Friday, October 22, 2010

The tooth fairy or GOP’s claim of an employer tax?

Question: Which is a more credible: The tooth fairy or the Republicans' claim of an employer tax increase?

Answer: The tooth fairy. More than 1.4% of people in Wisconsin see action from the tooth fairy.

I received an email recently from a woman who lives in Sturgeon Bay asking me, as co-chair of Joint Finance Committee, about a “new 11% employer tax” that her representative had vowed to repeal.

It is going to be tough to repeal something that does not exist.

From what I’ve been able to discern, her representative is talking about repealing combined reporting.*

The only problem is that combined reporting is NOT an employer tax. And it only impacts a tiny number of companies that had been dodging Wisconsin taxes.

What it does is close the Las Vegas Loophole. It ends accounting gimmicks that huge, multi-state corporations used to avoid paying taxes in Wisconsin. Some were splitting their corporations into separate entities or using a PO Box in a state that has little or no corporate tax to shelter their profits.

According to initial Department of Revenue estimates, only1.4% of companies in Wisconsin saw a tax increase due to combined reporting. Those few had been using Las Vegas Loophole game or other gimmicks to avoid paying Wisconsin taxes.

Because we closed this Las Vegas Loophole, the rest of Wisconsin businesses and families are no longer left to pick up the burden.

Republicans who want to get rid of combined reporting for their big corporate buddies had to give it a new name like “employer tax” because when middle-class, average people or small business owners hear combined reporting explained, they enthusiastically support it.

So when a politician talks about repealing combined reporting – or a falsely labeled employer tax – what they are saying is that they want huge corporations to be allowed to hide their profits out of state. And the rest of us in Wisconsin can foot their bill.

I supposed they’d like us to pay for it with money we get from the tooth fairy.

* Because we closed tax loopholes, in fiscal year 2009/10 these corporations paid $75.6 million in taxes under combined reporting. An analysis done in January 2009 by the Legislative Fiscal Bureau estimated that corporate taxes overall for that time period would be $700 million. So combined reporting tax fairness accounts for 10.8% of that estimated number. We assume that must be where they got 11%.