Overseas tax evasion by American corporations has become a political hot button of late: It haunted Mitt Romney in 2012, spurred President Barack Obama last year to crack down on so-called inversions, and has since been seized upon as a 2016 campaign issue by Hillary Clinton. American companies now have an estimated $2.1 trillion in untaxed profits stashed overseas, big sums of which belong to Apple, General Electric, and Microsoft.
Walmart is also a major overseas tax dodger, according to a new report from Americans for Tax Fairness, a liberal-leaning think tank and advocacy group. The world's largest retailer has stashed $64 billion worth of assets in Luxembourg, Europe's smallest and most notorious tax haven. These assets—including cash and the ownership of real estate holdings around the world—are worth more than Luxembourg's entire gross domestic product. If they were liquidated and sprinkled around, it would amount to more than $100,000 per acre in this tiny country of 1,000 square miles that lacks a single Walmart store. Walmart has so much wealth in Luxembourg, in fact, that it could pay several times over to plaster the entire country in Nexus Granite Self-Adhesive Vinyl Floor Tiles, which sell at Walmart for $8.99 per box.
Since 2011, Walmart has transferred more than $45 billion in assets to a network of 22 shell companies in Luxembourg, the report says.
In fact, most Luxembourgers can afford flooring that's considerably more posh. A primary source of the luxe in this city-state of some 500,000 people is its corporate tax rate. Between 2010 and 2013, Walmart reported paying less than 1 percent in tax to Luxembourg on $1.3 billion in profits. Walmart also generates $1.5 billion worth of tax deductions in Luxembourg each year by making "phantom interest payments" to its home office in the United States, according to Americans for Tax Fairness. These benefits may explain why, since 2011, Walmart has transferred more than $45 billion in assets to a network of 22 shell companies in Luxembourg, the report says.
Walmart disputed the report's findings: "This is the same union-supported group that regularly issues flawed reports on Walmart to promote their agenda rather than the facts," the company said in a statement to USA Today. "This latest report includes incomplete, erroneous information designed to mislead readers." But the retailing giant did not go into any further detail.
UPDATE 6:00 p.m. PST: In an email to Mother Jones, a Walmart representative detailed the company's objections to the report:
When calculating total assets, this calculation incorrectly includes intercompany assets, primarily investment in our wholly-owned subsidiaries and intercompany loans which both eliminate on consolidation. The methodology is flawed and based upon statutory reports prior to intercompany eliminations which occur during consolidation.
As disclosed in our last form 10K (footnote 14), the Walmart International segment has total assets after intercompany eliminations of $80.5 billion, the vast majority of which are retail store buildings, fixtures, inventory and distribution facilities physically located in the countries where we serve customers.
A protester outside the Disrupting Democracy event, where the Honduran president had been scheduled to speak.
On Monday, Honduran President Juan Orlando Hernández was expected to appear in San Francisco to talk about his efforts to cede a chunk of his impoverished Central American nation to an international group ofinvestors who want to create an autonomous, self-governing, libertarian paradise. There was one problem, however: His talk was part of a speaker series called Disrupting Democracy, which may be a better venue for someone like Rand Paul than the beneficiary of a military coup who won office using funds allegedly embezzled from the national social security system.
Hernández and his deputies skipped Disrupting Democracy due to "civil unrest," according the event's organizers. On Sunday, 8,000 protesters had marched through the capital city of Tegucigalpa calling for his ouster.
"Before we begin, I would like to apologize for some confused messaging," said panelist Randy Hencken, who directs the Seasteading Institute, which promotes the creation of floating technoutopian nation-states and cosponsored the event. "Here in Silicon Valley, when we want to improve something, we say 'disrupt,'" Hencken continued. "Nobody in Honduras approved or even knew about that whimsical title, which, when translated from English into Spanish, could easily be construed in a negative and unintended light."
At least a dozen anti-Hernández protesters showed up oustide the event, which was held at the South of Market headquarters of Lincoln Labs, a tech incubator cofounded by a former Mitt Romney campaign staffer.
"Nobody in Honduras approved or even knew about that whimsical title, which, when translated from English into Spanish, could easily be construed in a negative and unintended light."
The first Disrupting Democracy event, held in May, featured Paul discussing the growth of "a new generation of voter engagement." Any subject that appeals to both libertarians and techies appears to interest Lincoln Labs, which was founded in 2013 to serve "liberty advocates living in Silicon Valley"—"a forgotten community that felt ostracized with no home." Other Lincoln Labs events include its Reboot conferences and hackathons focusing on the technology of political campaigning.
Everyone at Monday's event seemed to agree that the Honduran scheme, known as Zones for Employment and Economic Development, or ZEDEs, now seemed imperiled—a discouraging turn, given Hernández's close cooperation with antitax crusader Grover Norquist and high-ranking representatives of the libertarian Cato and Hayek Institutes.
Yet the seasteaders were undeterred, even emboldened. If Honduras didn't want to create a Hong-Kong style city on its coast, maybe it would host a floating city in its territorial waters. "That gets rid of complaints of ceding over large portions of land," noted Seasteading Institute member Mike Doty, who had a long gray beard and a pirate-skull-patterned bandanna. "On the Pacific side, there's a large bay there…They've done the engineering studies, the feasibility studies. We're pretty far along."
One thing that can never be disrupted, it seems, is the vision of a technolibertarian.
Around this time last year, Google shocked Silicon Valley by voluntarily releasing statistics on the diversity of its workforce. The move helped shame other large tech companies into doing the same, and the picture that emerged wasn't pretty: In most cases, only 10 percent of the companies' overall employees were black or Latino, compared to 27 percent in the US workforce as a whole. For its own part, Google admitted that "we're miles from where we want to be," and pledged to do more to cultivate minority and female tech talent.
Now Google has an update: Its 2015 diversity stats, released yesterday, show that it has moved inches, not miles, toward a workforce that reflects America. The representation of female techies ticked up by 1 percentage point (from 17 to 18 percent), Asians gained 1 point, and whites, though still the majority, slipped by 1 point. Otherwise, the numbers are unchanged:
"With an organization our size, year-on-year growth and meaningful change is going to take time," Nancy Lee, Google's vice president of people operations, told the Guardian. Last year, Google spent $115 million on diversity initiatives and dispatched its own engineers to historically black colleges and universities to teach introductory computer science courses and help graduating students prepare for job searches. But unlike Intel, another big tech company that has prioritized diversity, Google has not set firm goals for diversifying its talent pool.
"While every company cannot match Intel's ambitious plan, they can set concrete, measurable goals, targets, and timetables," said a statement from the Reverend Jesse Jackson, who last year played a key role in convincing Google and other companies to disclose their diversity stats. "If they don't measure it, they don't mean it."
The Senate over the weekend let lapse some of the most controversial portions of the Patriot Act, including a provision that had been used by the National Security Agency to justify collecting American citizens' phone records en masse. Every day, the NSA receives from US phone companies metadata on billions of domestic calls, including the time the call was placed, its duration, and the originating and receiving numbers (but not the contents of the conversations). Privacy advocates have criticized the program as one of the worst examples of the Patriot Act's overreach, allowing access to potentially revealing information on basically any American citizen.
Although it remains unclear how the lapse of the law might actually play out, the effect of suspending the data collection for even a single day is gigantic in terms of the amount of information at stake. By Monday at midnight, 24 hours after the bulk data provision expired, the NSA would have normally collected metadata on 3 billion phone calls, according to a 2013 estimate by former NSA employees. Consider what would happen if each call log was put into its own line on an Excel spreadsheet:
Entering all of the data would take a single human typist at least 460 years.
Printing out the data would require a 24,000-foot stack of letter-sized paper—the height of 13 World Trade Centers.
The paper would weigh 740,000 pounds, or as much as could be carried by 17 big rigs.
And yet that's just a drop in the bucket compared to the NSA's overall capabilities. The agency can still wiretap overseas communications, not to mention view any domestic internet and call logs that are at least "three hops" from a suspected international terrorist. "You could call the same pizza delivery place as a terrorist and you are only two hops away," explains Ars Technica's Sean Gallagher.
A proposed Patriot Act reform bill now under consideration in Congress, the USA Freedom Act, would retain a "two hops" rule and require the data to be stored by phone companies instead of by the US government. But that may not represent such a major change. "They are going to still be able to go to phone companies and request that data," Gallagher points out. "And they won't necessarily need a warrant to get it."
Last summer, one of my neighbors in Oakland, California, anonymously reported me to the East Bay Municipal Utility District for wasting water. I'd been dousing my front yard once or twice a week with arcing sprays from three huge Rain Bird sprinklers. Upon receiving written notice of the complaint, I called the utility and learned that I wasn't actually violating water use rules, but the incident got me thinking. My ample vegetable garden was certainly green. Other yards the neighborhood were going brown. Did my neighbors think I was a water hog?
Drought shaming isn't just for celebrities or the rich. Smartphone apps such as Vizsafe, H20 Tracker, and DroughtShame allow users to snap and post geotagged photos of alleged water abuse. In Los Angeles, the infamous "water crusader" Tony Corcoran, a.k.a. YouTube's Western Water Luv, bicycles around town videotaping homeowners with modestly sized green lawns who dare venture outside with a hose in hand:
Few water scolds take such a confrontational approach. Most don't have the time to hunt down gushing sprinklers or the inclination to anger their neighbors. More common is the mild, polite sort of water shaming that a next-door neighbor directed at me last week, suggesting that I cover my garden in a layer of moisture-retaining bark mulch. I'd already felt pangs of guilt watching her irrigate her ragged flowers with a watering can filled with leftover dishwater.
With many California cities facing mandatory water cutbacks of 25 percent or more, it's probably for the best that keeping up with the Joneses sometimes means not keeping up your yard. After all, most utility districts lack the will to cut off people's water or the manpower to send out a fleet of water cops. And tiered water rates aren't a silver bullet, either; they face new legal challenges and aren't really steep enough to be all that effective. Ultimately, peer pressure is pretty much all we've got.
But here's the problem: Even as progressive urbanites police each other's water consumption, many California communities continue to treat water as a bottomless resource. In hose-happy suburbs such as Palm Desert, you're still more likely to be treated as a pariah if you let your lawn die. Even in my own water district, some neighborhoods over the hills stubbornly cling to the East-Coast ideal of glistening Kentucky bluegrass and fluffy hydrangeas.
A tech startup has figured out how to bring a measure of constructive drought shaming to communities that were once impervious to it. San-Francisco-based WaterSmart sends out individualized reports that show water users how they stack up against their neighbors. Using insights gleaned from behavioral science, the reports essentially traffic in the same kind of peer pressure one might get from living in, say, a Berkeley enclave of graywater guerillas. The result is an average water savings of 5 percent—a big deal at a time when every drop counts.
The goal, says WaterSmart marketing director Jeff Lipton, is to coax out the feelings of tribal affinity that drive human behavior. "As we evolved, humans turned to the tribe and the behavior that was normal in that group as a survival mechanism," he says. "There is sort of an existential threat of not fitting in. So it's not shame and it's not competition; I think it is a little more abstract than that." And a lot more wonky: WaterSmart has a 19-page paper on this stuff, including the science of "goal setting," "feedback," and "injunctive norms."
Though the WaterSmart interface seems simple, the calculations behind it are not. Two households of the same size can't be expected to use the same amount of water if one has townhouse without a yard and the other a suburban spread on half an acre. That's why WaterSmart combines utility data with property records to control for variables such as lot size, house size, microclimates, and the likely age of a home's appliances. Users can further tweak their homes' specs. If you have a large yard, WaterSmart will suggest installing drip irrigation and drought-tolerant plants. If you live in an old apartment building, it may prompt you to install a low-flow toilet or shower head.
Founded in 2009 by Peter Yolles, the director of water resource protection for The Nature Conservancy, WaterSmart grew slowly for several years, hindered, in part, by the low cost of water across the United States. Then came the drought. Last year, it tripled its customer base to 40 utilities in six states that represent 2 percent of all residential water meters in the country. It's expecting a similar rate of growth this year. "I think we are at the very early stages of a transformation of the industry," Lipton says.
WaterSmart still faces obstacles. Only about 20 percent of municipal utility districts employ advanced meters that can transmit residential usage in close to real-time, making it possible to frequently update customers on their water use. And glaring inefficiencies in agriculture, which uses 80 percent of California's water, provide a convenient scapegoat for homeowners who'd prefer to keep running their taps.
Some users may interpret their favorable WaterSmart reports as an excuse to use more water. I asked the company to crunch the numbers for my house. Comparable dwellings, I learned, use an average of 336 gallons per day during the summer. In the summer of 2013, my house used 156 gallons per day. Behavioral scientists call the impulse that I might feel to use more water "the boomerang effect." WaterSmart expects that it can keep the boomerangers in line with the virtual equivalent of a scowling neighbor, a frowning emoji.
Of course, the true dynamics of social pressure can be much more complicated. Last summer, my house used a whopping 591 gallons of water a day. I feel bad about this, but not that bad; most of the water went toward irrigating plugs of festuca rubra, a native grass that doesn't need any summer water once it's established. Now that it has taken root and I've mostly stopped watering it, I expect to easily best my neighbors' water savings this year and still have an attractive lawn. Other than my fescue, the greenest thing in the neighborhood will be all the envy.