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Fair & Adequate


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Home > Tax Policy >Tax Archive

 


Conservatives, progressives square off in tax debateraise taxes or cut spending

A conversation about tax policy in Wisconsin brought competing viewpoints together to discuss different perspectives on economic growth.

“A Taxing Conversation,” a forum sponsored by Citizens for a Strong Oshkosh held on April 12, 2012, featured presentations from George Lightbourn, president of the conservative Wisconsin Policy Research Institute, and Jack Norman, research director at the progressive Institute for Wisconsin’s Future.

Both Lightbourn and Norman agreed that taxes are only part of the equation of economic growth. Lightbourn presented several arguments advocating for tax cuts, focusing on the benefits of reducing the personal income tax, while Norman argued that there is still room to raise taxes.

See the story in the Oshkosh Northwestern 


Protestors demand Johnson Outdoors pays its fair share of state taxes

Closing panelists

Maria Maldonado, picketing a meeting of Johnson Outdoors shareholders, calls on the firm to pay a fair share of state taxes to help fund essential programs such as BadgerCare.

A group of protestors picketed the shareholder meeting of Johnson Outdoors in Racine, Wis., demanding the company pay a fair share of state taxes to help sustain vital social programs.

“If corporations like Johnson Outdoors would pay their fair share in taxes, families like mine wouldn’t be cut from receiving BadgerCare,” said Kelley Albrecht. The protest took place Thursday, March 01, 2012.

BadgerCare, a state insurance program providing health coverage to low-income families with children, is one of the many programs suffering under Gov. Scott Walker’s austerity budget.

Albrecht and others cited recent IWF reports that Johnson Outdoors, along with other companies owned by the heirs of Samuel Johnson, including consumer giant SC Johnson, use accounting dodges and loopholes to avoid paying state income tax. Racine-based Johnson Outdoors makes outdoor recreation equipment such as canoes, tents and scuba gear.

“We demand that Johnson Outdoors pays their fair share in taxes in order to stop the cuts to social services,” said Todd Stoner, another demonstrator.

IWF reported, in the August 2011 issue of its WhoDoesNotPayTaxes? newsletter, that Johnson Outdoors paid $0 in state income tax during 2000-2008 (the latest available data) despite $42 million in pretax profits.

Under Walker, Wisconsin is 53,700 jobs short of matching the national pace of job creation

Job trend chartAs IWF noted in The Price of Extremism: Wisconsin’s economy under the Walker administration, Gov. Walker’s policies are directly responsible for Wisconsin’s pathetic jobs performance during his budget.

The chart shows the percent change in the number of jobs in Wisconsin and the U.S. since June 2011, the time period when Gov. Scott Walker’s budget has been in effect. If only we’d matched the U.S. trend, we’d have 53,700 more jobs.


Same old story: Exec pay, profits soar; tax payments, employment lag

The Oct. 2011 issue of IWF’s WhoDoesNotPayTaxes? newsletter features four large Crocodiles cryingmanufacturing firms that pay zero—or almost zero—in state income taxes despite high profits and soaring pay for CEOs. 

Each of the four firms has thousands of Wisconsin employees: Kimberly-Clark, the paper-products giant; Brunswick, owner of Mercury Marine in Fond du Lac; Snap-on, the Kenosha auto-tool firm; and Rockwell Automation, descendant of Allen-Bradley, a Milwaukee industrial icon.

In the last decade, these four companies have made nearly $29 billion in pretax profits, and paid a total of only 0.01% of that in Wisconsin income tax. And while CEO compensation tripled, the average working wage remained flat.

For a national perspective on corporate tax avoidance, see the comprehensive new report from Citizens for Tax Justice and the Institute on Taxation and Economic Policy. The report—Corporate Taxpayers & Corporate Tax Dodgers 2008-10—shows that at least 78 of the nation’s biggest and most profitable companies paid no federal income tax in at least one of the last three years.

The 280 companies studied took $223 billion in tax subsidies. “This is wasted money that could have gone to protect Medicare, create jobs and cut the deficit,” said lead author Robert McIntyre.

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Economic stimulus top priority over deficit reduction

L-to-R: Panelists George Lightbourn, Jack Norman, and Diane Lim Rogers. Alan Viard (not pictured) joined the discussion via Skype. L-to-R: Panelists George Lightbourn, Jack Norman, and Diane Lim Rogers. Alan Viard (not pictured) joined the discussion via Skype.

The Concord Coalition brought its road show to the University of Wisconsin-Milwaukee (UWM), and IWF's Jack Norman—a last-minute addition to the panel—stressed that increased federal revenue for immediate job creation, rather than large cuts, is the key to long-term debt reduction.

The Concord Coalition has been touring the nation for several years, preaching the importance of long-term solutions to America's high deficits and debt. At UWM, when several student organizations, led by the Milwaukee Graduate Assistants Association, found the program lacked a progressive voice, they pressed for IWF's inclusion.

Diane Lim Rogers, the Concord Coalition's chief economist, stressed that her organization agrees with the importance of additional revenue, so long as it's accompanied by long-term cuts in programs such as Social Security and Medicare.

Norman applauded the recognition of revenue's role, but said that the Concord Coalition is among the many centrist organizations which speak so quietly about the role for additional federal revenue that they have let their anti-deficit message be hijacked by rightist ideologues whose only interest is slashing federal, state and local governments.

An audio of the hour-long discussion is available from WUWM-FM

Read a related article on wisbusiness.com

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Walker’s Special Session is a jobs fraud

scales people vs corporationsThe Governor says his Special Session of the Legislature is about jobs, but it’s really about rewarding campaign donors. Here’s what IWF’s Jack Norman told the Business Journal of Milwaukee about the Special Session bills:

“Much of it is irrelevant to jobs. The stuff that might impact job creation is marginal or long term. There is nothing to solve the immediate crisis, which demands jobs now.”

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Tax credits for Wisconsin video game companies

Video games are big business, and some think Wisconsin is an up-and-coming player in the industry. Federal and state incentives are helping video game companies, though some question whether the cost to taxpayers is worth it. Jack Norman is quoted in this Wisconsin Public Radio report.

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Consultant’s report shreds SC Johnson’s tax denials
IWF responds to company’s press statement

SCJohnson_cartoonNew details have emerged in the wake of IWF’s recent disclosure that SC Johnson and other companies controlled by the Johnsons, Wisconsin’s wealthiest family, haven’t paid Wisconsin income tax.

IWF has obtained a copy of a previously confidential report, prepared for SC Johnson in 2008 by the accounting firm PricewaterhouseCoopers (PwC). The report—intended as a sales pitch to win SC Johnson business for PwC—describes some of the Racine firm’s tax-avoidance techniques and casts doubt on the company’s response to IWF.

And a nationally prominent columnist, David Cay Johnston of Reuters, devoted a lengthy column to IWF’s disclosures and the contents of the PwC report. Johnston questions whether the Johnson enterprises are being held to a high enough standard by Wisconsin tax authorities.

Also, SC Johnson issued a statement on the tax issues, to which IWF has responded.


Drastic state budget cuts are NOT, repeat NOT necessary

The 2011 - 2013 Wisconsin State Budget that Governor Walker proposed cuts over $2 billion from cities, towns, counties, schools, colleges, and state services. The result will be a jump in unemployment, a drop in economic activity, reduced services to all citizens and thousands of personal tragedies as senior citizens lose home care, parents of children with disabilities lose respite help, public safety is less effective and low-income families face higher taxes, higher costs for childcare and higher costs for healthcare. This is an everybody-loses budget designed to address the state budget shortage. But this slash and burn plan ignores revenue options that would increase state income and eliminate the need for such dire budget cuts. The Wisconsin Values Budget, an alternative budget proposed by IWF and 34 other non-profit organizations, offers choices that are grounded in Wisconsin’s deepest values which promote opportunity, security, and freedom for all Wisconsinites.

See the brochure of the Wisconsin Values Budget

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Fond du Lac gets news about tax-exempt properties

A IWF report on the proliferation of tax-exempt real estate was given a Fond du Lac focus in a May 22, 2011 story in the Fond du Lac Reporter:Report: Too many tax-exempt properties in Fond du Lac area.”

The story says that in 2010, the conversion of taxable to tax-exempt status for several properties cost the city about $3.2 million worth of taxable property. Agnesian HealthCare, the largest health-care provider in Fond du Lac, owns 23 tax-exempt properties, according to the story.

City Assessor Don Wegner said he plans to begin recording a lot size for every tax-exempt property in the city, as an effort to obtain more information about tax-exemptions.

Click here for a copy of IWF’s report, Too Many Loopholes: How to turn property tax exemptions into revenue for local government.

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Walker’s budget a job-killer

Job killer protest signGov. Scott Walker keeps talking about creating jobs, but his policies are actually job-killers.

The combination of cuts in take-home pay for public workers and cuts in state and local programming are likely to eliminate about 16,000 private-sector jobs during the first year of his budget, according to IWF’s preliminary estimates using conventional economic modeling.

 The real economic damage comes from the ripple effects of his policies: as less money is spent by governments or government employees, there is less spending at the local level. When these localized impacts accumulate over the course of time and throughout the state, the total effect is the loss of thousands of good private-sector jobs.

In this news clip, IWF’s Jack Norman joins State Rep. Brett Hulsey (D-Madison) in challenging Walker’s so-called jobs strategy.

See the WKOW.com news clip

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Consultant’s report shreds SC Johnson’s tax denials
Also, Reuters columnist calls for “thorough audit” of firm

August 2011 -- Revelations about SC Johnson’s tax practices cast doubt on the company’s response to IWF’s recent disclosure that the huge Racine-based firm hasn’t paid a penny of state income tax since at least the year 2000.

A 15-page report prepared for SC Johnson in 2008 by PricewaterhouseCoopers (PwC) outlines some of the techniques the firm used to avoid Wisconsin state income tax. It strongly suggests that Johnson’s claim to have used Research & Development tax credits to avoid taxes is simply not the case.

The previously confidential report was received unsolicited by IWF. It was intended as a sales pitch by PwC to attract more business helping with SC Johnson’s state and local taxes.

The report uses a number of pages to describe some of SC Johnson’s tax practices as of June 30, 2006. For example, an inter-company loan involving a Puerto Rican affiliate allowed SC Johnson to claim $60 million in interest expense. This was used to reduce the firm’s tax liability.

Other techniques involved various shifts of royalty payments, interest and other items such as a $43 million so-called “mark-up adjustment”, among SC Johnson and its subsidiaries SC Johnson Home Storage (based in Delaware) and SNW Co. Inc. (also based in Delaware).

SC Johnson, in public statements following IWF’s disclosure that it paid no state income tax during 2000-2008, claimed it had used Wisconsin’s Research & Development tax credit to avoid taxes. But the PwC report, while noting that SC Johnson generated $1.5 million annually from the R&D credit, also said that the state hadn’t used any of those credits for eleven years and had a “state credit carryforward” of $16.5 million.

In other words, SC Johnson was simply stockpiling its $1.5 million-a-year R&D credit without using it. Instead, the firm used the intricate intra-company transfers to avoid taxes.

David Cay Johnston, an award-winning, widely-read tax columnist for Reuters news agency, used IWF’s disclosures and the PwC report in a long column which questions whether SC Johnson has been thoroughly enough audited by state officials.

Johnston notes that SC Johnson confirmed the authenticity of the PwC report.

Johnston cited a 2009 decision by the Wisconsin Tax Appeals Commission, Hormel Foods Corporation v Wisconsin Department of Revenue. The decision harshly criticized Hormel for engaging in intra-company transactions which had no purpose other than tax avoidance, and were therefore illegal.

Johnston asks: “ The question the PwC document raises is whether the Johnsons will be held to the same standard by the Wisconsin tax authorities as Hormel Food. Why must ordinary Wisconsin businesses and individuals bear the burden of state government while the richest family in the state runs tax-free enterprises?”

And yet another report says that Rep. Paul Ryan, whose district includes the heart of the Johnson family’s operations, tried several times to get legislation through Congress designed specifically to help SC Johnson.

The entire case needs to be thoroughly reviewed by state officials, to determine what is true and what is false regarding SC Johnson’s claims, and to assess whether there’s sufficiently strong oversight of Wisconsin’s corporate income tax.

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A Precarious Balance

cartoon

A dangerous balancing act that leaves much damage in its wake --2011-2013 state budget.

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Wheaton Franciscan wins tax exemption; blow to taxpayers

July 19, 2011 — Wisconsin Supreme Court Chief Justice Shirley Abrahamson was a lone voice, but hers was the voice that rang true.

As the lone dissenter in a 6-1 decision broadening tax exemptions for nonprofit hospitals, Abrahamson accurately noted that “the continuous removal of real property from taxation thus imposes a particular hardship upon local government and the citizen taxpayer.”

Unfortunately, the Court’s decision went the other way, overturning an Appeals Court decision and giving Wheaton Franciscan Healthcare a tax exemption for its outpatient clinic in Wauwatosa. The city claimed that the clinic should be classified as doctors’ offices and hence taxable, rather than as a hospital and hence tax-exempt.

The ruling means about $8.5 million, including interest, in repayment to Wheaton Franciscan for taxes paid since 2003.

The growing volume of tax-exempt medical facilities hurts local governments that rely on property tax revenue and hurts taxpayers who must make up for the lost taxation. IWF has published two editions of its report on the problem: Hospitable Taxes: How non-profit hospitals profit from our out-dated tax system.

Abrahamson pointed her finger at the culprit in this: the Legislature and its failure to modernize laws on tax exemption. The law governing this case dates to 1977, and “healthcare delivery has changed considerably” since then, she noted. “The large integrated health system model we have today strains the distinction created by the statutory language.”

But until the Legislature takes up the issue, Wisconsin is stuck with a growing number of tax-exempt medical facilities.

See Milwaukee Journal Sentinel story. 

See the decision by the Court, including Abrahamson’s dissent

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Community officials protect local control of labor contracts

Press conferenceHundreds of local officials from communities across Wisconsin are opposing Governor Walker’s proposal to restrict collective bargaining with public sector employees.  In an open letter to the Governor and Legislator, 327 elected and appointed leaders — from 35 cities, 55 towns, 34 villages, 40 counties and 40 school districts — urged state leaders to delete provisions related to collective bargaining from the Budget Repair Bill now being considered.

On Friday, February 23, 2011, a group of local officials from Eau Claire, La Crosse, Oshkosh, Winnebago County, Middleton and Madison held a press conference in the Capitol to spell out their objections to the Governor’s plan. Madison Mayor Dave Cieslewicz said Wednesday that local officials don’t want the collective bargaining provisions of Walker’s budget repair bill. “Allow us to make decisions locally about how we’re going to deal with this issue,” Cieslewicz said. “Destroying collective bargaining will not help us balance a single budget.”

Numerous governing bodies for municipalities, counties and school districts have passed resolutions against the Governor’s effort to usurp local control over collective bargaining.

Addition news coverage:
Oshkosh Northwestern
Wisconsin State Journal
La Crosse Tribune
WisconsinReporter.com
Wisconsin Radio Network

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Report shows cuts to public employee compensation damage Wisconsin’s economy

Cutting household income for state, local and school district public‐sector families, as proposed by Gov. Scott Walker and other political leaders, will cost the state $1 billion in reduced economic activity. The new IWF report, Unintended Consequences: The economic impact of cutting public sector wages and benefits, shows that the proposed cut in public worker compensation would result in the loss of 9,000 private sector jobs and $600 million a year in economic production in the private sector. It would eliminate $42 million in property taxes or shift them to other taxpayers and increase the state unemployment rate. Every county in the state would suffer with reduced economic activity and less local revenue.

To read more about how these proposals are a lose-lose strategy for Wisconsin see the report: Unintended Consequences
See the press release for the report

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Gov. Walker promised jobs, but his plan would destroy 10,000 jobs

economic declinePeople in Wisconsin may disagree about many things—but everyone wants more jobs.

Gov. Scott Walker’s plan to slash take-home pay for public workers would destroy about 10,000 jobs in Wisconsin’s private sector. At a time when the state needs good jobs more than anything, it is the wrong economic strategy.

For more details, see IWF's two-page release

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Job-killing budget bad for Wisconsin’s economy 
20,000 jobs lost by Legislature’s refusal to tax the wealthiest

We all want jobs. But the budget the Legislature is sending the Governor is a job-killing disaster.

The severe cuts in the budget will destroy the equivalent of 18,000 jobs in the first year and 22,000 in its second year, through direct layoffs of public employees and the ripple effects of reduced government spending.

That’s according to a simulation of the impact of the budget on the state economy, using economic modeling software.

“The Legislature’s budget is a job-killing assault on the public structures a prosperous middle class depends on, such as education, health and strong local governments,” said Jack Norman, Research Director for the Institute for Wisconsin’s Future. “Instead of more tax breaks for Wisconsin’s most prosperous individuals and corporations, legislators should have generated revenue from these sources in order to lessen the severe cuts.”

Click here for county-by-county details on cuts expected because of the budget.

IWF has long urged a balanced approach to budget-making, using targeted revenue increases to balance cuts and to ensure that Wisconsin’s wealthiest make sacrifices comparable to those forced on public sector workers.

That’s why IWF joined with dozens of other organizations to create the Wisconsin Values Budget,a job-saving balanced alternative budget.

For details on alternative revenue sources, see:  
> Full report Catalog of Tax Reform Options for Wisconsin
Short version of the Catalog of Tax Options
> Read the Milwaukee Journal Sentinel's op-ed by Jack Norman and Karen Royster

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IWF releases catalog of tax alternatives:
there are many ways to avoid drastic budget cuts

A report by the Institute for Wisconsin’s Future (IWF) in April 2011, offers a range of alternatives for increasing state revenue. IWF’s new Catalog of Tax Reform Options for Wisconsin looks at changes throughout the state tax system.

Enacting every option would generate $4 billion in yearly revenue, far more than needed. Enacting a subset of them would offset harsh cuts to schools, municipalities, counties and safety net programs. The catalog is a guide for a balanced approach to addressing the state deficit.

> Full report Catalog of Tax Reform Options for Wisconsin
> Short version of the Catalog of Tax Options
> Read the Milwaukee Journal Sentinel's op-ed by Jack Norman and Karen Royster

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The proposed budget will affect your communityNorth shore forum on WisconsinEye

April, 2011- Oshkosh, LaCrosse, Appleton, Eau Claire, Racine, Richland Center, Northshore Milwaukee, Waussau — across the state, hundreds of people are crowding into school auditoriums to hear about the budget Governor Walker has proposed for Wisconsin.

It is not good news. Local officials from each community are explaining how much funding the community will lose and how that loss will affect people and businesses.

Schools are receiving the largest cut in state aid while local officials are forbidden to raise property taxes to offset the funding reduction. The result?  Teachers get the pink slips and students face larger classes with fewer course options to prepare them for college.  Cities and counties are looking at 10% cuts in shared revenue that will lead to fewer services — including buses and transport for the elderly and people with disabilities, safety nets for families in crisis, basic maintenance of streets and infrastructure, even reduced public safety resources.

Pay cuts for public sector workers with hurt the local economy.  When families’ income shrinks, retail activity drops, costing communities millions of dollars and thousands of jobs.

Ironically, all these cuts not only fail to resolve thestate deficit but increase the deficit by almost $60 million. A lose-lose budget for the state’s economy, local communities and the individuals and families who live there. 

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Close property tax loopholes to help communities

Tax avoidance for dummiesCommunities face major cuts in 2011 because of the $3 billion state deficit. At a time when local property tax revenue is very crucial to protecting schools, police, firefighters, there are many large entities that pay no property tax at all. Families and small businesses may have to come up with several thousand dollars at holiday time, but wealthy non-profit hospitals, expensive senior housing programs, and others don't contribute a penny. Over the years, the legislature has passed many tax laws that reduce or eliminate responsibility for property taxes. A new study from IWF— Too Many Loopholes —outlines the numerous property tax exemptions that drain revenue from communities and tilt the weight of tax responsibility onto homeowners and small businesses. The report also offers solutions that increase funding for schools, cities and counties while leveling the tax paying field to include major institutions that currently use services but pay nothing.  

Read the Report:Too Many Loopholes; How to turn property tax exemptions into revenue for local government

Read the Milwaukee Journal Sentinel article

See the Press Release

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Wisconsin Recovers WebsiteWisconsin Recovers website homepage

The new Wisconsin Recovers website is officially open to show how the stimulus helped Wisconsin communities. This website is sponsored by Wisconsin Voices and is designed to be clear, easy to use and helpful in finding out how the Recovery Act funding affected you, your family and your county. wisrecovers.org

For more information, contact Jack Norman at IWF -- jnorman@wisconsinsfuture.org

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Harley-Davidson: No reason to re-open corporate tax loopholes

The highly-publicized Harley-Davidson situation has nothing to do with state tax policy, despite the efforts of many conservative commentators to link the two.
 This is clear from facts about Harley’s taxes contained in a short IWF report, Harley-Davidson: It’s not about state revenue policy.

The issue began when the firm announced it seeks concessions from unions representing 1,400 employees in Menomonee Falls and Tomahawk. Without concessions, the company said it might move headquarters and manufacturing out of Wisconsin, its home since 1903.

Anti-government forces exploited the situation into a forum for attacking last year’s enactment of combined reporting. Combined reporting is a reform of corporate income taxes that closes loopholes large firms had been using to avoid taxes.

That’s because combined reporting will cause a small increase in Harley taxes. But Harley’s state tax had already been slashed almost to zero by an earlier change to corporate income tax, a change that saved the company $14 million in 2008 alone.

Combined reporting ensures tax fairness. When some large corporations eliminate their Wisconsin tax liability, all others pay more to make up the difference. It’s a slanted playing field rewarding big companies willing to use aggressive tax-avoidance tactics.

As the Harley facts show—along with other new data contained in the report—combined reporting does not hinder a state’s ability to attract or retain jobs.

See the IWF report on Harley Davidson
See Jack Norman's op-ed piece in the Milwaukee Journal Sentinel
See the article in the Milwaukee Journal Sentinel.

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Closing state’s billion-dollar tax gap would help budget

Wisconsin loses $1.2 billion every year due to the “Tax Gap,” the difference between what is legally owed by taxpayers and what is actually paid.  This equals one out of every $10 collected by the state as general purpose revenue. The estimate is in a new IWF report: Wisconsin’s Billion-Dollar Tax Gap—How uncollected taxes can help fill the state’s budget hole.The tax gap is important because the loss of over one billion dollars a year means less state aid to cities, towns, counties and schools. The reduced state aid results in program cuts that raise class size, slow firefighter response time and deliver fewer meals on wheels to the elderly. At the same time, property taxes go up to make up for lost state dollars. It’s a double whammy for responsible citizens and business owners who file their tax returns, pay their taxes and support the services and infrastructure needed for stable and prosperous communities. Who’s not paying taxes? Some of it is people making honest mistakes or being confused by complex tax laws. But a good deal of it is deliberate:

What should be done?

State officials need ongoing information on how large the gap is, who is not paying and what mechanisms they are using to sidestep their responsibility. Technology upgrades are needed to improve online taxpayer services, communications and outreach as well as e-filing and the use of electronic databases for audits and collections. The Department of Revenue needs full staffing so it can fulfill its mission.

It’s time to simplify tax laws so they are clear. Wisconsin’s tax structure is too complicated due to the proliferation of new exemptions, deductions and credits which makes tax laws too long, too wordy and too easy to manipulate.

Read the report, Wisconsin’s Billion-Dollar Tax Gap—How uncollected taxes can help fill the state’s budget hole

See the press release

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Note to Tea Party -- the Federal Stimulus gave us tax cuts !!!! Wisconsin tea party demonstration

In Wisconsin (and every other state), tax cuts from the federal stimulus have been raining cats and dogs. Thanks to the federal stimulus, Wisconsin individuals, families and businesses are seeing a $5.2 billion tax cut over the 2009-2010 tax periods. Who's getting these tax cuts? EVERYBODY!

Each of Wisconsin’s 2.2 million working families or individuals is receiving a tax cut averaging $506 per year in 2009 and 2010 through the Making Work Pay credit. That’s enough to pay for a month’s worth of groceries, and it amounts to a statewide tax cut worth $2.3 billion. And there are many more tax cuts and direct aid that benefit diverse groups of citizens and companies.

While banks have kept a tight hold on their funds, the federal government has been pumping money into the economy consistently since February 2009 through the stimulus—the American Recovery and Reinvestment Act (ARRA)—to prevent an economic collapse.

This recession has been painful for the people of Wisconsin who have lost jobs, pensions, home values and, sometimes, hope. The federal government has been a constant target of anger and frustration because people want to blame someone, and the bankers who created this catastrophe have faded back into their skyscrapers. However, for those who want government to cut taxes and put money into people’s pockets to jumpstart the economy: Open your eyes. Your wish has already been granted.

See: Milwaukee Journal Sentinel article

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IWF Conference Examines Property Tax Exemptions

Who isn’t paying their share of property taxes?

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That was the focus of attention for about eighty local officials and other leaders—from over 30 Wisconsin communities—at an all-day conference in Madison, FLively conversation over lunchebruary 19, 2010 sponsored by IWF.

The conference was titled Rethinking Ways to Fund Local Government: Exploring Property Tax Exemptions.

Particular attention was paid to large nonprofit health-care systems; real estate speculators who abuse agricultural assessment; billboard owners; and nonprofit housing for affluent seniors.

Closing panelists

Closing panelist Brad Karger, Marathon Co. Administrator, Mark Harris, Winnebago Co. Executive, and Jessica King, Oshkosh City Council Member discuss where do we go from here.

Documents from the conference:

Conference agenda
Norman PowerPoint on Health Care facilities
Schlafer PowerPoint on Health Care facilities
Weeth PowerPoint on billboards
Weissenfluh PowerPoint on billboards
Reavey PowerPoint on nonprofit housing
Summary of nonprofit housing session
Dept of Revenue breakout session

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National Tax Foundation Prescribes Poison Pill for Wisconsin

If national think tanks could be sued for malpractice, Wisconsin would collect a sizable settlement.

In its recent report, 2010 State Business Tax Climate Index, the Washington, D.C.-based Tax Foundation lays out how Wisconsin could ‘improve’ its tax policies. It recommend taxing groceries, eliminating business development incentives, slashing the state investment in health, education and transportation, and making everyone pay a flat income tax rate.

“It’s a total losing proposition for middle class families, small business, students and senior citizens,” states Jack Norman, Research Director for the Institute for Wisconsin’s Future (IWF).

According to the IWF critique, the Tax Foundation uses cascades of numbers to mask a predictable anti-government rant. The Tax Foundation is governed by a Board that includes campaign advisors from the George W. Bush, Dick Cheney and John McCain campaigns as well as conservatives notable for their work with wealthy individuals and corporations.

Conservative pundits in Wisconsin cheered the report, eager to cite national experts to justify reduced taxes and reduced state investments in essential infrastructure. Given their “just say no” mindset, these conservative pundits have failed to look closely at the policy conclusions embedded in the Tax Foundation report. 

At a time when businesses, workers and taxpayers need to gear up for rebuilding the state economy for long-term prosperity, the Tax Foundation report would send the state down river to a Mississippi Delta quality of life. Where are the lawyers when you need them?

Click here for IWF’s critique of the Tax Foundation report. 

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Federal TARP aid is a success story for Wisconsin’s small banks

Wisconsin’s small, community banks—with a little help from the federal government—have played a valuable role in helping stabilize the state economy during this deep recession, according to a report from the Institute for Wisconsin’s Future.

While some of Wisconsin’s largest banks continue to struggle for survival, its nearly three hundred community banks have increased lending while maintaining fiscal health, according to IWF’s analysis of bank data.

It has been two years since the recession began and one year since the federal bank assistance program—TARP (Troubled Asset Relief Program)—was enacted. Twenty Wisconsin banks received TARP assistance. While the three huge TARP recipients are still struggling (M & I Marshall & Ilsley, Associated, AnchorBank), the 17 small banks that received TARP funds have as a group been Wisconsin’s strongest in terms of increased lending, stable capital, and maintenance of employment. These seventeen banks used the federal TARP funds to increase their lending, boosting small business activity around the state.

Financial giants caused the threat of global financial collapse and the worldwide recession. But small banks don’t deserve to be blamed for the economic disaster. Wisconsin’s smaller banks have helped the state weather the resulting storm.

The resilience of Wisconsin’s small banks and their ability to use TARP funds effectively demonstrate that proactive intervention by government is a critical tool for restoring Wisconsin’s prosperity. Government efforts to direct the flow of money during this economic crisis have been a vital safety net for Wisconsin’s middle class and small businesses.   

Hear Jack Norman talk about this issue on WUWM's Lake Effect
Read the full IWF TARP report
See the press release

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Proposed restrictions on billboard taxes bad for communities

During a time of severe budget crises for local governments, the worst thing the Legislature could do is create even more exemptions from the local property tax, thereby depriving counties, municipalities and schools of vitally needed revenue.

Yet that’s exactly what would happen if legislation is passed to change the way advertising billboards are assessed for property tax purposes.

Assembly Bill 215, now before the Assembly’s Committee on Jobs, the Economy and Small Business would handcuff local government assessors who have been trying to properly assess the taxable value of billboards. AB215 is tailor-made for the billboard industry rather than for the local governments which depend on property tax revenue to fund essential services.

For details, see this IWF press release.
For background, see this article in the Business Journal of Milwaukee.

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Tax day article

As anti-government groups gathered to protest taxes on April 15, IWF pointed out the ironic fact that tax costs are down for most Wisconsin residents while vital services continue. 2009 is a good year for most taxpayers.

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IWF seeks moratorium on all tax breaks in the legislative pipeline

The Legislature should immediately stop work on the thirty or more new or expanded tax breaks already introduced this session.
There are two reasons for halting action on these proposed tax credits, deductions and exemptions:

1. Given the budget crisis, it makes no sense to cut state revenue. Some of the proposed tax breaks may be sensible proposals, but with the huge cuts proposed in state services, this is not the time to enact new breaks.

2. The nonstop proliferation of tax breaks over the past twenty years has not only riddled the state tax base with holes, but has led to an enormous increase in the complexity of Wisconsin’s tax code and tax forms.

For details, see:

IWF press release

• IWF working paper: Simplifying Wisconsin Taxes

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IWF Tax Gap estimate confirmed by state
Hearing on “Invest in Revenue” set for March 25

Wisconsin’s Department of Revenue has confirmed IWF’s January estimate that the state’s tax gap—the difference between taxes owed and taxes collected—exceeds one billion dollars.

IWF included the estimate in its report, Investing in Revenue: How Wisconsin can profit by using the Minnesota model for closing the tax gap. The report urged the state to invest in the Revenue Department’s capacity to collect taxes, saying as much as $100 million annually could be collected with a modest investment in Revenue resources.

On March 4, 2009, the Milwaukee Journal Sentinel’s Steven Walters reported on Page One that “Unpaid taxes in Wisconsin reach $1 billion.” Walters noted: “The total of delinquent taxes owed state government rose about 27% in a year, going from $800 million to $1.03 billion on July 1, according to Revenue Department figures requested by the Journal Sentinel.”

Walters also reported that “Senate President Fred Risser (D-Madison) plans a March 25 committee hearing on the Revenue Department's tax-collection efforts, including the controversy over whether the agency needs more - and not fewer - workers.” Risser chairs the Senate’s Committee on Ethics Reform and Government Operations.

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Property taxes are really regressive

Modest-income homeowners and homeowners over 65 years old are bearing the brunt of Wisconsin’s property tax increases, according to a path-breaking new report on the unpopular tax.

Homeowners in the bottom 40% of income had a property tax burden more than twice that of homeowners in the upper 40%, according to the study by Rebecca Boldt and Bradley Caruth, both of the state’s Department of Revenue, and Andrew Reschovsky of UW-Madison. Tax burden measures the tax as a percentage of income.

The three researchers used pioneering techniques to track property taxes and income for three-quarters of a million Wisconsin homeowners who stayed in the same house between 2000 and 2005. Previous studies of property taxes have almost never been able to connect property taxes to individual homeowners and their incomes. 

The study found tremendous variation in property tax burdens, with 41% of homeowners actually seeing a decrease in property taxes, after adjusting for inflation. But falling property taxes were most likely to be seen only by higher-income homeowners.

ChartFor lower-income and older homeowners, property tax burdens generally grew during the five-year period. By 2005, the poorest fifth of homeowners paid 6.3% of their total income in property taxes, about three times the ratio paid by the richest fifth, after taking state and federal tax relief programs into account. [see chart]

The authors argue that Wisconsin’s two property tax-credit programs are too small and poorly targeted.

For the full report click here.

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Progressive tax reform surges in Wisconsin

It was the best week for tax reform that Wisconsin has seen in a long, long time, the culmination of years of preparatory work.

On Feb. 19, 2009, Gov. Jim Doyle signed into law a budget-repair bill that includes several breakthrough tax reforms, including the adoption of combined reporting for corporate income tax, to close loopholes that allow multi-state corporations to avoid state taxes.

And on Feb. 17, Doyle proposed a budget for the upcoming 2009-’11 biennium that would include additional progressive tax reforms, including two income tax increases for the wealthiest taxpayers, one to increase the top marginal income tax rate and the other to increase capital gains taxes.

The budget-repair bill squeezed through the Legislature with the tightest of margins, including a 50-49 vote in the Assembly that killed the last chance of combined reporting opponents. The legislation included a variety of tax modernization items:

* Combined reporting for corporate income, to shut the loopholes used by some major corporations to avoid paying taxes and to create a level playing field so all firms play by the same rules;
* Bringing Wisconsin into the national Streamlined Sales Tax project, to hasten the day when sales tax can be charged on Internet sales;
* Extending the sales tax to a number of digital products that have avoided taxation;
* Creating a hospital assessment that will bring hundreds of millions of federal dollars to the state and increase payment levels for many of Wisconsin’s hospitals.

The budget proposal for 2009-’11 will be debated in the Legislature over the coming months. Tax reforms in the governor’s proposal include:

• A higher individual income tax rate for the wealthiest taxpayers in the state, those earning over $300,000 a year;
• Scaling back the exemption of capital gains income from 60% to 40%, reducing a benefit that goes almost entirely to the state’s wealthiest taxpayers;
• A new assessment on oil companies, to help fund road repair and building.

Taken together, these structural changes will move Wisconsin’s tax system into the 21st century. The reforms will help create a tax system that is more fair to taxpayers—individual and businesses alike—while increasing support for vital public infrastructure and services.

These revenue policies are major steps forward in the long-term effort to rebuild an adequate funding base so that major public systems, including transportation, education, public safety and community development, are capable of providing a strong foundation for economic growth and recovery.

See IWF’s latest report on combined reporting: Combined Reporting: How Closing Corporate Loopholes Benefits Wisconsin.

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Funding-reform plan unveiled

The School Finance Network, a coalition of nine statewide education groups, just released its long-anticipated reform plan around the state. For details on the plan and how to get involved in the campaign to enact it, go to www.sfnwisconsin.org

On January 27, over 40 leaders from Eau Claire and Altoona discussed possible ways to increase state revenue in order to boost state aid for community services and infrastructure. Dr. Jack Norman, IWF Research Director, reviewed a range of ways that Wisconsin could expand its revenue base based on the latest IWF reports on strengthening the Department of Revenue and modernizing tax policy. The groups discussed the options as one step in developing a plan for long-term state fiscal reform.

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More state revenue without raising taxes:
Beefing up tax enforcement pays dividends

Wisconsin could generate nearly $100 million a year by increasing tax-enforcement efforts in the Department of Revenue, according to IWF’s newest report: Investing in Revenue: How Wisconsin can profit by using the Minnesota model for closing the tax gap.

A $25 million investment in tax-enforcement resources for the Department of Revenue (DOR) could return $200 million in additional revenue in the coming state budget 2007-’09 biennium, the report argues. That is $175 million that state budget makers would not have to find through spending cuts or tax increases when they address the state’s deficit. It can be part of a multifaceted approach to addressing Wisconsin’s current budget deficit and establishing budget stability in the future.

IWF’s optimism about the benefits of stepped-up tax enforcement is based on results in Minnesota, which has followed that path since 2001 with outstanding results. IWF urges lawmakers to take a close look at Minnesota’s experience, which could be replicated here.

Click here for a copy of the report.
See the story in the Milwaukee Journal Sentinel.

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All options on the table
New report outlines possible sources of additional tax revenue

In the wake of reports that Wisconsin’s budget shortfall for the coming biennium could exceed $5 billion — the deepest hole the state has faced in decades — the Institute for Wisconsin’s Future (IWF) and the Wisconsin Council on Children and Families (WCCF) have released an inventory of options for reforming the state’s tax system and finding a balanced approach for filling the deficit.

The Catalog of Tax Reform Options for Wisconsin includes a number of suggestions for bringing additional tax revenue to the state, to help protect essential public structures in a time of economic distress. No specific item is endorsed, but the report stresses that some combination of the recommended measures is necessary for a balanced approach to addressing the looming deficit while preserving vital public services and infrastructure.

Areas covered include changes to the sales tax, personal income taxes, business taxes, transportation taxes, and miscellaneous taxes.

Click here to see the report.
Read WCCF's op-ed in the Capital Times
Read op-ed in Milwaukee Journal Sentinel
Also stories in Wisconsin State Journal (Nov. 29)
and Milwaukee Journal Sentinel (Nov. 28)
Hear Jack Norman on At Issue with Ben Merens

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