The roar of the Harleys riding out of town
In last week’s column for the Waukesha Freeman, I wrote again about the effect of combined reporting on Harley Davidson and reminded readers just who is responsible for bring that tax law to Wisconsin.
Publication:Waukesha Freeman (Conley); Date:May 6, 2010; Section:Opinion; Page Number:10A
Harley sputters under new tax law
Combined reporting adds up to loss
(James Wigderson is a blogger publishing at http://www.wigderson.com and a Waukesha resident. His column runs Thursdays in The Freeman.)
We’re in year two of unfettered Democratic rule, and we’re now seeing the results.
Wisconsin’s taxpayers and much of the business community gave a sigh of relief when the state Senate gaveled themselves home early this legislative session. Some terrible legislation was left on the agenda waiting for action when the state Legislature closed up shop for the election year.
However, the Democrats already did much of the damage we feared when they took control of both chambers of the Legislature following the last election, including over $5 billion in new taxes.
Despite the gluttony for revenue, it still remained unmatched by the Democrats’ lust for spending.
We head into this November’s elections with a state budget with tremendous revenue shortfalls and a looming structural deficit crisis for whomever succeeds Gov. Jim Doyle. The only reason the Legislature isn’t in special session right now fixing the problem of a budget imbalance is because the Democrats actually gave themselves a temporary out until next year built in the budget.
Making matters worse, the tax increases under the Democrats are hitting businesses directly on the bottom line.
Last week, famed motorcycle manufacturer Harley-Davidson told its employees that the company needs to find $54 million in savings or else consider moving manufacturing operations elsewhere. While Harley-Davidson is trying to avoid the connection, the company is suffering a $22.5 million tax increase in the middle of a recession, money that would go a long way to solving Harley-Davidson’s financial difficulties.
The company is being hit by Wisconsin’s new combined reporting tax that was first enacted last year during in a so-called budget fix that the Democrats ironically labeled a “stimulus bill.” The only things so far it’s stimulated are the accountants and the state’s Department of Revenue.
Combined reporting requires corporations to report and include the income of out-ofstate subsidiaries. The idea is to prevent corporations from paying fees to their subsidiaries in order to avoid tax liabilities.
Of course, the real issue isn’t tax fairness as the supporters of the combined reporting law claim. Wisconsin already had a law on the books allowing the Department of Revenue to pursue payment from companies that would try to avoid taxes by paying their subsidiaries. It’s about the $1.2 billion in revenue the law is expected to generate.
Harley-Davidson is a victim of that law, and soon its employees will have to pay for the new law, too, possibly with their jobs.
As the legislative session drew to a close, the Democrats scoffed at the idea that Wisconsin is a tax hell. They pointed triumphantly to a state Department of Revenue report showing Wisconsin is 24th in taxes. What they failed to mention is that the numbers were from 2006-2007, before the Democrats took complete control in Madison.
The unfortunate truth is that Wisconsin’s 5 billion in tax increases were the sixth-largest increases in the country, and the Democrats still couldn’t get Wisconsin’s fiscal house in order.
Now the Democrats are claiming the combined reporting tax has nothing to do with the situation at Harley-Davidson, as if $22.5 million isn’t nearly half of what Harley-Davidson says it needs to find in cost reductions. Governor Doyle even challenged his critics, wondering what planet we’re on.
I might suggest to the governor that when retires he might consider leaving planet Madison to see how economics on Earth really works.
In the meantime, state Rep. Leah Vukmir has called for a special session of the Legislature to repeal the combined reporting law. While I suspect the governor is unlikely to do so, the Democrats cannot claim they weren’t given a chance to change their policies.
Of course, we can’t help but notice the irony of the state closing the Legislature early before honoring Harley-Davidson with the designation as the state’s motorcycle. It might have made a great going away present.