Friday, April 08, 2005


The state legislature of Maryland has approved a most deplorable anti-business measure. It proposes to tax any business in Maryland that employs at least 10,000 workers and is not paying at least 8% of its payroll towards employee healthcare. In practice, this will only affect one company, Wal-Mart. They employ 15,000 people in Maryland and currently pay about 7% of payroll towards healthcare.

So here we have a bunch of politicians trying to tell a business how to allocate its payroll benefits. What is their purported justification - that the state has to pay the healthcare of poor residents via Medicaid and that apparently Wal-Mart is somehow contributing to this fiscal burden?

There is so much going on here that I really don’t know where to begin. This legislation is built on the false premise that since only 54% of Wal-Mart’s Maryland employees get some form of employee sponsored healthcare, that the rest of the employees don’t have any health coverage at all, and are usurping the state’s Medicaid funds. Maybe some of these uncovered employees have health insurance through their spouses. Where is the data on this? But the larger issue is whether or not it is appropriate for government to be interfering with private enterprise in this way.

This proposed law represents nothing less than a socialist political attack on Wal-Mart. This case really highlights how economically illiterate many politicians are. First of all, Wal-Mart may decide to close some stores to get under the 10,000 employee threshold. Wouldn’t 5,000 more unemployed Marylanders hurt the state’s Medicaid budget? And wouldn’t closing some stores limit consumer choices in those areas and result in higher prices paid? Or Wal-Mart may just raise prices across the board to recoup this new tax – also bad for consumers. The politicians think they were clever to put the threshold at 8%, just above Wal-Mart’s current percentage (also this is clear evidence that the law was written to punish one company). Today the fine would just be $11 million, a number that Wal-Mart could manage to pay. Their intention was to make Wal-Mart look cheap (and inhumane) for fighting the legislation. But as in any extortion case, the stakes are much larger. If Wal-Mart caves in and pays the fine, they may inspire similar legislation in other states and thus are unlikely to roll over. At a minimum, Wal-Mart has already delayed plans for a new distribution center in Maryland because of this law. There is no way that this situation plays out favorably for residents of Maryland – and they can thank the politicians that they elected.

If I ran Wal-Mart, I would play hardball with these pols. I would move some stores just over state lines to teach them a basic lesson in capitalism.

Brainless Wal-Mart bashing is out of control these days. To the critics of its “low wages and benefits”, I ask why then does Wal-Mart have ten times as many applicants as it does jobs when it opens a store? The unions and their political allies implicitly think Wal-Mart employees are too stupid to realize that they are being “exploited”. How is that for arrogance?

No Wal-Mart bash is complete without the requisite empathy for the poor “mom and pop” stores that Wal-Mart devours. This canard fulfills the econo-moronic template as the “pitiable victims of rich evil CEOs”. Every time I hear the “mom and pop” lament, I think back to the last air conditioner I bought in Brooklyn. I went out of town to Wal-Mart and got a huge 12,000 btu air conditioner for around $240. The same air conditioner sold at the “mom and pop” hardware store in my neighborhood for $700. Wal-Mart critics don't care about the moms and pops that shop.

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