The Wisconsin legislature recently muscled through a biennial state budget that defenders say contains tax credits for businesses to create jobs, make capital improvements, and expand research and development.
But tax hikes overwhelm those limited virtues, say critics of the budget passed by the Democrat-majority legislature and signed by Gov. Jim Doyle, also a Democrat.
“Out of a $62 billion state budget, to highlight tax credits of $130 million is just political spin and an attempt to divert attention from reality,” said Brett Healy, president of Wisconsin’s John K. MacIver Institute for Public Policy.
Billions in New Taxes
Healy said the legislature’s 11 percent business tax hike passed in February, along with the budget’s $2.05 billion in increased taxes and $3.58 billion of borrowing, overshadow the minuscule targeted business aid.
“There are various tax incentives, true. The problem is these are relatively small in dollar impact, while the corporate, small business, high-bracket income, and capital gains tax hikes are collectively much larger,” said Todd Berry, president of the Wisconsin Taxpayers Alliance. “Sadly, from a perception perspective, the result sends, at best, very mixed signals from Wisconsin.”
Misguided Tax Breaks
Mark Robyn, staff economist at the Washington, DC-based Tax Foundation, said state governments should not pick winner and loser industries through targeted incentives.
“Many of the provisions in this budget seem misguided,” said Robyn. “There are tax cuts for things like new jobs, but why are new jobs more deserving of a tax cut than old jobs? Is it good to give one company a tax credit for creating a new job while another company must cut a job because of increased income taxes?
“This is a perfect example of narrower bases necessarily leading to higher [tax] rates,” Robyn continued. “A better solution would be to lower everyone’s rate to give a break to both new businesses and established businesses.”
Wisconsin’s failure to employ a broad-based, low-rate tax system is hurting the state, Berry says.
“Both Democrats and Republicans for a number of years now have preferred the ‘Christmas-tree’ approach to tax policy, which allows career politicians to say ‘I did something for you,'” Berry said. “Unfortunately, the downside to this approach only becomes visible later. With a narrowing of the tax base in years past, we have now, finally, increased rates.”
Plant Closings, Job Losses
Healy noted some of Wisconsin’s biggest employers are pulling jobs out of the state.
“Briggs & Stratton Corporation, an iconic Wisconsin employer, announced it will close a Wisconsin plant, resulting in an elimination of 530 jobs while they will be adding jobs to their Georgia and Alabama plants. Gardner Denver, Inc. plans to relocate its Thomas Products Division and 366 local jobs to Louisiana. And Mercury Marine may soon move operations to Oklahoma, potentially jeopardizing 2,000 jobs,” Healy said.
Brien Farley ([email protected]) writes from Genesee, Wisconsin.