You have probably heard about Rachael Maddow's response to the PolitiFact article that called her a liar. At some point, we're going to have to start countering this nonsense by pointing to the specific bills that created the "economic crisis."
In a way, it's kind of PolitiFact to direct us to the memo that they use to determine the defecit numbers. Of specific interest is this line, which PolitiFact so helpfully ignored:
Our analysis indicates that for the three-year period, aggregate, general fund tax collections will be $202.8 million lower than those reflected in the November/December reports. More than half of the lower estimate ($117.2 million) is due to the impact of Special Session Senate Bill 2 (health savings accounts), Assembly Bill 3 (tax deductions/credits for relocated businesses), and Assembly Bill 7 (tax exclusion for new employees).
More below the fold.
State Bill 2's financial impact is not so terribly bad:
Using this methodology and an effective date of January 1, 2011, it is estimated that allowing a tax credit for amounts contributed to HSAs will decrease revenue by $20.7 million in fiscal year 2012, $27.3 million in fiscal year 2013, and $29.0 million annually beginning in fiscal year 2014.
I find it interesting that Health Savings Accounts (or HSAs) are used mostly as a tax dodge for wealthy people. This bill makes them much more cost efficient by allowing them to "double dip" as deductions from both federal and state taxes.
Assembly Bill 3 doesn't really seem to do all that much...
If it is assumed that 25% of the 416 firms that moved into Wisconsin had not done business in the state in the preceding ten years and assuming that their tax liability averages $2,700 annually, then the fiscal effect of the proposal would be an annual revenue loss of $280,800 (416 x.25 x $2,700).
... Until you read the bill.
The credit is equal to the amount of the taxpayer’s income or franchise tax liability after applying all other credits, deductions, and exclusions.
Now, if I were a billionaire looking to buy up some power plants, this would be an amazing deal because it says that I pay one-third of my taxes over three years (It's a credit, not a refund, so I'd actually have to pay that first year). Then, assuming this bill is still in place, I would create another business in another state and sell my assets in Wisconsin to it. Notice that there's nothing in the bill that prevents me from doing this forever.
The bill that gets my attention, however, is Assembly Bill 7.
While the draft language provides a credit for a claimant's entire gross tax liability, the fiscal estimate is derived assuming that the credit is based only on the claimant's gross tax liability related to business activity. It is assumed that the fiscal estimate associated with individual income tax claimants would be significantly higher if based on the existing draft language.
Digest that for a minute, then go to the bill itself:
(c) Limitations. Partnerships, limited liability companies, and tax−option corporations may not claim the credit under this subsection. A partnership, limited liability company, or tax−option corporation shall compute the rate of credit that each of its partners, members, or shareholders may claim and shall provide that information to each of them.
Emphasis mine.
This is why the person crafting the impact statement includes such a strong disclaimer. Each of the subsections explicitly excludes the various types of corporation. The tax credit is applied to the partners, members and shareholders. Genuine "small businesses" do not generally have very many of these. Large corporations, by contrast, have a lot of them. It looks like all you have to do for 15% off the top is divide your gross by $250,000 and have that many partners, members and shareholders. Pretty nifty, huh?
In this case, Walker and PolitiFact are actually telling the truth. They've blown a giant hole in their tax revenue and locked themselves out of raising taxes to fix the problem.
Now, in the interest of fairness, there is one number being thrown around that gives me pause:
Medical Assistance. It is estimated that an additional $153.2 million GPR will be required to fund medical assistance (MA) benefit costs through June 30, 2011. The projected shortfall is primarily due to MA enrollment costs and service costs exceeding Act 28 estimates.
Given that the budget memo includes a number of deferred payments and payments they might have to make (lawsuits, etc.), I figured this number deserved some investigation. Act 28 is the most recent budget bill that addresses Medicaid matching payments. The reason they're having a problem with this is that health care costs have skyrocketed. Remember when the President said that rising health care costs would cripple our economy unless we had reform? Well, this is a very clean example of it.
So, at the end of all this, if I were to rate PolitiFact I would give them a Mostly False. Yes, the Wisconsin budget was more complicated than the small blurb from the memo indicated and, yes, they would have faced some serious deficits that were not of their making, but the medical assistance shortfall is largely due to the unwillingness of their party to regulate the health insurance industry and the rest of their serious concerns are the cost of being entirely in the pocket of big business. It's like giving $1,000 to your girlfriend when you're already behind on your rent, then asking not to have to pay your utilities. Other states have faced situations like this and worse, but they didn't see it as an opportunity to go union busting.