Business/Finance

Have you heard of “dark store theory?”

Dark-Story-Theory

I should no longer be surprised by the ways corporations and the rich find to get ever richer, but I am still surprised from time to time. Here’s a new one – have you heard of the “dark store theory?”

Property taxes are important sources of income for localities. That money is especially important for funding education.

One way property taxes on private homes can be assessed is by using comparables – in other words, having your home compared to similar ones in the area and having taxes set accordingly.

Now, however, big box stores want to get in on the act. More and more, highly profitable big box stores like Wal-Mart, Lowe’s, and Target are requesting that their property taxes be established by comparing their stores to similarly sized stores. Not just any similarly sized stores, however – dark, abandoned ones. So, yes, stores that are open and making big money are actually asking to pay the same property taxes as those assessed on empty buildings. The notion that this is legal is called “dark store theory.”

Interviewed by NPR, Linda Terrill is a tax attorney in Kansas who argues that the term “dark store theory” is a misnomer and based on a misunderstanding of how property is assessed. Per NPR:

interviewer: Terrill says there’s nothing strange about comparing empty stores to open ones. Property tax is about the building, not what’s inside it, no matter how well the owner’s doing.

TERRILL: if I win the lottery, the value of my house doesn’t change.

Terrill’s comparison of winning the lottery to having one’s property taxes assessed is disingenuous. If one wins the lottery, one pays income tax. If one makes improvements on a home, higher property taxes may be assessed.

Furthermore, there’s this:

interviewer: Terrill says it shouldn’t matter if the store is dark or not. Dave Maturen disagrees. He’s a Michigan state lawmaker who says it’s not that a store is dark but why it’s dark that’s a problem. Maybe it’s the location – the vacant store sits in the part of town that shoppers have abandoned while the new store appeals its taxes from the hottest corner.

DAVE MATUREN: Certainly, the person that decided to shell out, you know, $15 million to $20 million wasn’t doing it foolishly, and they had a good idea that this was a good spot and a good structure to put in place.

Most of us live near big-box stores that have been abandoned, the retailer opening another store at a more choice location or, often, opening a larger store very close by. You may have wondered, as I have, why the older, smaller, abandoned Wal-Marts in your community have stayed abandoned for years now. Well, it turns out that when a retailer abandons a store, that retailer will not sell or lease to any business that may be competition, leaving few interested in the property.

interviewer: But Maturen says this is mostly about deed restrictions. He says when a retailer quits a store, it’s often just moving down the road and doesn’t want a competitor to move into its empty space. Maturen says those restrictions make this real estate hard to sell.

MATUREN: And deed restrictions may say you can’t sell food, you can’t sell clothing, you can’t sell garden equipment.

middle fingerSo, big box stores abandon huge buildings. These buildings are eyesores. Big box retailer won’t allow anyone else to have the building. And now, they’re asking for their very profitable stores to pay the same property taxes as what is due on the empty buildings they created.

And if a municipality rejects the scheme, big box retailers will drag it through the courts with appeal after appeal, running up millions in legal fees that rich corporations can afford, but cities and towns can not. A number of localities have ended up compromising to avoid legal fees, not giving the initially requested 50% cut to, say, Wal-Mart’s property taxes, but instead giving them a 25% cut, which is still a big savings to Wal-Mart – and a big loss to these locales.

Make America great some more.

 

 

Categories: Business/Finance, Economy

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