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A Walmart Supercenter in Thomaston, Maine, was causing the town headaches by fighting its property tax bills, using a scam tactic that has spread all across the nation. So the state representative for the area, Democratic Rep. Ann Matlack, set out to do something about it — and won, beating the big box stores and their lobbyists, and securing a major new protection for local communities and taxpayers from corporate tax shenanigans.

At issue is something known as “dark store theory.” I’ve written about this before, but as a quick review for newer readers: Dark store theory is a tactic big box stores such as Walmart, Target, Home Depot, and Lowe’s use to lower their property taxes by arguing that their stores should not be treated as open, thriving businesses for tax purposes, but as empty worthless husks that no one would ever want to use. They also place restrictive contracts into their deeds — such as clauses stipulating that the site can’t be sold to another big box store — and then use those very restrictions to argue for lower property taxes.

“We have a couple big box stores in my House district, and specifically one was creating issues with the assessor for the town of Thomaston,” Matlack told me. “They were continually appealing their tax assessment and it was a real problem.” She said Walmart was using a nearby store that it had intentionally closed and refused to sell as a comparable for lowering the Thomaston store’s tax rate.

As I’ve said before, it all gets a little bit “Alice in Wonderland” if you think too hard about dark store theory, with thriving, national corporations arguing their stores should be valued as if they weren’t, well, exactly that. But it works.

In 2019, the Maine Center for Economic Policy surveyed the 25 Maine towns with the highest retail sales, as well as every town with a Walmart, and found big box stores requesting that their property taxes be reduced by about a third, on average. As the Maine Monitor wrote earlier this year, large retailers “are overwhelming assessors and creating a years-long backlog at a state board that hears the cases, as well as costing taxpayers hundreds of thousands of dollars in lost tax revenue and legal fees.” Many communities simply give up or settle, rather than wage a long court fight with corporations that have essentially limitless resources.

In response, Matlack proposed and Maine’s legislature passed LD 1129, which was enacted last week without the signature of the state’s governor. (So it basically sat around long enough without being vetoed that it became law.) The bill had actually been floating around for a few years, according to Matlack, but got lost in the pandemic shuffle. She picked it up this year and the political will was finally there to push it across the finish line, on a mostly party line vote. (Just one Republican in each chamber voted for it.)

The new law stipulates that assessors must take into account all characteristics of a big box store, including its current income, when assessing the property, and that restrictive sales terms can’t be used to artificially hold down the value of a property.

This is a very big deal, not just in Maine but as a model for the rest of the country. In the states where the dark store tactic first took root — Wisconsin, Indiana, Michigan, and Texas, in particular — loads of cases have led to billions of dollars in property tax payments either coming or potentially coming off the local tax rolls.

In Maine, though, unlike those other states, the legislature acted.

“This is a matter of fairness,” said Sarah Austin, director of policy and research at the Maine Center for Economic Policy, in a statement. “This new law will help ensure that big-box retailers pay what they owe and protect Maine small businesses and homeowners.” 

But it’s not just about fairness. It’s also about power. Big retailers have launched an effort to promulgate dark store theory because they have the time and resources for a long fight that pays off in the long term, unlike the communities that are seeing property tax revenues plummet in the here and now.

As Ron Knox of the Institute for Local Self-Reliance wrote, “Walmart’s extraordinary market dominance gives it the scale to engage in a systematic strategy like this, with the upfront costs of developing this legal tactic and deploying it via litigation at state tax boards more than rewarded by the huge cumulative gains of succeeding across thousands of communities.”

And it’s local businesses and residents who pay the price, both in the lost tax revenue but also in the time and effort spent fighting endless property tax appeals.

As Matlack told me, “It hits residents in their property taxes whenever something like a Walmart or a Lowe’s or another big box store decides to appeal their assessment. It means either the residents have to pay more in taxes for good roads, for infrastructure, for police and fire departments, and so forth, or pare back on things they decided that they need or want. It’s a real economic burden on the municipalities and the assessors were really feeling that.” Statehouses, though, are where lawmakers can stop this nonsense in its tracks, as Matlack and the Maine Democrats showed, joining New York in passing legislation to get rid of dark store theory on a state level. Other states can and most certainly should follow suit.

This post initially appeared in a slightly different form on the author’s Substack, Boondoggle, on May 4, 2022.

Pat Garofalo is the author of The Billionaire Boondoggle: How Our Politicians Let Corporations and Bigwigs Steal Our Money and Jobs, the Boondoggle newsletter, and the director of state and local policy at the American Economic Liberties Project.