We are currently in the longest period of national economic expansion in U.S. history. National unemployment is low, and many communities have more jobs available than people to fill them. Yet despite this, Wisconsin lags behind its Midwestern neighbors and the country in private-sector job creation.
During our state budget debate, Rep. John Nygren commented that Wisconsin needs to “live within its means.” However, the reality is the Republican majority for years has ensured the “means” available to invest in our economy are squandered. So why, despite these strong economic times, has Wisconsin failed to keep up with our surrounding states?
One key factor has been the ineffective and unaccountable so-called Manufacturing and Agriculture Credit (MAC). The MAC was first introduced in the 2011-’13 budget in a last-minute motion. Initially, the credit was estimated to cost $128 million each year when fully phased in, but the annual loss of revenue has now skyrocketed to more than $300 million. By the end of 2019, this reckless tax credit will have cost the state $1.4 billion.
Not only did the MAC reduce corporate tax rates to near-zero levels, it also changed our economic tax credit incentive programs. Tax credits used to be awarded to companies to offset their tax liability in exchange for adding new jobs. With zero tax liability, tax credit incentives have now been made refundable. In other words, tax credits on top of the MAC are awarded in the form of cash payments. For example, Foxconn pays almost no corporate income tax, and their credits for employment and capital investment would result in up to $2.85 billion in tax credits (cash payments) courtesy of Wisconsin taxpayers.
The generous nature of the MAC was supposed to draw in businesses. This, too, was flawed from the beginning. Republicans did not tie the credit to job creation, therefore companies are free to take this credit without creating a single job. Even manufacturers that close factories, outsource jobs and lay-off workers can receive the credit. Wisconsin actually created more manufacturing jobs in the two years before the MAC was implemented than the four years after it took effect.
Long-Term Investment Makes a State Successful
This poorly designed tax credit had one clear outcome: to give huge sums of money to a small number of wildly rich individuals. The latest numbers show that in tax year 2019, 16 individuals with adjusted gross incomes of $30 million or more will each receive an average of $2.2 million using the MAC. I believe targeted, effective and accountable tax cuts can play a part in increasing the income of those who need it most, but the MAC is none of those things.
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As a Democrat, I believe in the long-term investments that make a state successful: public education, universities and tech colleges, roads, bridges, transit and clean water. Not coincidentally, those investments line up exactly with the things that make a place an attractive place for young, working-age people. And that is the bottom line. Each time Republicans pass knee-jerk, politically motivated tax policies like the MAC, the ability of our state to put money into the priorities of the people is diminished. Each time Republicans choose policies slanted in favor of the ultra-wealthy, our ability to invest in the quality of life for the people in our state suffers.
In 2010—Democratic Gov. Jim Doyle’s final year in office—Wisconsin was 11th among the 50 U.S. states in economic growth coming out of the Great Recession. Tough decisions to raise taxes on the top 1%, expand low-income health insurance and maximize federal stimulus funding helped Wisconsin maintain crucial investments in education and health care during tough times. But in contrast, the final quarter of 2018 saw Wisconsin ranked 39th in private-sector job creation and growing jobs at roughly half the national average. This is not only a repudiation of the ineffectiveness of the MAC but damning evidence against eight years of unilateral Republican control over state government.
Wisconsin Republicans have been fortunate the impact of lost revenue from refusing the Medicaid expansion and the MAC during the past eight years has been minimized because of net new revenue growth during the national economic expansion. Some programs have received increased investment, while other entities like cities, counties and the University of Wisconsin System have done their best to maintain services and programs. But what will happen when the global or national economy slows down? If Republicans underfund or even cut investment in essential programs during good economic times, what happens when there is a national recession?
While the MAC is not the only poor tax policy or spending decision (see taxpayer-funded private schools) made in the past eight years, it remains an albatross each time we face down our state budget. Any policy this costly, ineffective and unaccountable needs to be reconsidered.
Gordon Hintz is a member of the Wisconsin State Assembly.