & Washington, Washington, DC
800-390-3277 or 202-530-5600. Fax: 202-530-5508
Email: sscohen@farrmiller.com

International Bottled Water Association, Alexandria, VA
703-683-5213, Fax 703-683-4074
Email: ibwainfo@bottledwater.org

The Kovler Fund aka Marjorie Kovler Research Fellowship, Boston, MA
617-514-1624, Fax: 617-514-1625
Email: kennedy.library@nara.gov

Go to overview of the presidential debates and the need for reform.

Part-time Researcher / Writer Sought

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Reclaim Democracy! works to expand voting rights, build an inclusive democracy, and shrink the power of money and corporations over government and civic society. After years of all-volunteer operation, we seek a person to help with research, update durable resources on our website, and to create original articles (mostly researched commentary). You’ll receive editing assistance from nationally-published writers and, if successful, proceed to craft commentaries for outside publications.

Strong research, typing, and persuasive writing skills are essential. Knowledge of organizing, voting rights, corporate power/accountability, and racial justice is desirable.

Most research and writing can be performed at home on your schedule, with an occasional meeting. Starting pay is $18 – $24/hr. and will increase after two months. A range of 10-40 hours per month is offered initially. A strong performer willing to engage in fundraising activities can expand their role (we are a 501c3 nonprofit).

Our articles typically connect to current events in ways that advance these core objectives: 

  • Help build a movement to thwart voter suppression, schemes to block direct democracy, and otherwise prevent progress toward a more representative representative multi-racial democracy. We promote a constitutional right to vote as a vehicle to focus energy proactively
  • Eroding the power of corporations and limiting them to business activities
  • Revoking the Court-created precedents that equate money with speech and bestow constitutional rights upon corporations
  • Defending human rights from racism, fascism, corporate exploitation, and other threats

The position is available immediately and, though our writing is typically for a national audience, we prefer to a relationship with a person here in Chittenden County (VT).

Please send a brief note of interest and link (web page or a Google Doc) 2-3 persuasive writing samples to: info@ReclaimDemocracy.org. If you have other skills you’d like us to know about, please share! We’ll respond within three business days.