Monday, February 13, 2006

A basic analysis of whether Wal-Mart will move

(From a comment I left in this thread, "Wal-Mart's CEO speaks out.")

We can presume that Wal-Mart is willing to spend (or lose) $x to "make its point" (garnering publicity and public support) about Maryland's tax. If Wal-Mart projects that it will still make $y profit by keeping a presence in Maryland, then Wal-Mart will remain so long as [y]>=[x]. Now if Wal-Mart is in fact losing $y, and it will lose $z by moving, it will stay in Maryland so long as [y]=<([x]+[z]). For example, Wal-Mart might project losing $10 million by staying in Maryland, and that it will lose $9 million by moving. It will stay if it values "making its point" at $1 million or more, it will stay. If it values "making its point" at only $500K, it will move, because losing that money to "make a point" isn't worth the reduced losses of moving.

As I said, tax-and-spend politicians will inflict taxes as heavy as possible without forcing people out. It's really a tragedy how a business is pressured into staying, because moving would be more expensive. Right now Wal-Mart is restructuring things like supply centers and delivery routes, changes that reduce operational costs now. We can presume that before Maryland's tax, these changes would have been more expensive than the status quo, otherwise Wal-Mart would have already shifted toward them.

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