Wednesday, September 28th, 2016

Got my bottom line shredded in the combine

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Harley Davidson told it’s employees last week they need to figure out how to come up with $45 million in savings. Of course, maybe they wouldn’t have to come up with so much if the state wasn’t shaking them down for an additional $22.5 million this year thanks to the new combined reporting requirement. As I wrote for the MacIver Institute this week,

While Governor Jim Doyle may say combined reporting is not an issue for Harley Davidson, as he did on Friday, but the $22.5 million in combined reporting taxes is hitting their bottom line like a farm combine slices through a corn field.

Wisconsin now faces the burden of doing what it can to prevent another large manufacturer from leaving the state. While Harley Davidson so far wishes to handle this as an internal cost-control issue, will the state find itself creating financial incentives to keep Harley Davidson from leaving? Would it not be easier than riding to the rescue of these companies and their employees to just have a business climate already in place that fosters the economic conditions for growth?

If the goal is tax fairness, as the supporters of combined reporting claim, how is it fair that a company needs to be drowning under the Wisconsin tax burden before they can seek any sort of relief, and then it’s just more exceptions carved out the state tax code?

Aha! The supporters of higher taxes will say. The state tax burden isn’t so bad according to them, and they point to a study released just prior to the close of the legislative session saying Wisconsin’s tax burden is about average, 24th overall.

The problem with the study is that the numbers they are using are from 2006-2007, prior to the current budget in place, and even prior to the state budget fix passed last year, too. It’s from a time when Democrats were only in control of the Governor’s mansion and responsibility for the state’s tax policy was shared between the two parties.

In the 2009-2010 biennium, under complete Democratic control, Wisconsin had one of the largest tax increases in the country (see here for a snapshot on the detrimental budgetary moves of the last two years). Only six other states had a higher percentage increase. That increase includes the new combined reporting tax burden on corporations.

Defenders of the combined reporting requirement, like former Commerce Secretary Dick Leinenkugel, like to point out that Wisconsin is one of 23 states (out of 45 that tax corporate income) that now have a combined reporting requirement. We might not have been on the cutting edge of new taxes, but that hasn’t prevented Wisconsin business from bleeding.

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