|
Conservatively Speaking
State Senator Mary Lazich (R-New Berlin) represents parts of four counties: Milwaukee, Waukesha, Racine, and Walworth. Her Senate District 28 includes New Berlin, Franklin, Greendale, Hales Corners, Muskego, Waterford, Big Bend and parts of Greenfield, East Troy, and Mukwonago. Senator Lazich has been in the Legislature for more than a decade. She considers herself a tireless crusader for lower taxes, reduced spending and smaller government.
No improvement in Wisconsin's woeful business climate
By Mary Lazich
Friday, Oct 31 2008, 09:11 AM
Wisconsin’s business tax climate continues to be one of the worst in the country. The nonpartisan Tax Foundation in Washington D.C. has released its 2009 State Business Tax Climate Index, ranking Wisconsin number 38 (Wisconsin was number 39 last year). The annual study is significant because it demonstrates how states compare to one another in competitiveness.
Here are the five specific areas the Tax Foundation reviewed in each state to come up with its Index and how Wisconsin scored on each: corporate taxes (29), individual income taxes (44), sales taxes (18), unemployment insurance taxes (25), and property taxes (31).
American companies confront a double-whammy. They pay one of the highest corporate tax rates of any of the industrialized nations. The top federal rate on corporate income is 35 percent. On top of that, some states institute harsh tax systems that make competition difficult. Companies will go where they have the best advantage. As the Tax Foundation correctly reports, “States with the best tax systems will be the most competitive in attracting new businesses and most effective at generating economic and employment growth.”
While booming job creation overseas can’t be overlooked, the U.S. Department of Labor reports most significant job relocations are from one state to another. A state like Wisconsin must be more concerned about jobs moving to Indiana (Business tax climate number 14), Michigan (number 20) or Illinois (number 23) than India or China.
The ten states with the best business tax climates are, in order, Wyoming, South Dakota, Nevada, Alaska, Florida, Montana, Texas, New Hampshire, Oregon, and Delaware. Wyoming, Nevada and South Dakota do not have corporate or individual income taxes. Alaska does not have individual income or state-level sales taxes. Florida and Texas do not have individual income taxes. New Hampshire, Delaware, Oregon and Montana do not have sales taxes. States that are able to draw adequate revenue without one of the major taxes will be more competitive than states that impose every possible tax.
Some factors contribute to Wisconsin’s poor ranking. The income level at which a state’s top rate kicks in determines what amount of income is subject to the top rate. Wisconsin scores badly here because it is one of the states that has arranged its multiple tax brackets so that the top rate takes effect in the middle range of income ($152,140).
Wisconsin has an Alternative Minimum Tax (AMT) that is modeled after the federal AMT. The Tax Foundation says the AMT is, “an inefficient way to prevent tax deductions and credits from totally eliminating tax liability,” that puts states like Wisconsin through, “needless tax complexity.”
Then there is our gas tax, the fourth highest in the country at 32.9 cents. Because gasoline constitutes a large expense, states with lower gas taxes are more competitive.
How can states like Wisconsin improve their business climates? What about tax incentives and subsidies? The Tax Foundation’s position and I concur, is that, “if a state needs to offer such packages, it is most likely covering for a woeful business tax climate. A far more effective approach is to systematically improve the business tax climate for the long term so as to improve the state's competitiveness.”
Surely, other factors play a role in a state’s business climate including how close it is to raw materials and transportation centers, the quality of schools, the skill of its workforce, and the state’s quality of life. Some of these areas lie beyond the scope of state lawmakers to directly control. However, legislators can make policy decisions that directly impact a sate’s tax system, and thus, the state’s business climate.
I agree with the Tax Foundation that writes:
“Taxes matter to business. Business taxes affect business decisions, job creation and retention, plant location, competitiveness, the transparency of the tax system, and the long-term health of a state's economy. Most importantly, taxes diminish profits. If taxes take a larger portion of profits, that cost is passed along to either consumers (through higher prices), workers (through lower wages or fewer jobs), or shareholders (through lower dividends or share value). Thus a state with lower tax costs will be more attractive to business investment, and more likely to experience economic growth.”
The best tax system is one that is simple and fair to all businesses that shuns excessive business taxes and keeps costs for adhering to the system down. Until Wisconsin adopts policies to enable a business climate that encourages growth, it will continue to have problems competing.
You can find the 2009 State Business Tax Climate Index here.
|
|
