Wednesday, October 22nd, 2014

Walk-O-Meter

Repeal the "combined reporting" business tax approved in 2009


In a conference call Monday with reporters, Walker said his first budget would undo tax increases approved this year by the Legislature. This year's state budget included increases in business taxes; the capital gains tax; and the income tax for the wealthiest residents. Walker said he would do away with those increases.

Updates

Full repeal was not sought, but 'tweaks' were welcomed by business

As part of a series of tax-cut proposals, candidate Scott Walker pledged to repeal the "combined reporting” system of corporate income taxes that Wisconsin -- following the lead of other states -- approved in 2009.

Walker said he would use his first budget proposal to undo the change, which was OK"d under Gov. Jim Doyle and the Democratic-controlled Legislature

Wisconsin had debated the change for years. The old system let each company file its own tax return, even if they have the same owners. That allowed parent companies to move income and expenses among subsidiaries, minimizing their overall taxes.

Proponents of combined reporting cited the need to close loopholes and increase tax collections, while opponents said it could cost some companies more and stifle economic growth.

Walker"s first budget, introduced in March 2011 and approved in June 2011, did not end combined reporting.

Instead, Walker made other changes estimated to save some businesses a total of $46 million in fiscal 2012 and 2013, and $40 million annually after that, according to state figures.

In contrast, the change to combined reporting was expected to increase tax collections by more than $240 million in the first two-year period.

Depending on your point of view, they are either technical changes that improved the system -- or potentially weakened it by creating potential new loopholes. Business groups praised Walker's "tweaking” of combined reporting, saying it could lower their costs.

That view is an important barometer in measuring how Walker did in the budget, in light of the repeal pledge.

Looking ahead, Walker isn't promising to go to a full repeal; he's "evaluating the impact additional changes would have,” spokesman Cullen Werwie said.

That puts this one at a Compromise.

Sources:

Wisconsin Legislative Fiscal Bureau, summary of tax changes 2011-"13, June 13, 2011

Ron Shanovich, fiscal analyst, Wisconsin Legislative Fiscal Bureau, July 6, 2011

Email exchange with Todd Berry, president, Wisconsin Taxpayers Alliance, July 5, 2011

Interview with Jack Norman, research director, Institute for Wisconsin's Future, July 5, 2011

Scott Walker for governor, campaign press release, January 26, 2010

JSOnline.com,"Walker says he would cut taxes in first budget,” Nov. 2, 2009

Milwaukee Journal Sentinel, "Wisconsin candidates for governor say they won"t raise taxes,” April 12, 2010