We Pay More When They Don’t Pay Anything

“What have you done to help our local businesses,” the farm woman asked me. “Have you closed those loopholes so the really big companies pay taxes too? It’s not fair to our local businesses that pay taxes like the rest of us.”

This time I could answer “yes”. We got the job done.

This past week Wisconsin joined 22 other states in closing a loop hole very large companies that do a lot of business in Wisconsin use to avoid paying taxes to the state.

Sometimes called the “Las Vegas Loophole” or the “Delaware Loophole” the game is named after the place where large companies set up a shell corporation and move earnings to that shell to avoid paying state corporate income taxes.

Several studies reported many very large companies are not paying their fair share of taxes. For example, the Institute for Wisconsin’s Future reported in 2005, Microsoft, Merck and Sears earned a combined $18 billion in profits – but paid a combined ZERO in Wisconsin corporate income taxes. Coke paid Wisconsin taxes in 2003, but Pepsi did not; nor did McDonalds. But Harley Davidson – a Wisconsin based company – paid nearly $13 million in taxes for the same year. The same study reported a staggering 56 percent of the companies that took in over $100 million in receipts paid NO Wisconsin income tax.

In a bill passed last week and signed into law by Governor Doyle, Wisconsin will now require combined reporting . The law requires companies to pay taxes owed in Wisconsin on income made in Wisconsin.

The new law helps level the playing field between Wisconsin companies and multi-national corporations. The law is consistent with tax rules in Minnesota, Illinois and Michigan. And lest you think this new law is a partisan issue – the idea was first proposed by our former Republican Governor, Tommy Thompson and is followed in Texas, Alaska, Arizona and Utah – states dominated by Republican Governors and Legislatures.

But it didn’t take long for our Republican Minority Leader to decry “Tax hikes like these will take even more money from people’s pockets and kill good paying jobs.”

All during the debate in the Senate and the Assembly we heard the threat of jobs leaving the state. But facts are stubborn things. Since 1990 only eight states have increased manufacturing jobs. Seven of these are long-time combined reporting states!

This past week I talked with companies affected by the change. The conversation began with their request that I vote against the bill. But once I explained the situation, I heard more often than not something that went like this;

“This change is going to cost me money. But, you know, I understand the troubles the state is facing. It was a good deal while we had it, but now, I – and my company – really want to be part of the solution – not part of the problem.”

I couldn’t agree more.