Taxes must be both adequate to support public institutions and fair to taxpayers at all levels of income and wealth. IWF’s tax research is devoted to modernizing Wisconsin’s state and local tax systems to these ends.
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 new 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
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:
- Individuals, business owners and corporations skipping out on paying income tax;
- Internet buyers and others avoiding sales tax;
- Smokers sneaking around the cigarette tax by going out of state.
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
IWF Conference Examines Property Tax Exemptions
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| 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. |
Who isn’t paying their share of property taxes?
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, February 19, 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.
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
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.
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 new 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 EffectRead the full IWF TARP report
See the press release
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 working paper: Simplifying Wisconsin Taxes