Money Talks: Wal-Mart’s Lobbying Muscle

Retailer is a key player in shaping national policies, from trade and taxes to health care and labor rights.

The U.S. Capitol Interior.

WASHINGTON — Wal-Mart Stores Inc. has significantly increased its lobbying muscle in the nation’s capital to influence policy and help shape the debate on Capitol Hill and in the White House on such key issues as trade and comprehensive tax reform.

This story first appeared in the March 28, 2012 issue of WWD.  Subscribe Today.

The retail giant boosted its lobbying expenditures dramatically to $7.6 million in 2011 from $5.94 million in 2010, according to Congressional records. Lobbying expenditures, filed on a quarterly basis, cover a portion of a company’s or trade association’s lobbyists’ salaries as well as any money spent on preparing for meetings with members of Congress and administration officials as well as related travel.

Wal-Mart has taken on a big role in Washington, relying on its own in-house government relations team based here, as well as its main retail trade association — the Retail Industry Leaders Association.

RILA increased its lobbying expenditures to $3.48 million in 2011 from $2.44 million in 2010, according to Congressional records.

In the early days of the Obama administration, Wal-Mart was proactive in supporting and lobbying on health care reform, even endorsing an employer mandate, which was not universally popular across all retail groups.

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Wal-Mart’s support of the employer mandate during the health care debate won it points with the Obama administration and even among some labor groups, which have traditionally been critical of the retailer’s employee standards.

But the policy tussles have moved on from the health care debate to new areas.

“We are committed to playing an active role in the political process and believe we continue to have opportunities to lead on the big issues facing Americans,” a Wal-Mart spokesman said. “Recently, we have been focused on issues such as trade agreements to bring everyday low prices to American consumers, and creating economic opportunities through jobs and investment in the community.”

Trade issues have topped Wal-Mart’s list of lobbying priorities. In its most recent quarterly lobbying report — the fourth quarter of 2011, which ended Jan. 31 of this year — Wal-Mart listed 17 trade policy issues. They ranged from the Trans-Pacific Partnership negotiations to talks about China’s “misaligned” currency, to renewal of the Generalized System of Preferences and new regulations concerning conflict minerals in the Democratic Republic of the Congo.

“Trade agreements can remove barriers including regulations and inefficiencies that add costs to our business,” the spokesman said.

TPP, a regional trade agreement being negotiated between the U.S. and eight other countries, holds potential for retailers like Wal-Mart as well as for apparel brands, because Vietnam is taking part in the negotiations and could receive duty free benefits, making apparel imports to the U.S. cheaper.

But there is a big battle over strict rules of origin that the U.S. proposed — essentially to help protect the U.S. textile industry — that would require all apparel be made of fabric and yarns supplied by the U.S. or other TPP partner countries to qualify for duty free benefits when shipped back to the U.S. That means companies making their apparel in Vietnam, the second-largest apparel supplier to the U.S., cannot use Chinese fabric or yarns in the finished product if they want to receive those benefits.

Wal-Mart’s main retail lobbying group — RILA — has said it opposes a yarn-forward rule of origin and supports instead a more flexible rule of origin that would allow companies to use inputs from other countries, such as China.

“We support a Trans-Pacific Partnership agreement that includes robust and reciprocal market access for goods and services, strong protections for intellectual property rights and investment, solid disciplines on technical barriers to trade and innovative provisions on supply chains and regulator harmonization,” the spokesman said.

Comprehensive tax reform and a separate issue regarding Internet sales taxes are big issues on Wal-Mart’s agenda this year.

Wal-Mart’s president and chief executive officer Michael Duke, testifying before the Senate Finance Committee in July, pressed Congress for a reduction in the corporate tax rate from 35 percent to the “mid 20s.” Duke said Wal-Mart paid $4.7 billion in corporate taxes in the U.S. last year, a 32.2 percent effective corporate tax rate, representing about one-third of all corporate income taxes the Treasury Department collected.

RILA has welcomed a plan put forward by House Ways & Means Chairman Dave Camp (R., Mich.) that would lower the top corporate tax rate to 25 percent from 35 percent and eliminate certain tax deductions and credits. Retailers were against a plan that President Obama unveiled in February that called for reducing the corporate tax rate to 28 percent from 35 percent. Retail groups, including RILA, said Obama’s plan did not go far enough to lessen the tax burden, and also gave advantages to some industries at the expense of others.

“If you look at the report the President put out a few weeks back, when he proposed corporate tax reform, it pointed out that retailers pay the highest rates among industry groups, and that isn’t fair,” said Bill Hughes, senior vice president of government affairs at RILA. “We’re for going big [in terms of tax reform]. Get rid of all of the special favors and deductions and lower the rate as low as possible to make us competitive internationally. Our members are unified on that and Wal-Mart is a huge help to us in explaining that story to members of Congress.”

RILA and Wal-Mart have also been pressing hard with other retail groups for federal legislation that would enable states to collect sales taxes from out-of-state merchants, regardless of whether they have a physical presence in the state.

“The online sales tax loophole that allows Internet-only retailers to avoid collecting and remitting state sales taxes is hurting local businesses and threatening jobs,” the Wal-Mart spokesman said. “We need federal e-fairness legislation…to close this loophole and restore fairness to the retail marketplace.”

The bill could gain traction this year in Congress, according to Hughes, who attributed the Internet sales tax issues as one of two main policy advocacy issues behind RILA’s increase in lobbying expenditures last year. (The second issue Hughes pointed to was credit card interchange fees — the hidden fees that credit card companies, including Visa and MasterCard, charge retailers when customers use those cards.)

“There has been a lot of activity in the states in the past couple of years where the states are looking at the unfairness [that remote and Internet sellers do not have to collect sales tax while brick-and-mortar retailers do],” Hughes said. “All of that energy is not being translated into federal action and that has contributed to the uptick in our lobbying activity.”

He said Wal-Mart has been a key player in support of the legislation.

“They are a great partner,” Hughes said. “They work very closely with us and other companies, too. They really bring a lot to the table in telling our story and being an effective advocate.”