For all their talk about providing targeted tax relief to the middle class, Governor Scott Walker and legislative Republicans once again find themselves defending a move that made for good sound bites but brought virtually no tax benefit to taxpayers in outstate Wisconsin or the small businesses here they claimed to be helping.
The most recent revelation that a Republican tax cut oasis was merely a mirage deals with Walker's idea to provide capital gains tax relief for investment in businesses that operate primarily in Wisconsin.
Naturally, it sounds like a great idea to reduce taxes for someone who decides that money otherwise spent on the stock market should be kept closer to home. Governor Walker promised to aid this by having his Wisconsin Economic Development Corporation provide a list of companies that have at least half of their payroll and half of their property in the state.
But the WEDC, a semi-private agency hastily created by legislative Republicans eager to scrap the old Commerce Department, never put out a list of such companies eligible for 2011 tax deferrals until a reporter asked about it on December 20.
That's December 20 of the year 2012.
Only about $40,000 in capital gains tax relief has been provided according to the Milwaukee Journal Sentinel. That's not even a rounding error in the billions of dollars in taxes paid to the state each year. So for all the fanfare about relieving taxes, nothing got done for the taxpayer.
And nothing got done for those small businesses either, especially in our neck of the woods. When the WEDC finally released its list of 120 Wisconsin companies eligible for the investor assistance, it incuded exactly two companies in this part of the state and it's unclear if Bloomer Plastics or Mastercraft Industries of Rice Lake saw a dime of extra investment because of Walker's mirage.
Asked about the delay, a WEDC spokesman gave the usual excuse about how busy they were forming a new agency. That defense has come up a lot in addressing WEDC slipshod operations: the bad bookkeeping, the failure to track $12 million in overdue loans, the lack of review over agency credit cards, and the exodus of Commerce employees who had experience in providing the oversight that would keep political appointees from wasting tax dollars and failing at its mission.
Until a recent audit made the public aware of these failures, the WEDC was susceptible to embezzlement, it was in danger of costing Wisconsin federal funds for job creation, and above all, for a governor who formed the agency because he thinks "government should be run like a business," it was simply failing at Walker's top charge of creating jobs better than the old department.
Instead, Wisconsin is at the bottom of Midwestern job creation and what few investors would be willing to invest in state-based businesses cannot even get a simple list of companies to consider in order to get a capital gains tax break.
It's not easy to provide targeted tax relief, but it's not impossible. In order to attack a budget gap brought on by the recession, Democrats in 2009 kept income taxes flat for 99 percent of taxpayers but increased the capital gains tax from 2.7 percent to 5.4 percent. In exchange, a tax deferral program was created for "qualified new business ventures," the start-up companies, often in high tech fields, with greater potential for Wisconsin job creation than the big businesses that were laying off workings in droves.
A balanced approach however, raising taxes on those who benefitted the most from the Wall Street bubble while beefing up the reward for investing on Main Street in Wisconsin, is tough to explain in short campaign commercials. It's easier for a politician to simply claim, "Democrats raised taxes." But now the people who claimed they would provide tax relief to the middle class have shown they don't know how to do that.
Or never really wanted to in the first place.
Milwaukee Journal Sentinel 1/13/2013
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