IWF | Institute for Wisconsin's Future| Tax project: recent news

Wisconsin’s extensive roster of non-profit hospitals own at least six billion dollars worth of tax-exempt property that could be generating at least $117 million in property taxes yearly to help support local services, according to a new IWF report.

The 124 tax-exempt hospitals and medical centers are located in 100 communities statewide. Because they generally do not pay property taxes, homeowners and business owners are forced to pay the hospitals’ share for the police, fire, transit, road maintenance, schools and other basic systems of government the hospitals themselves rely on.

Gov. Doyle’s signature makes it law: The real estate gimmick Wal-Mart (and unknown others?) have been using to avoid Wisconsin corporate income tax is now illegal.

The Legislature closed the tax scam as part of the budget repair bill, and Doyle signed it into effect May 16. In his veto message, Doyle wrote that the new law “closes an unacceptable tax loophole used by multinational corporations to shift profits out of the state to avoid paying Wisconsin taxes.”
The measure shut down the use of intricate tax techniques to avoid taxes by having one branch of a company pay rent to another branch of the same company.
It's a relatively small fix (estimated to bring in $15 million this biennium) but an important first step in much-needed corporate tax reform. It's a change IWF has long urged.

Florida's The Tampa Tribune published a superb editorial endorsing combined reporting, the tax reform that closes the loopholes that allow big companies to shift profits from one state to another.

The Tribune said: “Florida allows multistate businesses to shelter Florida income in other states. This makes the effective income-tax rate on small Florida businesses higher than the rate paid by corporations sheltering income elsewhere…Finding legal ways to collect taxes that are already on the books is not a tax increase. This year, with revenues falling far short of covering basic priorities, the Legislature should take a serious look at a few revenue-generating reforms.”

Combined reporting is included in the Wisconsin Senate’s budget-repair bill. It’s a long-overdue reform.

The Milwaukee County Board recently approved 14-4 a resolution urging more transparent reporting of tax liability and tax reduction methods. Introduced by Sup. Gerry Broderick, the resolution added support to the push for SB367, tax disclosure legislation proposed by Sen. Dave Hansen (D-Green Bay).

Groups representing hundreds of thousands of Wisconsin taxpayers have sent Gov. Jim Doyle a letter supporting his call to deal with projected budget shortfalls by securing additional state revenue to minimize budget cuts.

Despite recessionary budget difficulties, the state must protect the broad network of services crucial to our constituents. This can be done by implementing a hospital tax, canceling the elimination of the estate tax, and beginning the effort to close corporate tax loopholes.

Signers include the Wisconsin State AFL-CIO and a number of other labor unions; League of Women Voters of Wisconsin; Wisconsin Council on Children and Families; Citizen Action of Wisconsin; Wisconsin Alliance for Excellent Schools; Institute for Wisconsin's Future; and leaders of other organizations including the Wisconsin Alliance of Cities and Disability Rights Wisconsin.

IWF Director Karen Royster's op-ed on tax disclosure "Bill on tax disclosure is worthy"

Wisconsin is transforming its economy to attract biotech investors, 21st-century service entrepreneurs and talented young people looking for a community that supports economic growth and a quality lifestyle for families. Good education, safe streets, strong transportation, flourishing parks, recreation and culture as well as a broad network of effective community services attract investment and immigration...

Milwaukee’s school board has advanced a pioneering resolution that could lead to all Wisconsin’s school districts demanding meaningful state tax disclosure legislation.

On Aug. 9, 2007, the Legislation, Rules and Policies Committee of the Milwaukee Public Schools Board voted 5-0 to urge the Wisconsin Association of School Board to support comprehensive tax disclosure legislation. The resolution goes to the entire MPS Board on Aug. 30.

The resolution, crafted by MPS Board President Peter Blewett, recognizes that schools are dependent on a reliable stream of adequate state revenue. But as the resolution states, “few members of the public have access to accurate and current information about who actually pays Wisconsin taxes and how much they pay.”

The resolution urges the state’s school boards to endorse a tax disclosure law that would require three elements:

»A regular tax incidence study, “showing how tax responsibility is distributed among income groups and other categories”

»A regular report on tax expenditures (“tax credit, deduction and exemption programs that reduce state and local revenue”)

All three items are important elements of tax disclosure, which IWF strongly endorses.

Is Wisconsin a tax haven for corporations? Though it may go contrary to the popular opinion, the answer is Yes. A report by Jack Norman illustrates exactly how easy corporations have it when it comes to taxation in Wisconsin and how the corporate sector is underpaying state and local taxes by more than one billion dollars annually. Between tax exemptions and loopholes, many large corporations that do business in Wisconsin pay hardly any state taxes at all. Meanwhile, across the state public services are being cut and individuals pay some of the highest property and personal income taxes in the country.

View a 5-minute condensed video version of highlights of the IWF presentation.

“Are Wisconsin’s Taxes Too High?” was Norman’s cover story for Isthmus, the Madison newspaper, April 6, 2007.

Broken Partnerships is an IWF report explaining how the business sector underpays taxes by over $1 billion.

Wal-Mart brags about avoiding Wisconsin taxes

Wal-Mart responded to IWF’s recent criticism of its tax-avoidance by bragging publicly about how effective it is at not paying taxes in Wisconsin. A Wal-Mart spokeswoman said the giant company uses the so-called REIT tax loophole to avoid corporate income taxes from 84 of its 89 state stores.

Wal-Mart’s comments came in response to a column by Mike Ivey in the Capital Times newspaper, which relied on IWF data.

»Read Ivey’s original column.
»See Wal-Mart’s response.
»See IWF’s sidebar on Wal-Mart, published as a part of our Broken Partnerships report.
»See a report on Wal-Mart tax avoidance by Citizens for Tax Justice

Wisconsin tax heaven: The corporate contribution to state and local revenue

Contrary to the claims of corporate lobbyists that the state has unreasonably high business taxes, Wisconsin is already a low-tax state for large firms.

And this means the corporate sector is not making a fair contribution to the cost of maintaining public structures of state and local government, from schools to roads to public safety to the environment.

To back up these statements, the Institute for Wisconsin's Future released a mass of data on December 4, 2006, detailing that more than thirty states have higher taxes on corporations and that over 60% of the biggest companies operating in the state paid zero corporate income tax in 2003.

Wisconsin Manufacturers & Commerce, the target of much of IWF’s criticism, responded with this statement. IWF responded to WMC with this statement.

View IWF’s PowerPoint presentation as a .pdf.