'Business as Usual' is NOT Getting it Done in Wisconsin

Lasee’s Notes

Imagine being given a large sum of money to invest in a business venture – with no strings attached and no accountability if your business didn’t succeed. Sounds great doesn’t it? Now what if it was your money on the line? Would you be willing to make that investment? That wouldn’t be wise. Unfortunately that seems to be the criteria state agencies use to determine which businesses get our money in the form of economic development grants and loans.

The non-partisan Legislative Audit Bureau released a report on the state’s economic development programs. According to the Audit Bureau, the state currently offers 152 programs (one hundred and fifty two!!) through eight state agencies for economic development purposes.

From 2001-2005, these programs awarded $180 million in grants and loans, $56 million in tax credits, $240 million in bonding authorizations, and $64 million in loan guarantees. That’s over $500,000,000 in five years or roughly $7 million for each of Wisconsin’s 72 counties.

What did we get for our half-billion dollar investment? Good question. The Audit Bureau couldn’t say for sure because the majority of our development programs are not tracked properly. In other words, we don’t know where the money is going in many cases.

The audit did uncover several ridiculous uses of state development dollars including:

• $29 million in tax credits to insurance companies which created 316 jobs. That means taxpayers spent nearly $92,000 per job. Great investment considering the jobs most likely paid much less. Why are we subsidizing insurance companies anyway?

• At least two companies laid off employees within three years of receiving state grants to create jobs.

• Duplication of program goals is the norm. We have 34 programs devoted to helping businesses purchase land or buildings and 26 programs for business planning. (I wonder which ones of these are truly effective.)

• 21% of state assistance was given to projects in eight counties with no indicators of economic need.

• 17 of the 152 programs are inactive, yet still receive some state support.

Why is this important to you?

It’s our taxpayer money at work - at high costs and low value with little accountability.

Part of the reason taxes are so high is we tax all of us more to do silly things like this. All in the name of economic development, so politicians can say that they did ‘something.’

Whatever happened to competition? What happened to supporting good businesses instead of propping up businesses with millions of dollars in grants and loans that may not make it anywhere else? I contend that we often prop up companies that are on their way out instead of giving good companies what they need to succeed (more sensible regulation and lower taxes).

We pay a lot of money for short term gain in the name of ‘economic development and job creation’ which leads to long term pain caused by a changing economy.

We need to be better stewards of the taxpayer’s money. Rather than taxing all of us and good businesses more only to dole it out to businesses that may not be economically viable in the future, wouldn’t it make more sense to allow profitable companies to keep more of their money to pay their employees, pay down their debt, or create more jobs?

Too often our politicians in Madison want to look good and appear as if something is getting done. Instead of being good stewards and making sure our money is spent wisely, we accept ‘business as usual’ and move on to the next press appearance.

We can and must do better.

------------------------------------------------------------------------------------
Lasee’s Notes is a weekly column by Representative Frank Lasee, 2nd Assembly District, covering events in the Legislature and statewide.

Barking up the wrong horse

-or Beating a dead tree.

I mixed a couple metaphors there to get your attention, as I fear I may quickly lose it.

Fist, stand in front of the mirror and ask the question, who really pays the corporate income tax? Then, I an going to urge you to badger your legislators to abolish the $600 million/year corporate income tax. That is a single tool that could cut the size of government and grow the economy in one simply complicated step-leap.

What am I talking double-talking about? For starters, the corporate tax code composes about 25% of our state tax law, a candid Dept. of Revenue bigwig once said. It costs upwards of $20 million a year for state workers to administer that compiles code, process forms and enforce a Gordian knot of rules. If we could slash through the knot and get off businesses' backs, it would take more than a few inches off the size of government's Big and Tall trousers and let the economy grow like corn in an ethanol state.

And it could stop a budding IT fiasco. The DNR and Dept. of Workforce Development have been working for years on combining tax collection systems for various withholding and employment taxes (see the UW payroll program of late). At the risk of wasting money already spent on this nearly decade-old project, axing the corporate tax might simplify things to the point where they could actually implement a joint IT project.

Canning the corporate tax code would also save in staff expenses at legislative bureaus. It would end administration of numerous lucrative tax breaks, funding for which could be used to offset the lost revenue. Other lost revenue could be offset by ending property tax breaks that those "greedy" business interests have acquired over the past year. That's a statement intended for those who never built a business. And it would end the DOR's crippling pursuit of tax shelters for corporate investment income. The dreaded, two-headed beast, "combined reporting," could be laid to rest with other bogeymen.

Next there is our Dept. of Commerce, which gleefully distributes $40 million a year, in the name Governor Du Jour, through its Technology Zone Program, just one of many grant programs, which require dozens of application evaluators abd processors, the deciders among whom are loyal to the supporters of Gov. Du Jour.

Government redistributing wealth in its infinate political wisdom and interest? I don't think this is what Adams and Jefferson had in mind.

And I haven't even touched on the 8.5 million little piggies in Wis DOT's Transportation Economic Assistance program, in addition to their other sundry grants. Sometimes government cooks best by staying out of the kitchen. You want a surefire recipe for creating jobs? We don't need a $750 million Institutes for Discovery in Madison. Just demolish the corporate tax and ring the dinner bell.

At the very least, abolishing the corporate income tax is something worth a study by the Legislative Fiscal Bureau. And it may be a more pratical step than a TABOR or a TPA for reducing government spending and waste.

Can somebody toss me a sturdy stick? I want another whack at that dead tree.
-------------------------------------------------------------------------------------
By Richard Parins, President of The Brown County Taxpayers Association.

A Borrowing Epidemic

Lasee’s Notes

How would you like to have a magical credit card that allowed you to buy just about anything you wanted? Oh, and you never had to worry about paying the bill. Sounds like a fantasy doesn’t it? It is. There is no such thing. We live in a real world, with real costs, and real debts. When we borrow money, we have to pay it back, simple as that.

Unfortunately, many state and local government officials seem to believe they can rack up large sums of debt and not worry about paying the bills.

The Wisconsin Taxpayers Alliance, one of the state’s most respected non-partisan fiscal research groups, released a study (access it here) last week which should make politicians wake up and come back to the real world.

The study found that total debt for state and local governments in Wisconsin had increased by 38% from 2000-2004. That’s over 8% per year. Our state debt now stands at nearly $9 billion ($9,000,000,000). This borrowing epidemic, which is a large contributor to our high tax burden, grew nearly four times as fast as inflation (10.4%).

To put this borrowing into perspective, consider the fact that our personal income grew by 16% during this same time period. In fact, in 2000 to 2002 our total state debt increased by roughly 14% per year, nearly surpassing our income growth for the entire period. As our incomes increased gradually, government debt blew up.

This enormous debt has more serious consequences.

After reviewing our financial situation, three national bond rating agencies (Moody’s, Standard & Poor’s, and Fitch) consistently ranked only two to four states lower than us (California, South Dakota, Louisiana, and Idaho). We’re 46th of 50. That puts our bond rating among the worst in the nation and dead last in the Midwest.

Why should you be concerned?

A state’s bond rating is similar to a person’s credit score. Both measure risk. That is, how likely you are to pay back the money you borrow. If you have a poor credit score and get a loan, it will be at a higher interest rate than a person with a better credit score. The higher the interest rate climbs on our government loans, the more we all pay. That’s a serious problem.

The other problem is that we have to make payments on our existing debt. Because tax collections have remained nearly the same and our debt has increased substantially, we are in a situation where we have to borrow more to cover these obligations. As the debt service climbs it will crowd out other options for paying the bills. That is of course unless we want to raise taxes even higher.

All of this increased borrowing and spending is leading us down the road to becoming a ‘Wississippi’ state – a state with only middle class and poor, where demand for services outstrips the ability of the citizens to pay for those services. In other words, our high tax burden and increased government debt are chasing out higher-income people. We are moving closer to the point where we no longer have the tax base or borrowing power to support the services we’ve enacted.

Someone has to pay for it all. With wealthy people leaving the state in high numbers, that responsibility shifts even more to the middle class. No budgeting gimmicks or accounting tricks will get around that fact.
-------------------------------------------------------------------------------------

Lasee’s Notes is a weekly column by Representative Frank Lasee, 2nd Assembly District, covering events in the Legislature and statewide.

Those Darn Exceptions

Lasee’s Notes

“…I announced a plan to freeze property taxes the responsible way. Not only does my plan set strict limits on taxes, but it makes an historic funding commitment to schools and local governments that will take the burden off property taxpayers.” This is how Governor Doyle described his plan to provide tax relief to property owners in February 2005. Sounds good doesn’t it?

The Governor claimed that his ‘responsible’ freeze would maintain our schools, roads, police and fire departments, and all of the other generous services our governments provide without raising property tax bills. Unfortunately for taxpayers, that bubble burst last week.

The Wisconsin Taxpayers Alliance, a non-partisan fiscal watchdog group, released a study that found property tax rates among all Wisconsin municipalities increased on average of 4.1% last year despite the Governor’s freeze. That increase was nearly the same as the past 3 years. In fact, 77% of Wisconsin municipalities with populations over 2,000 exceeded the limits. More than a third of these communities raised taxes more in 2006 than in 2005 when there was no freeze.

Wait a minute. I thought Governor Doyle took the burden off property taxpayers by capping the increases in our tax bills to 2%. So how did this happen?

Unlike the Republican tax freeze that required all local taxing jurisdictions – counties, municipalities, school districts, and technical schools - to freeze tax collections at 2004 levels for the next three years, the Governor’s version was full of exceptions that allowed governments to spend more.

Most notably the Doyle plan allowed municipalities, counties, and tech colleges to increase spending by more than twice the rate of inflation. The Governor placed no limits on school district spending. Given these facts, it is not surprising that tax bills went up.

Ryan Parsons, a researcher for the Taxpayers Alliance, summed up the problem when he said, “Although the municipal levy restrictions weren’t that tough, we were surprised that the increase was over 4%. It just shows the cumulative effect of all the exceptions piling up.”

Those darn exceptions – they keep sticking it to the taxpayers.

These are the same exceptions that have infected our federal government and seem to be spreading to our state and local governments as well. These exceptions of course are the little loopholes that seem to work there way into many well-intentioned public policies that lead to more spending.

These loopholes have contributed to a federal debt that stands at $8.4 trillion (that’s twelve zeroes) and a state debt of nearly $9 billion. And growing in both cases.

Politicians understand that they can sell responsible, tough reforms to the voters and also include loopholes that fly under the radar and keep the spending interests happy.

What can we, the taxpayers and voters, do?

We must keep the pressure on by staying informed and reading the small print. So the next time a politician tries to pull the wool over our eyes, we can surprise them and call them on it.
------------------------------------------------------------------------------------
Lasee’s Notes is a weekly column by Representative Frank Lasee, 2nd Assembly District, covering events in the Legislature and statewide.