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By Mary Lazich
Wednesday, Nov 19 2008, 03:41 PM
Whenever a new economic report surfaces about Wisconsin, the news usually isn’t very good, whether it be about taxes, our business climate, per-capita income, or Tax Freedom Day. I have blogged extensively about these reports and the latest also shows some critical shortcomings.
The “2008 State New Economy Index” has been released by the nonpartisan groups, the Ewing Marion Kauffman Foundation and the Information Technology and Innovation Foundation.
According to stateline.org, “The groups used 29 indicators to rank each state on how well its economy is structured to compete regionally, as well as globally. States at the top of the list tend to have a high concentration of workers in ‘knowledge jobs’ that require at least a two-year college degree, are at the forefront of the information technology and Internet revolutions and have institutions and residents that embrace the digital economy.”
When it comes to the New Economy, Wisconsin ranks number 33 among the states. The report defines the New Economy as, “a global, entrepreneurial, and knowledge-based economy in which the keys to success lie in the extent to which knowledge, technology, and innovation are embedded in products and services.”
More specifically, the New Ecomony is:
Knowledge-dependent. Knowledge workers have become the largest occupational category.
Global. More goods and services are being traded and exported.
Entrepreneurial. Most, if not all of the job growth in America is derived from companies that are less than five years old.
Rooted in information technologies. IT’s are every where, the most important technology engineering our economy, a key component in almost every sector.
Driven by innovation. Competition is heavily based on the ability to create and adopt new products and business models. As the report states, “Innovative capacity (derived through universities, Research & Development investments, scientists and engineers, and entrepreneurial drive) is increasingly what drives competitive success in the New Economy.”
The Midwest has failed to catch on to the New Economy with the exception of some our neighbors: Illinois (rank number 16), Michigan (rank number 17), and Minnesota (rank number 14).
Why is the “2008 State New Economy Index” important? The report says, “How closely do high scores correlate with economic growth? States that score higher appear to create jobs at a slightly faster rate than lower-ranking states. Higher New Economy scores were positively correlated with higher growth in state per-capita incomes between 2002 and 2006….states that embrace the New Economy can expect to sustain greater per-capita income growth for the foreseeable future.”
Solutions? We must keep our best and brightest here in Wisconsin and we must dramatically improve our business climate.
Here is the complete “2008 State New Economy Index.”
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By Mary Lazich
Friday, Oct 31 2008, 09:11 AM
Wisconsin’s business tax climate continues to be one of the worst in the country. The nonpartisan Tax Foundation in Washington D.C. has released its 2009 State Business Tax Climate Index, ranking Wisconsin number 38 (Wisconsin was number 39 last year). The annual study is significant because it demonstrates how states compare to one another in competitiveness.
Here are the five specific areas the Tax Foundation reviewed in each state to come up with its Index and how Wisconsin scored on each: corporate taxes (29), individual income taxes (44), sales taxes (18), unemployment insurance taxes (25), and property taxes (31).
American companies confront a double-whammy. They pay one of the highest corporate tax rates of any of the industrialized nations. The top federal rate on corporate income is 35 percent. On top of that, some states institute harsh tax systems that make competition difficult. Companies will go where they have the best advantage. As the Tax Foundation correctly reports, “States with the best tax systems will be the most competitive in attracting new businesses and most effective at generating economic and employment growth.”
While booming job creation overseas can’t be overlooked, the U.S. Department of Labor reports most significant job relocations are from one state to another. A state like Wisconsin must be more concerned about jobs moving to Indiana (Business tax climate number 14), Michigan (number 20) or Illinois (number 23) than India or China.
The ten states with the best business tax climates are, in order, Wyoming, South Dakota, Nevada, Alaska, Florida, Montana, Texas, New Hampshire, Oregon, and Delaware. Wyoming, Nevada and South Dakota do not have corporate or individual income taxes. Alaska does not have individual income or state-level sales taxes. Florida and Texas do not have individual income taxes. New Hampshire, Delaware, Oregon and Montana do not have sales taxes. States that are able to draw adequate revenue without one of the major taxes will be more competitive than states that impose every possible tax.
Some factors contribute to Wisconsin’s poor ranking. The income level at which a state’s top rate kicks in determines what amount of income is subject to the top rate. Wisconsin scores badly here because it is one of the states that has arranged its multiple tax brackets so that the top rate takes effect in the middle range of income ($152,140).
Wisconsin has an Alternative Minimum Tax (AMT) that is modeled after the federal AMT. The Tax Foundation says the AMT is, “an inefficient way to prevent tax deductions and credits from totally eliminating tax liability,” that puts states like Wisconsin through, “needless tax complexity.”
Then there is our gas tax, the fourth highest in the country at 32.9 cents. Because gasoline constitutes a large expense, states with lower gas taxes are more competitive.
How can states like Wisconsin improve their business climates? What about tax incentives and subsidies? The Tax Foundation’s position and I concur, is that, “if a state needs to offer such packages, it is most likely covering for a woeful business tax climate. A far more effective approach is to systematically improve the business tax climate for the long term so as to improve the state's competitiveness.”
Surely, other factors play a role in a state’s business climate including how close it is to raw materials and transportation centers, the quality of schools, the skill of its workforce, and the state’s quality of life. Some of these areas lie beyond the scope of state lawmakers to directly control. However, legislators can make policy decisions that directly impact a sate’s tax system, and thus, the state’s business climate.
I agree with the Tax Foundation that writes:
“Taxes matter to business. Business taxes affect business decisions, job creation and retention, plant location, competitiveness, the transparency of the tax system, and the long-term health of a state's economy. Most importantly, taxes diminish profits. If taxes take a larger portion of profits, that cost is passed along to either consumers (through higher prices), workers (through lower wages or fewer jobs), or shareholders (through lower dividends or share value). Thus a state with lower tax costs will be more attractive to business investment, and more likely to experience economic growth.”
The best tax system is one that is simple and fair to all businesses that shuns excessive business taxes and keeps costs for adhering to the system down. Until Wisconsin adopts policies to enable a business climate that encourages growth, it will continue to have problems competing.
You can find the 2009 State Business Tax Climate Index here.
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By Mary Lazich
Tuesday, May 27 2008, 09:04 AM
On April 1, 2008, I blogged about a Competitive Wisconsin Inc. (CWI) report that used 33 measures in six categories to show Wisconsin’s ability to compete nationally continues to sag.
The nonpartisan Wisconsin Taxpayers Alliance (WISTAX) took the tables and charts from the CWI report and assigned grades to Wisconsin in all 33 benchmarks.
WISTAX reports, “Of the 33 measures, Wisconsin had four grades in the A range, 12 each in the B and C ranges, and five in the D range. The average grade over all measures was just below 2.5, or B-/C+. The two areas with the strongest grades were quality of life (averaging about a B) and workforce excellence (B- average). Low grades were given to new business creations (D+) and venture capital per worker (D), both of which suggest that future job creation could be at risk. Also disconcerting was the steady rise in energy costs (C-), once an area of decided advantage.”
Here is the entire WISTAX report.
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By Mary Lazich
Monday, Apr 21 2008, 03:13 PM
No matter what economic study or report you look at, the conclusion is always dismal for Wisconsin when it comes to taxes.
The latest comes from the Small Business & Entrepreneurship Council.
Small Business & Entrepreneurship Council chief economist Raymond Keating has just completed the “Business Tax Index 2008” for all 50 states and the District of Columbia.
Using 16 different tax measures to compile one score, Keating ranks the states according to their Business Tax Index. Among the factors Keating studied were a state's top personal income tax rate, a state's top individual capital gains tax rate, a state's top corporate income tax rate, property taxes, and gas taxes.
Wisconsin ranks number 32, near the bottom third of all the states.
Keating writes, “As Elvis Presley said: ‘A little less conversation, a little more action please.’ For example, more action is needed by elected officials in many states to make their state tax systems friendlier towards entrepreneurs and small businesses.”
I concur, having blogged extensively about Wisconsin’s unfreindly business climate that is severely hampering business growth and retention. Our high taxes coupled with one of the lowest per capita income rates in the country are forcing too many residents to leave the state.
Our state faces a revenue shortfall of $652.3 million, and yet some legislators in Madison want to increase taxing and spending even further.
Keating’s new study is yet another wake-up call to the Legislature and the governor to control excessive taxing and spending.
Read Keating’s entire piece.
Also, the nonpartisan Tax Foundation in Washington D.C. has more details on Wisconsin’s tax system and comparison to other states.
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By Mary Lazich
Tuesday, Apr 1 2008, 02:45 PM
Almost a year ago, on April 2, 2007, I blogged that the U.S. Bureau of Economic Analysis reported during 2006, the rate of growth in Wisconsin income ranked near the bottom compared to all other states. Wisconsin’s per-capita personal income grew 4.3 percent. The national average of per-capita personal income growth was higher at 5.2 percent. Our income growth ranking put us in the bottom 10 states.
I also blogged about a Wisconsin Taxpayers Alliance study that found from 1999 to 2005, Wisconsin’s median household income fell 2.2 percent from $45,667 to $44,650, while the national median rose 13.8 percent from $40,696 to $46,326. Wisconsin ranked 50th in the nation in household income growth during the period. Meanwhile, spending by state and local governments in Wisconsin takes over 20 per cent of your personal income.
You can read my entire blog from a year ago here.
It’s disturbing that the downward spiral of Wisconsin income continues.
Competitive Wisconsin, Inc. (CWI), a nonpartisan group of state agriculture, business, education and labor leaders has released its tenth annual Benchmarks Survey, rating Wisconsin in 33 areas of interstate competitiveness. Seventeen benchmarks changed this year, with eight improvements, and nine declines on some key areas, signaling reason to be concerned about Wisconsin’s ability to compete nationally.
Three benchmarks stand out:
1) PER CAPITA INCOME: Wisconsin’s per capita income, $34,476, is below the national average of $36,629. As CWI reports, “Personal per capita income is often cited as a measure of a state’s relative economic health. Wisconsin’s per capita income also continues to significantly trail that of its neighbors, Illinois ($38,297) and Minnesota ($38,751).”
2) JOB GROWTH: CWI reports, “In 2006, the number of Wisconsin jobs increased 0.7%, a drop from 1.1% in 2004 and 1.2% in 2005. Wisconsin trails the national average of 1.8%.”
3) CREATION OF NEW PRIVATE BUSINESSES: Wisconsin lags behind the nation in this category as well. CWI reports, “The number of new private businesses in Wisconsin dropped 0.4% in 2006, while the number of businesses grew nationally 2.5%. Even more troubling is that all of Wisconsin’s neighbors had increases in 2006.”
The CWI study is the latest in a series of gloomy eye-opening reports clearly demonstrating Wisconsin’s fragile economy is headed in the wrong direction.
Incomes are down. Job opportunities are down. The number of new businesses opening that offer job opportunities is down.
Because hard-working families have less income, their ability to keep financing government’s whimsical spending habits is more difficult. Since families have less, it is imperative government refrain from taxing them more.
Wisconsin is struggling to resolve a $652 million revenue shortfall. The wrong solution is to raise taxes. Wisconsin taxpayers have given so much for so long that they cannot give anymore.
When families have trouble making ends meet, the last thing they do is pull out the Visa card. State government should adopt the same common-sense policy. How many more abysmal reports do we have to read before we realize the time to stop taxing and spending arrived a long time ago?
Here is the CWI report and a CWI press release.
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By Mary Lazich
Tuesday, Mar 18 2008, 04:38 PM
The nonpartisan research group, the Tax Foundation in Washington D.C. has released a study showing most states in America, including Wisconsin, tax businesses at a higher rate than any other country in the developed world.
Here is how the Tax Foundation came up with its findings. For each state, the Tax Foundation added the state’s corporate tax rate to the federal corporate tax rate. The results:
- 25 states, including Wisconsin have a combined corporate tax rate higher than top-ranked Japan.
- 35 states, including Wisconsin have a combined corporate tax rate higher than third-ranked Germany.
- 46 states, including Wisconsin have a combined corporate tax rate higher than fourth-ranked Canada.
- All 50 states have a combined corporate tax rate higher than fifth-ranked France.
I agree with Tax Foundation president Scott Hodge, who authored the study. Hodge says, “Tax competition for jobs and investment is fierce, and the U.S. continues to fall further and further behind. Our states should be the world's leaders in many things, but high taxation should not be one of them. The high federal corporate tax rate is literally crushing states' competitive abilities. That means fewer jobs for American workers."
Here is the Tax Foundation news release.
Here is the Tax Foundation full study.
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