Tax on Bigness

During the reign of the late Huey Pierce Long, Louisiana passed a tax on chain stores, graduated according to the number of stores in the chain. There was nothing new about penalizing chain stores for their "cutthroat"' efficiency. Sponsored by disgruntled independent merchants who have seen nearly one-fourth of the nation's retail trade pass into the hands of the chains, graduated chain store taxes have been enacted by 19 States and sanctioned by the Supreme Court.

But the Louisiana tax differed from other chain store levies in one vital particular: for tax purposes the number of units in the chain was denned as the number in the whole national system, not just the number in Louisiana. Thus, in calculating the tax to be paid by Great Atlantic & Pacific Tea Co. for each of its 106 stores in Louisiana, the rate is based on all 15,082 A. & P. stores throughout the U. S. If the Louisiana tax were figured on the number of stores within the State, as other States' chain stores taxes are figured, A. & P. would pay $50 per store. Counting all A. & P. stores in the land puts the chain into the top bracket ($550 per store).

To this new wrinkle in chain store taxation A. & P., the biggest national chain operating in Louisiana, naturally raised strenuous legal objections. Joined by other national chains with a stake in Louisiana, A. & P. carried its case to the U. S. Supreme Court, which tossed a bomb into U. S. merchandising by upholding the Louisiana tax last fortnight.

In a dissenting opinion Justice Sutherland observed that the old-type chain store tax went to "the extreme verge of the law" and that the Louisiana tax "goes far beyond the verge." But Justice Roberts for the majority agreed with the lower courts that "all the stores of a retail chain contribute to the central purchasing power of the chain irrespective of State lines and location of stores, and increase the per unit multiple advantage enjoyed by the operator of the system; that the greater the number of units, the greater the purchasing power of the chain. . . ." Again demonstrating the broadening constitutional view of modern U. S. business as evidenced in the Wagner Act decision. Justice Roberts held: "If the competitive advantages of a chain increase with the number of its component links, it is hard to see how these advantages cease at the State boundary."

Upon the economic and social consequences of either chain stores or chain store taxes, it is not the duty of the Supreme Court to pass. In arguing its case A. & P. predicted that with validation of the Louisiana levy "the era of the national chain is over," perhaps that the "era of national corporations and of firms or individuals doing business in more than one State is over." By last week it had become apparent that the Louisiana tax decision might become a potent weapon in (he war on Bigness. The words of Justice Roberts meant that through tax discrimination one State could strike at a whole corporation, not simply that part of the corporation doing business within its boundaries. Said Henry Ward Beer, old-time trial counsel to the Federal Trade Commission: "The long advocated amendment of our anti-trust laws to prevent the growth of monopoly has been effectively accomplished through the means of taxation."

Chain store taxes similar to Louisiana's are pending in several other States and addition of a few more States to the tax column would take a sizable chunk of A. & P.'s profits. Long were the conferences in A. & P. executive offices in Manhattan last week but no company comment was forthcoming, an "official spokesman" merely observing: "Mass distribution is not static." Two alternatives to chain store merchandising are already showing hardy growth--the supermarket and the voluntary chain. Not unlike the "Iowa Plan" by which oil companies sell filling stations to their operators (TIME, Nov. 23), the voluntary chain consists of stores owned and operated by independent merchants but serviced and supplied by a central organization. A. & P. could become a voluntary chain by selling stores to their managers, continuing to function as a wholesaler only.

The supermarket is even more of a menace to the little independent than the chain, for the supermarket can undersell them both (TIME, May 24). Moreover the supermarket, doing on the average ten times as much business as a single chain store unit, counts as only one store for taxation purposes. But what chain-store men would prefer to either the supermarket or the voluntary chain would be to persuade the public that anti-chain store legislation amounts to subsidizing inefficient or outmoded independent retailers at the consumer's expense.

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