"REPORT: Ending Special Interest Tax Dodging Would Balance Wisconsin’s Budget And End The War On Unions"
Over the weekend, Main Street America held the largest rallies yet to take place against Wisconsin Gov. Scott Walker’s (R) radical proposal to gut his state’s public employee union collective bargaining rights. Walker claims that his assault on the state’s labor unions is designed to help close his state’s budget deficit and save taxpayers money.
Yet the truth is that the relatively minor budget woes that Wisconsin faces aren’t a result of the middle class pay and benefits afforded to hard-working teachers, municipal employees, and other Main Street Americans. Rather, declining tax revenues from a recession caused by Wall Street and corporate tax cuts Walker immediately rammed through the legislature are much more responsible for the relatively minor shortfalls the state is facing.
Walker claims that that the state is facing a $137 million budget deficit and says that the state’s hard-working public employees should sacrifice their pay and benefits and have their collective bargaining rights crippled in order to close this budget gap. Additionally, Walker has included language in his latest budget proposal that would restructure the state’s debt, which would essentially take care of any economic problems in the short-term. Despite the fact that they aren’t responsible for a budget deficit, Wisconsin’s public employee unions have “announced they would accept paying half the cost of pensions and 12.6 percent of the cost of health insurance — as long as they were allowed to keep their collective bargaining rights” — a deal Walker has flatly rejected.
Yet if Walker really feels like the state is facing unacceptable budget problems and that it needs to be able to recoup revenue, he doesn’t have to attack the pay, benefits, or rights of his public employees at all. All he has to do is look at his state’s tax code and take action to close a handful of special interest tax loopholes and tax breaks so that the state’s richest pay their fair share so that the middle class that has already sacrificed so much doesn’t continue to have to bear all the burdens of the recession by itself. ThinkProgress has assembled a far from comprehensive list of just some of these special interest tax breaks and loopholes that could help balance the budget and end any need for a war on unions:
– Close The Internet Sales Tax Loophole: Currently, online retailers all over the country make skillfull use of the tax code to avoid paying sales taxes. Big retailers like Amazon.com set up subsidiary corporations in states and then argue that the subsidiary corporation doesn’t obligate the parent company to collect sales taxes in the state. A University of Tennessee study estimates that “in 2011 alone, Wisconsin will lose an estimated $127 million in uncollected sales tax on purchases made online” — only $10 million short of what Walker projects his state’s deficit to be. While the best way to close the internet sales tax loophole is for federal action, some states like New York have enacted what they refer to as the “Amazon law,” which would decree that any internet sales company would be liable for the state’s tax laws if it has “independent ‘affiliate’ websites in the state promoting sales on its behalf.” After New York enacted its law to capture previously lost revenues in 2008, Amazon responded by unsuccessfully suing the state. Wisconsin could follow New York’s lead.
- Close Special Interest Property Tax Loopholes: Much of the funding necessary to support government services in Wisconsin comes from property taxes, collected by municipalities, with these taxes currently generating “far more revenue than any other state or local tax.” Considering that much of the Wisconsin state budget is consumed by aid to municipalities, closing these loopholes would relieve city budgets and therefore help reduce statewide expenditures. The current exemptions on potential property taxes amount to $700 million a year. Many of these exemptions were won by interest groups with clout in the state legislature. For example, nonprofit community hospitals — which make up 89% of hospital revenue in the state — currently have an exemption, allowing them to forgo $128 million in taxes in 2008. Certain retirement homes also have an exemption that costs the state $15 million a year. The 2009-2011 state budget included a special exemption “for student housing owned by a nonprofit organization that houses up to 300 students, with at least 90% of its residents enrolled at the University of Wisconsin-Madison” — which benefitted a single dorm: the “Pres House on the UW-Madison campus, which would pay about $250,000 in taxes without it.” While some of the state’s current exemptions make sense, others simply benefit special interest groups and should be closely examined.
- Crack Down On Corporate Income Tax Dodgers: The Institute for Wisconsin’s Future (IWF) notes that the state is “losing over one billion dollars annually to the ‘tax gap,’ the difference between what is legally owed by taxpayers and what is actually paid.” It notes that “business income is only 8% of Wisconsin income, but responsible for 57% of the underreporting tax gap,” mostly due to underreporting. This gap accounts for $113 million in revenue. Some companies dodge their taxes by setting up subsidiaries in neighboring states with corporate income tax havens, like Nevada and Delaware. IWF suggests that simplying the tax code and expanding the network of state auditors could help close the tax gap and stop businesses from underreporting their income to avoid taxes.
And it’s worth noting that the tax cuts Walker rammed through during his first month in office “will reduce general fund tax collections by $55.2 million in 2011-12 and $62.0 million in 2012-13.” It is simply irresponsible for Walker and his allies to continue to blame middle class Wisconsinites for his state’s modest budget woes while ignoring the tax dodging by the state’s special interests who continue to fail to pay their fair share.
There are some reports that the bolting story may be false.