Bentonville, AR. Walton's Phony Family Philanthropy
A new report, "The Phony Philanthropy of the Wal-Mart Heirs," issued this week by the United Food and Commercial Workers (UFCW) and the worker's group OUR WALMART says the Walton family has used the front of a philanthropy---the Walton Family Foundation---to dodge billions in estate taxes for generations of heirs of Sam and Helen Walton. Instead of creating "opportunities for the disadvantaged," the new report suggests that the Waltons have created opportunities mostly for the most advantaged family in America--themselves.
The report says the Waltons wanted to look like "the most generous philanthropists in America," but were "hardly philanthropists" at all, for the following three reasons:
* the Walmart heirs have given surprisingly little of their own wealth to the foundation that bears their name--their combined contributions equal just .04% of their present net worth;
* the Waltons have used the tax-exempt Walton Family Foundation as part of a wealth management strategy to reduce or eliminate estate taxes on the inter-generational transfer of Walton family wealth; and
* the Foundation's assets and grant-making are actually rather modest compared to the Waltons'
The four Walton heirs---Rob, Jim, Alice -- and Christy, widow of Sam and Helen's son, John, have a combined fortune worth $139.9 billion, including ownership of just over half of Wal-Mart's outstanding shares. Rob, Jim, and Alice control their stock through the family holding company, Walton Enterprises, LLC, which also helps to manage the Walton Family Foundation. This year, Wal-Mart will pay Rob, Jim, Alice, and Christy Walton $3.16 billion in dividends---which is like receiving $8.6 million in dividends every day of the year.
The Walton Family Foundation has nearly $2 billion in assets, but its holdings are equivalent to less than 1.5% of the Waltons' $139.9 billion net worth. "With this kind of wealth," the report says, "the Waltons could easily afford to support good jobs for Wal-Mart employees and also give generously to the family foundation. But they don't."
"Phony Philanthropy" charges that "the Waltons game the rules governing tax-exempt organizations by taking advantage of loopholes in the tax code to finance their foundation with special tax-avoiding trusts... They have done so with the assistance of financial experts who manage the family holding company, Walton Enterprises, and the Walton Family Foundation with a keen eye toward maximizing the family's wealth."
The Waltons take advantage of complex loopholes in the U.S. tax code to avoid billions of dollars in estate taxes by funding their Foundation with special trusts. Instead of using their own funds for their Family Foundation, "the Wal-Mart heirs channel funds to the Walton Family Foundation through 21 Charitable Lead Annuity Trusts (CLATs) that were established with the assets left behind by the late Helen and John Walton." CLATs are designed to help the super-wealthy avoid gift and estate taxes that would otherwise be imposed on the inter-generational transfer of wealth. These CLATs have provided more than 99% of the Family Foundation's contributions since 2008. The Walton CLATs had assets of about $8.8 billion at the end of 2012---more than 4 times the Foundation itself.
Under the rules governing these charitable trusts, a portion of the income they earn---like dividends and capital gains, go to the Walton Family Foundation. But when these trusts expire, their assets, plus any income earned above the amount required to go to the Foundation, will go to the trusts' non-charitable beneficiaries---the next generation of heirs to the Wal-Mart fortune. These trust assets will transfer free of estate taxes---a huge windfall of unearned wealth possibly worth tens of billions of dollars.
An estimated $1 billion in contributions to the Walton Family Foundation came from several other trusts established by Sam and Helen Walton---Charitable Remainder Annuity Trusts (CRATs). "All these little-known trusts were designed to secure and increase the Walton family's wealth alone, and improve their public image, while taking advantage of the Foundation's tax-exempt status to advance causes and public policies that are consistent with the family's public relations concerns, business interests, and conservative worldview," the UFCW charges.
One of the causes of the Walton Family Foundation has been the undermining public education. The Foundation has been providing grants to charter schools, but the UFCW says the Foundation's "real interest lies with voucher programs, a mechanism for school privatization through which public tax dollars can be diverted to private institutions... the family apparently began working on charter schools as a sort of compromise, only after it became clear that privatization of schools was a very controversial idea...No matter where people come down on the issues of education reform or school choice," the UFCW says, "we can all agree it is unfair that the Walton family gets to dictate the future of public education because of the amount of money at its disposal, and to do so in a way that is unaccountable to the public."
"The Waltons seem to consider themselves philanthropists," the report concludes, " but it is not at all clear why they should---unless having their name on a foundation is sufficient to qualify for that title. When it comes to their own family foundation, the Waltons fail miserably as philanthropists, compared to the standard set by their billionaire peers and middle class Americans--and relative to their almost unlimited means."
What you can do: This new study concludes that the Family Foundation set up by the Waltons is just that---a mechanism to help predominately the Walton Family. It is an accounting tool to protect the vast wealth of America's richest family from U.S. taxation---which ironically keeps that money from being used by the federal government for schools, public infrastructure, and even defense.
The report says the Waltons "have enough wealth and power to literally change the world... Yet, these Wal-Mart heirs have so far chosen to use their enormous wealth and power primarily in order to accumulate more wealth and power... The Waltons have used their foundation as a wealth management strategy and as a shield against public criticism over their role as owners of Wal-Mart---the largest low-wage employer in the United States. We believe this report is an important step in helping Americans to see through the Waltons' phony philanthropy."
For full copy of the "Phony Philanthropy" report, go to: