Scott Walker Approves Obscure Tax Break For Furniture Company, Quickly Collects Large Campaign Donation

CREDIT: AP Photo/Jacquelyn Martin

Less than a month after voting to give a Wisconsin furniture company a $6 million tax credit that allows it to lay off half its in-state workforce, Gov. Scott Walker (R) received $20,000 in campaign donations from the company’s leadership, a newspaper in the state reports.

Ashley Furniture won the credit from the Wisconsin Economic Development Corporation (WEDC) in January on a 9-2 vote. As WEDC Chairman, Walker was one of the 9 votes in favor. Then in February his campaign received four $5,000 donations from company founder Ronald Wanek, current CEO Todd Wanek, and their respective spouses, the Wisconsin State Journal reports.

A Walker spokeswoman told the State Journal that there was no connection between the WEDC decision and the campaign contributions that followed. Neither the governor’s office nor his campaign nor Ashley Furniture responded to emails from ThinkProgress requesting comment on the story.

Walker is currently under scrutiny for allegedly soliciting far larger donations to the state arm of the Club for Growth. But while the dollar figures involved in that ongoing court case are attention-grabbing, the alleged misconduct there is less overtly tied to Walker’s ability to make decisions that help donors’ bottom line. The Club for Growth investigation suggests that Walker may have illegally coordinated with an outside electioneering group in violation of campaign finance law while soliciting contributions from vulture capitalist Paul Singer, Home Depot founder Ken Langone, and other billionaires who frequently open their checkbooks for right-wing causes.

The Ashley Furniture story features a more direct, localized use of Walker’s authority over state funds. The company says the deal, which is worth more than all its previous tax incentives from the state combined, will allow it to expand its headquarters in Arcadia, WI.

“But it wouldn’t require Ashley to create any new jobs, instead granting the company license to lay off half of its current 3,848 Wisconsin-based workers in exchange for an enterprise zone tax credit,” the State Journal reports, calling the credit “one of the most valuable and coveted state subsidies.” A WEDC spokesman told the State Journal that it “is committed to doing whatever it can to work with the company and preserve those jobs.” A former WEDC executive told the paper he didn’t think the group had ever handed out a tax subsidy that was conditioned on job cuts rather than job growth, but added that the the specific circumstances in this case could warrant such a move.

Previous research suggests that deals like this one do not pay off for the taxpayers who fund them or the states that dole them out. The seminal academic assessment of business tax incentives concluded in 2004 that the deals provide little to no net benefit in large part because the incentives amount to giveaways to companies that “would have been happy to locate in your state anyway,” economists Alan Peters and Peter Fisher wrote. Instead of producing a net gain for either the national, state, or local economies, the deals are “a zero-sum game” that “simply produce an unending merry-go-round of tax cuts and subsidies whose net effect is to starve government of the resources it needs to finance the services it should be providing[.]”

More recent research has arrived at similar conclusions about the inefficacy of business tax breaks, and a 2012 survey from the Pew Trusts found that very few states bother to conduct any thorough evaluation of whether or not their tax credits pay off. While Wisconsin won praise from Pew for doing more than most states to check the receipts on its incentives, the state only evaluated (and rescinded) its filmmaking tax credit program. The broader corporate subsidy system in the state has not been subject to the same scrutiny.

The total cost of state business tax incentives, whether piecemeal ones like Walker’s deal with Ashley Furniture or wholesale tax code loopholes, runs into the tens of billions of dollars per year.