New IWF tax expose: GE pays $0 state tax
January 2012 - General Electric has brought many good things to Wisconsin, especially good jobs. We just wish they’d pay income tax, as well.
Our latest tax newsletter provides the first national documentation of GE not paying income tax at the state level. GE has been become the national poster-child for corporate tax avoidance.
See other issues of WhoDoesNotPayTaxes?
Walker’s budget a job-killer
Gov. 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.
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.
Consultant’s report shreds SC Johnson’s tax denials
Also, Reuters columnist calls for “thorough audit” of firm
New 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.
“The Truth About Taxes” (the New York Times is correct)
Common sense, learned opinion and the public all understand the basic facts about the economy. According to the latest New York Times/CBS News Poll, 63% of the public support raising taxes on households that earn more than $250,000 a year to help address the deficit.
This editorial in the Times (Sunday, Aug. 7, 2011) well expresses the argument for increased taxes. As it notes: “Here is the bottom line. There is no economically sensible or politically honest way to address the deficit without also increasing revenues and reforming the tax code.”
A Precarious Balance
A dangerous balancing act that leaves much damage in its wake --2011-2013 state budget.
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.
Job-killing budget bad for Wisconsin’s economy
20,000 jobs lost by Legislature’s refusal to tax the wealthiest
June 2011 — We all want jobs. But the budget the Legislature is sending the Governor is a job-killing disaster.
County Impact Fact Sheets |
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