The Significant Risk of Never Breaking Even on Foxconn Subsidies

Wednesday, August 16, 2017 at 5:35 PM by

When the Legislative Fiscal Bureau wrote last week that it would take until at least 2043 for Wisconsin to break even on the Foxconn subsidies, they were summarizing a Department of Administration analysis that used the “best case” assumptions. Using the same methodology and most of the same assumptions, a new Wisconsin Budget Project analysis calculates that other scenarios within the range described by Foxconn could mean that the cost of the state subsidies would not be recovered until 2050 or 2058.

Of course, the DOA analysis and our alternative scenarios all raise the question of whether we can ever expect to break even on the state’s investment and local costs. As many people have pointed out, tech companies aren’t the most stable employers, and Foxconn’s own record illustrates that point. With that in mind, our new analysis calculates how much Wisconsin would be in the hole if Foxconn pulled out of Wisconsin 25 years from now or, alternatively, if they pull out of Wisconsin in 2034 when the annual subsidy payments would end. Read more

Foxconn Deal Keeps Looking Worse

Wednesday, August 9, 2017 at 4:56 PM by

The massive subsides for Foxconn proposed by the Governor keep looking worse as we learn more. The most recent sobering information came this week when the Legislative Fiscal Bureau (LFB) issued a new analysis of the proposed subsidies. The figures in that August 8th analysis reinforce why a number of commentators and editors for business publications, including the editors of Bloomberg, have been extremely critical of the proposal.

Here are some of the key points in the new LFB review of the Foxconn bill: Read more

Reviewing the Foxconn Costs and Risks (without the Rose-colored Glasses)

Wednesday, August 2, 2017 at 5:31 PM by

Different Assumptions about Foxconn Job Creation Yield Much Higher Estimates of the Cost of Jobs

The cost of the proposed new tax credits for the tentative deal with Foxconn could be far larger per job created than some people have suggested. Those costs will vary greatly depending on the ratio of spending for payroll versus the capital expenditures.

The more that Foxconn invests in its facilities and state-of-the-art automation, rather than payroll, the more the proposed deal will cost state taxpayers per job created. A new Wisconsin Budget Project report examines the potential tax credit costs based on four scenarios that make different assumptions about the number of new jobs, the duration of the project, and the amount of Foxconn spending for capital improvements. Read more

Windfall: Recent Tax Cuts Deliver Big Benefits to Wisconsin’s Richest Residents

Tuesday, June 27, 2017 at 3:14 PM by

PizzaA series of major tax cuts passed between 2011 and 2016 has been a boon to the wealthy, giving big tax breaks to Wisconsin residents with the highest incomes. A new analysis by the Wisconsin Budget Project takes a look at the outsized tax benefit lawmakers have provided to the top 1% by income in the state, and contrasts it to the much smaller tax breaks received by residents in the other 99%.

There are several ways of comparing the size of the average tax cuts received by residents in different income groups. But in this case, all of the methods point to the same conclusion: the tax cuts that lawmakers have passed in recent years have provided much larger tax breaks to the wealthiest than to other groups of taxpayers.  The analysis examines how the tax cuts stack up in three different ways:

Measured as a share of revenue loss to the state: Out of every dollar in new tax cuts, the top 1% of Wisconsin residents by income got $0.24. Read more

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Kansas’ Experiment Yields Valuable Lessons

Monday, June 12, 2017 at 1:12 PM by
Kansas map

Wisconsin lawmakers should heed the warnings from Kansas

Wisconsin lawmakers advocating for additional tax cuts should consider the example of Kansas, a state that has pushed through enormous tax cuts and that has been held up by tax-cut proponents as a model worth replicating. The massive tax cuts in Kansas damaged the state’s schools, colleges and universities, and key services – and failed to improve Kansas’s economic performance.

The tax cuts passed in Kansas are larger than the ones that have been passed in Wisconsin, but otherwise they share many characteristics. In both states, tax cuts helped the rich much more than most state residents, making income inequality worse. And both states raised taxes on low-income families working to climb into the middle class.  

In the face of disappointing economic growth, Kansas lawmakers have acknowledged that they need to take a different approach, one that invests in assets that help businesses thrive, communities prosper, and hard-working families climb the economic ladder. Read more

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Proposed Changes to Transportation Finance Camouflage Tax Increase on Gas

Friday, May 12, 2017 at 5:44 AM by

State lawmakers have proposed changes to the way gas is taxed that would result in buyers paying more in taxes for each gallon of gasoline purchased.

The tax increase is part of a broad package proposed by Assembly Republicans that also includes raising the vehicle registration fees for some car owners, allowing counties to add a 0.5% sales tax to fund local roads, and directing the Wisconsin Department of Transportation to ask for an exemption from federal requirements that bar new toll roads. The transportation package is paired with a package of income tax cuts that would give extremely large tax breaks to earners with the highest incomes, while shutting out Wisconsin residents with low incomes (see New Income Tax Proposal Overwhelmingly Favors Highest Earners, May 2017).

Rather than increase the gas tax directly, lawmakers have proposed decreasing one tax and increasing another, in what seems to be an attempt to mask the fact that consumers would pay more in taxes when they buy gas. Read more

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New Income Tax Proposal Overwhelmingly Favors Highest Earners

Thursday, May 11, 2017 at 8:02 AM by

Republicans in the Wisconsin Assembly have proposed a package of tax cuts that would give extremely large tax breaks to earners with the highest incomes, while shutting out Wisconsin residents with low incomes.

The tax package has multiple components, the largest of which is the gradual flattening of the state’s income tax rates. The proposal would reduce income tax rates over ten years to a flat rate of 3.95%. Currently, the bottom income tax rate is 4.0% and the top marginal rate is 7.65%, so the proposal would result in a 0.05 percentage point reduction in the tax rate for income in the bottom bracket, and a 3.7 percentage point reduction for income in the top bracket.

Wisconsin’s income tax system as it currently stands is progressive, meaning that taxpayers with higher incomes pay a higher share of their income in taxes. The progressive nature of the state’s income tax partially – but not completely – offsets the regressive nature of the state’s sales tax and property tax. Read more

Categories: 2017-19 biennial budget, Blog, income taxes, STATE BUDGET, STATE TAXES | Comments Off on New Income Tax Proposal Overwhelmingly Favors Highest Earners

Wisconsin Left with Little to Show for Nearly Eliminating Requirement that Manufacturers Pay Income Tax

Wednesday, May 3, 2017 at 7:40 AM by

The number of manufacturing jobs in Wisconsin has grown more slowly than the national average, despite a major new tax break that nearly wipes out income taxes for manufacturers.

The number of manufacturing jobs in Wisconsin grew by 1.4% between September 2013 and September 2016, less than the national rate of 2.1%. These figures are based on the Quarterly Census of Employment and Wages, the “gold standard” measure of jobs figures. September 2016 is the most recent month for which jobs figures are available from the QCEW; that month’s figures are preliminary. The manufacturing tax break started with tax year 2013 and was phased in over a four-year period.

Manuf-jobs

The slow growth of manufacturing jobs in Wisconsin is notable because over that same period Wisconsin gave manufacturers a tax break worth $457 million, through a tax credit that nearly wipes out income tax liability for manufacturers and some other businesses. But lawmakers didn’t require manufacturers to create any jobs to receive the tax break – in fact, even manufacturers that are laying off employees or sending Wisconsin jobs overseas can receive the tax cut. Read more

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High Cost, Little Benefit to Tax Gimmick Under Consideration

Thursday, April 20, 2017 at 7:39 AM by

Governor Walker has proposed a back-to-school sales tax holiday, a gimmick that would reduce the resources available to support Wisconsin’s schools, university system, and communities, without providing any real economic benefit.

Under the proposal, purchases of school supplies, computers, and clothing would be exempt from the sales tax for one weekend in August. This move would cost the state an estimated $11 million a year in lost tax revenue, and local governments an additional $750,000 a year in lost revenue. This reduction in revenue would make it harder for Wisconsin to make the kinds of investments in education, health, and workforce systems that can spur economic growth.

A sales tax holiday would do little to boost consumer spending or give a tax break to Wisconsin families with low incomes. There are a whole host of downsides to a sales tax holiday, including:

  • Instead of encouraging consumers to spend more money, sales tax holidays simply shift the timing of the spending;
  • A sales tax holiday on back-to-school items involves lawmakers picking winners and losers among types of goods that should be exempt from the sales tax;
  • Sales tax holidays are not an effective tool for giving a tax cut to individuals with low incomes, since a large amount of savings is also given to people in higher income groups as well.
Read more
Categories: 2017-19 biennial budget, Blog, sales tax, STATE BUDGET | Comments Off on High Cost, Little Benefit to Tax Gimmick Under Consideration

Governor Proposes Expanding Tax Credit that Encourages Work and Improves Children’s Opportunities

Tuesday, April 18, 2017 at 6:54 AM by

Governor Walker has proposed increasing the state’s Earned Income Tax Credit for some families, a move that would improve child well-being and expand economic opportunity for families with low and moderate incomes. He included the measure in his proposal for the budget period that runs from July 2017 to June 2019.

Expanding Wisconsin’s EITC would give a much-deserved break to working parents with low and moderate incomes. The EITC lets working families keep more of what they earn to help meet basic needs and pay for things that allow them to keep working, such as child care and transportation. This tax credit offers working parents a hand up by encouraging and supporting work. It’s a modest investment that can make a big difference in the lives of families.

The EITC also boosts local communities and economies across the state. It puts more money in the pockets of low-wage workers, who then spend it at local businesses to pay for things like groceries and child care. Read more

Categories: 2017-19 biennial budget, Blog, EITC | Comments Off on Governor Proposes Expanding Tax Credit that Encourages Work and Improves Children’s Opportunities