Wisconsin Open for Business
Last month, In Business magazine held a roundtable discussion with business leaders who represent hundreds of small and large businesses across this state to discuss what immediate changes must be enacted by our new state Legislature and Governor Walker.
The big picture for both of those governing bodies is to create a permanent environment that is conducive to attracting and retaining businesses here in Wisconsin, putting to rest once and for all the anti-business climate that the state has suffered under for several years.
Our elected officials also need to realize that the past liberal policy of throwing incentives at favored industries or businesses is not a sustainable policy for success. In fact, that policy has invited companies (think Mercury Marine, General Motors, and Harley-Davidson) to threaten to leave and then extort special tax breaks and incentives for themselves if they stay.
Meanwhile, businesses that don’t behave in that manner, who remain here in Wisconsin, have been punished with an anti-business tax climate and heavy regulation. Too much regulation and taxation creates an environment in which businesses are conditioned to behave in a self-serving manner.
Did you know that in 2009, state income tax revenue fell by 11% as a result of increasing taxes? The lesson is that higher tax rates equal lower tax revenue. Lowering state income and business taxes is vital. Wisconsin has some of the highest taxes in the nation. Certainly, if other states can get along with less government, so can we.
We should start with eliminating the estate tax, which is key for capital retention. Most senior business owners buy a condo down south to retire to during the warmer weather. Once they begin thinking about selling their business and transitioning, the first step they take is to live six months and one day in a state with no state income tax or estate tax so that they can establish residency. Then they sell their business and move the proceeds (and their income and other capital) south.
Once those owners move their bank accounts south as part of establishing residency, Wisconsin can no longer tax their income or their estates. And keep in mind that once they move, they are also moving their capital out of Wisconsin, making less available for investment here.
We need those owners and retirees to be encouraged to keep their capital here, but they will only do so if they are not penalized. Wisconsin lacks angel and venture capital compared to other states, yet there is plenty of capital fleeing the state every year. All we have to do is change a few tax rules and all that capital can stay here to fund expansion of Wisconsin firms and fund new start-up technology firms and other businesses. The growth alone will generate millions more in new tax revenue.
Let’s also repeal combined reporting, which taxes and penalizes national companies that have chosen to locate here. This outrageous double taxation policy will be responsible for driving hundreds of businesses out of state if it is not the first law repealed in the New Year. Many companies are on hold, waiting to see what happens.
And let’s start by eliminating a few state departments wholesale. This state has twice the number of state employees that it had under Gov. Tommy Thompson, who left for Washington 10 years ago. Are Wisconsin taxpayers receiving twice the service level? Doubtful.
Gov. Walker should consider writing an overall business culture and policy statement that will govern subordinates and department secretaries. They need his guidance, so what are his big-picture goals? They should be lower taxes, less regulation and bureaucracy, a level playing field, treating businesses as customers, and job creation. If all your appointees have a set of governing guidelines, they could make their individual decisions based upon those guidelines.
Next month, I’ll be back with more pro-growth specifics.
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