Wisconsin Republican Governor Scott Walker made national headlines this week by announcing his intention to strip public employees of collective bargaining rights. He even threatened to call out the National Guard to back up this claim. The bombastic proposal was presented as a part of plan to close the state’s $137 million budget shortfall. The real kicker to Walker’s budget dreams is that while hacking away at public workers he also intends to lower tax rates. Quite a feat, and it raises issues about just what the tax situation is in the state.
Any investigation in tax rates in Wisconsin must begin with a look at their neighbors in Illinois. A recent decision by the Illinois state legislature to close their own budget deficit included a provision to raise taxes on corporations. This made Walker giddy. He invoked an old state tourism slogan “Escape to Wisconsin,” to make an invitation to companies in Illinois to escape the new budget filling tax regime. One problem with this. Even after the Illinois hike, the state’s corporate tax rate is still lower than Wisconsin. Why would this be attractive to business?
Wisconsin’s corporate tax rate stands at 7.9 percent, in the upper echelon of states ranging from a high of 10.84 percent in California to a half a dozen states with no corporate taxes. The Wisconsin tax is a flat tax, so all businesses regardless of their size pay the same percentage tax. Previously, the tax had been a progressive one ranging from 2.3 percent on the first $1,000 of taxable income to 7.9 percent for anything above 6,000. This structure was changed in 1981 to the current flat system purportedly in response to the growth of corporate activity, which resulted in most of the taxes being paid in the highest bracket.
This much is widely known. What is less recognized is that loopholes and tax credits often make Wisconsin’s corporate tax collection look like something akin to the state’s famed Swiss cheese. Simply put, a business can secure a tax credit for doing just about anything in the Wisconsin. The state publishes 15 pages of tax credits and you get one for doing anything from harvesting woody biomass, to milking a cow or even sending your employees to college. This was the chip Walker was playing against his neighbors in Illinois – the tax rate may look scary, but you might never have to pay it.
The most remarkable of these credits is the Water Consumption Credit. The credit allows industrial enterprises to defer up to $300,000 a year in payments to the municipal water company. This credit can be claimed each year from 2009 until 2020. Credits such as this, along with the relatively tax-free Development Opportunity Zones and Enterprise Zones have resulted in the loss of millions of dollars in tax funds that have been funneled right back into the pockets of big business.
The trend is clear when the tax revenue numbers are considered in a historical perspective. In 1980, just prior to the switchover to the flat tax scheme, Wisconsin collected more than $300 million in corporate taxes which represented 10 percent of the overall tax revenue in the state. For the tax year 2008-2009, the state collected more than $600 million in corporate taxes, an amount that represented only 5.2 percent of the overall tax revenue. So, today after nearly thirty years of loopholes and flat taxing, taxation on corporations produces one-half of the contribution they made to the overall tax collection in 1980. The simple act of making corporations contribute at 1980 levels would more than cover the state’s budget deficit.
Raising corporate taxes seems like a good place for the public employees being targeted by Gov. Walker to start. In the case of Wisconsin, this might not even mean raising the rate. It could be as a simple as closing the loopholes, ending the regime of tax credits and shutting down the tax-free zones. This would expose Walker’s plan for what it is – ideological rubbish dressed up as a budget proposal.
If given a free democratic choice at the polls, Wisconsin residents would certainly choose to make the corporations pay their taxes in full. This was done in January 2010 in Oregon where a public referendum supported increasing the state’s taxes on business to cover a budget shortfall. No cuts to services, no end of collective bargaining and no more public employees forced onto the unemployment lines. Just the richest corporations who operate in the state being made to shoulder the budget burden. Wisconsin public employees and other unions would be wise to organize a fight-back campaign that targets the real sources of wealth in the state – the corporations.
Billy Wharton is a writer, activist and the editor of the Socialist WebZine. His articles have appeared in the Washington Post, the NYC Indypendent, Spectrezine and the Monthly Review Zine. He can be reached at firstname.lastname@example.org. Become a FAN on Facebook.
[DS added the video.]
Wisconsin Governor Launches Attack on Public Sector Employees and Unions; Threatens to Deploy National Guard to Quell Labor Protests
Feb. 15, 2011
Recently elected Wisconsin Republican Governor Scott Walker has proposed a bill that would eliminate almost all collective bargaining rights for most public workers and slash their pay and benefits. Walker has also notified the state’s National Guard to be on alert for actions taken by unsatisfied state, county and municipal employees. On Monday, hundreds of protesters marched on the State Capitol in Madison, with more protests being planned. Joining us from Madison is John Nichols of The Nation magazine and Brad Lutes, a Wisconsin public school teacher. Nichols warns the governor’s actions could have national ramifications: “If Governor Walker pulls this off, if he succeeds in taking away collective bargaining rights from the union, AFSCME, which was founded in Wisconsin back in the 1930s, if he takes down one of the strongest and most effective teachers’ unions, WEAC, in the country, then we really are going to see this sweep across the United States.” [includes rush transcript]