Walker Recommends Eliminating Corporate Taxes

Wednesday, October 27, 2010 at 11:35 PM by

Wisconsin policymakers will have to grapple next year with a deficit of roughly $3 billion, and that number could grow higher in the months ahead. A deficit of that size would be a huge challenge even if some candidates weren’t promising to roll back tax increases adopted in the last budget.

The Milwaukee Journal Sentinel reported Monday that Scott Walker has now suggested going even further in making deep tax cuts, by eliminating corporate income taxes altogether. In response to a questionnaire from the Metropolitan Milwaukee Association of Commerce, Walker said he favors repealing corporate income taxes. Such a change would cost the state more than $800 million each year.

The article reports that Walker’s opponent in the Governor’s race, Tom Barrett, did not respond to that question in the survey; however, he said at a recent press conference that ending the corporate income tax would cause a tax shift to working families.

Quoting from the article, “The MMAC didn’t endorse candidates in state races, but the group has contributed $381,000 this year to the Republican Governor’s Association, which has run ads against Barrett.”

A brief commentary on the Isthmus Daily Page today considers the wisdom of making Wisconsin the 6th state not to have a corporate income tax – joining Texas, South Dakota, Nevada, Washington and Wyoming. As the column notes, “most of these states derive a significant amount of their revenue from severance taxes on natural resources, such as oil and coal reserves.”  Yet even though they have that alternative source of revenue (that WI does not enjoy), in most of those states their failure to invest in their education systems undermines their efforts to market their “pro-business” environment.

Incidentally, although corporations frequently complain about Wisconsin’s tax rate, the latest Census Bureau data on state and local revenue show that Wisconsin’s corporate income tax ranked 23rd in 2008, relative to income (and 20th on a per capita basis). And a national business-sponsored group called the Council on State Taxation (COST), which attempts to compare states based on the full range of state and local taxes that businesses pay (rather than just corporate income taxes), estimated in its most recent ranking that WI was tied with 5 other states for the 16th lowest business taxes.

Putting aside the merits of eliminating or reducing corporate taxes, what I have found especially disappointing in recent months is the inconsistency of so many politicians regarding the need to get Wisconsin’s fiscal house in order. On the one hand, almost all the candidates argue strenuously that we have to change the practices that created Wisconsin’s large structural deficit. Nevertheless, many of them turn around and commit the same fundamental mistake as so many politicians before them – promising new cut taxes and/or new or expanded programs, without acknowledging that those policies will require new revenue or offsetting cuts.

Jon Peacock

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