Fearful Symmetries

Witness a machine turn coffee into pointless ramblings...

03 December, 2012

Wisconsin Manufacturing and Ag Open for Business*

* (If you mean that they are the recipients of hundreds of millions of dollars in tax breaks.)

The Wisconsin Rapids Tribune reports that $100 million in business tax credits will be realized soon thanks to the Republicans in the Wisconsin legislature.

Wisconsin manufacturers and farmers are poised to cash in on the biggest state tax break they’ve received in decades, a move hailed by business groups but questioned by others worried about the annual tax revenue loss of more than $100 million.

The Republican-controlled Legislature included the “domestic production tax credit” in the 2011-13 state budget. It applies to production in Wisconsin and on Wisconsin property that’s assessed for manufacturing or agricultural use. Over the next four years, income taxes on these sectors will be reduced to nearly nothing.

Todd Berry, president of the Wisconsin Taxpayers Alliance, a nonpartisan research group, said Wisconsin is one of the top manufacturing states in the country and it makes sense to assist the sector economically, given its importance and the stress it has been under.

“The harder question is whether it makes sense for state government to essentially play favorites,” Berry said. “Is there some reason we should favor a widget manufacturer over a software developer?”

Berry also faulted the Legislature for failing to specify how the tax cut would be funded, either with more revenue or less spending.

Berry's comment about it making sense to assist the manufacturing sector in Wisconsin made me chuckle because, over the weekend, the NYT published an article about tax "incentives", i.e. – bribes, that local government dole out to businesses called "As Companies Seek Tax Deals, Governments Pay High Price". It is well worth reading but it was the article's interactive sidebar that really caught my attention. If you look at the Wisconsin data, you'll see that we spend "at least $1.53 billion per year on incentive programs". That's $0.10 per dollar of our entire state budget. When that figure is broken down by industry, the top recipients of bribes that involve taxpayer money are, you guessed it, agriculture with $302 million and manufacturing with $572 million worth of "incentives". And now these top 2 recipients of tax breaks are poised for another $100 million or so over the course of a few years.

Both articles note that it's not clear if these tax breaks have the desired effect that legislators intend when passing the laws.

Still, Jon Peacock, director of the Wisconsin Budget Project, a Madison-based tax and budget policy research organization, said one of the problems with the tax cut is it’s not directly tied to job creation.

“We have no assurance that any of the businesses that get this tax break aren’t just going to pocket the money or use it for higher dividends for their stockholders,” Peacock said.

And from the NYT's piece:

The cost of the awards is certainly far higher. A full accounting, The Times discovered, is not possible because the incentives are granted by thousands of government agencies and officials, and many do not know the value of all their awards. Nor do they know if the money was worth it because they rarely track how many jobs are created. Even where officials do track incentives, they acknowledge that it is impossible to know whether the jobs would have been created without the aid.

“How can you even talk about rationalizing what you’re doing when you don’t even know what you’re doing?” said Timothy J. Bartik, a senior economist at the W.E. Upjohn Institute for Employment Research in Kalamazoo, Mich.

All of this makes me shudder to think what these industries would be like in this state if they actually had to compete in a "free market".
|| Palmer, 12:12 PM

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