I read an article on CNN titled My grocery bill will skyrocket if military stores close about the possibility of cutting back funding to military grocery stores due to government spending cuts. I was then struck with the following question and I hope somebody here can clear it up. Is it the case that commercial entities (retail stores, restaurants, etc) in the U.S. are compensated by the government (say by tax breaks) if they offer military discounts?
Company X located outside a military base offer discounts to military as a form of marketing. They want to encourage a group of potential customers to use their store/service. In some cases they are competing with subsidized store on the base. In other cases their only competition is other stores outside the base. The smart ones also understand the pay structure of military pay to make it easier for enlisted to stretch their money for the entire month.
The government doesn't offer compensation to the business near bases. The businesses see their offer and discount as advertising expenses, and are figured into the prices they have to charge all customers.
You will also see these types of discounts offered by some businesses in college towns. They are competing with the services on the campus and with other off-campus businesses. Some also allow the use of campus dollars to make it easier for the student to spend money.
This story is about military grocery stores - i.e.: grocery stores for military personnel on military bases. There are no discounts for military personnel in a regular grocery store. But they may have subsidised prices in grocery stores located inside a military installation, and these are those stores that the story is talking about.