The Truth-O-Meter Says:
One Wisconsin Now

"Gov. Scott Walker and the Republican-controlled state legislature have added over $140 million in new special interest spending"

One Wisconsin Now on Friday, January 28th, 2011 in a news release

One Wisconsin Now says Scott Walker and the Legislature have increased spending by $140 million

With his first "state of the state" address the night of Feb. 1, 2011, Wisconsin Gov. Scott Walker likely will tout some of his early legislative victories.

Among them: Three tax breaks worth an estimated $140 million.

But one of Walker’s political antagonists, Madison-based One Wisconsin Now, has slammed the three bills. In a Jan. 28, 2011, news release, the liberal advocacy group said:

"Gov. Scott Walker and the Republican-controlled state legislature have added over $140 million in new special interest spending."

So, which is it? Tax cuts or spending?

We know that state government folks are pretty crafty. But is it really possible for them to spend money they’ve decided not to tax in the first place?

One Wisconsin Now’s statement cites three of the measures taken up by lawmakers since Walker called them into special session just hours after being inaugurated on Jan. 3, 2011.

Here’s a look at each of the bills and their financial impact as estimated by the Legislative Fiscal Bureau, the Legislature’s non-partisan research agency.

Economic development tax credit

Signed into law Jan. 31, 2011, this bill increases the state’s economic development tax credit fund to $98.1 million, up from $73.1 million. The fund provides a tax credit for job creation, capital investment or related activity. The additional $25 million in credits is not expected to be claimed during the 2011-2013 biennium.

So, if employers create new jobs and claim the credits, they would pay less in taxes to the state. No spending would be involved.

Health Savings Account deduction

Also signed into law, this measure allows people to deduct contributions they make to Health Savings Accounts from their state income taxes, as they can from their federal income taxes. Nearly every other state already allows this.

The deductions will reduce state revenue by an estimated $20.7 million in 2011-2012 and $27.3 million in 2012-2013.

Tax deduction for creating jobs

Under this bill, which is awaiting Walker’s signature, employers would receive a tax deduction for each job they create. They would pay an estimated $33.5 million less per year in income and franchise taxes.  

In other words, the bill doesn’t result in any spending, but the state would take in less tax money.

See a pattern here?

The bills in question don’t create any expenditures -- those are done in budget bills, which Walker has yet to introduce. But they do mean the state will take in less money.

One Wisconsin Now says they apply to "special interests." They may be targeted for specific purposes, but they also hit a wide range of people, including small business owners and any working person who has an HSA.

We asked Scot Ross, One Wisconsin Now’s executive director, how his organization could say the state would be spending $140 million when the effect of the three bills would be that the state would have $140 million less to spend.

His reply: "When money would otherwise be in the treasury which is no longer going to be there as a result of legislative action, that is the definition of spending."

Actually, it’s just the Legislature making the treasury smaller. But we decided to ask the question again.

Ross: "If no action had been taken, this money would have been in the treasury. It will now no longer be in the treasury. We feel that is a form of spending."

Hmmm.

Ross is no dummy. He has a B.A. from the University of Pittsburgh and an M.A. from George Washington University, according to a political bio. He’s worked for a number of Democratic politicos, including Wisconsin congressman Ron Kind. He even worked as a journalist.

And Ross isn’t alone with his spending notion.

David Riemer, who was budget director under Democratic Gov. Jim Doyle, said the concept of a "tax expenditure" dates back some 50 years to Stanley Surrey, an assistant U.S. treasury secretary. The idea, Riemer said, is that tax breaks with a particular purpose that could be accomplished by direct spending should be considered expenditures.

"Their way of viewing this," Riemer said of One Wisconsin Now, "is a legitimate, honestly grounded approach. But there’s also legitimate arguments on the other side."

OK, let’s go to the other side.

George Lightbourn, who was secretary of administration under two Republican Wisconsin governors, said that what One Wisconsin Now is claiming is "ridiculous" -- "there’s nothing being spent, there’s not an appropriation being made."

"From a political standpoint, I could see where you’d make that argument," Lightbourn said, referring to One Wisconsin Now. "But it wouldn’t hold water with the accountants."

Or with the average taxpayer.

We decided to try Ross a third time. This time, he tried to make his case by pointing out that Walker had described the federal stimulus bill as spending, even though the bill included tax cuts.

Tax cuts and credits did make up about one-third of the $862 billion stimulus-- but two-thirds was spending.

Three strikes is enough.

One Wisconsin Now called $140 million in state tax breaks "spending." It’s estimated that the three bills in question would bring in $140 million less to state coffers. But that’s not spending. You can’t spend what you don’t have.

We rate the statement Pants on Fire.

Update: The day this PolitiFact item, One Wisconsin Now executive director Scot Ross modified the way he described the three tax break bills. Rather than calling them spending, he said in a news release issued by the liberal Citizen Action of Wisconsin that the bills are "deficit-hiking corporate giveaways."

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Published: Tuesday, February 1st, 2011 at 9:00 a.m.

Subjects: Health Care, Small Business, Taxes

Sources:

One Wisconsin Now, news release, Jan. 28, 2011

Interview, Scot Ross, One Wisconsin Now executive director, Jan. 28, 2011

E-mail interview, Cullen Werwie, Gov. Scott Walker spokesman, Jan. 28, 2011

Wisconsin Legislative Fiscal Bureau, Health Savings Accounts bill memo, Jan. 18, 2011

Wisconsin Legislative Fiscal Bureau, job creation tax breaks memo, Jan. 20, 2011

Wisconsin Legislative Fiscal Bureau, economic development tax credit, Jan. 7, 2011

Milwaukee Journal Sentinel, Walker signs bill limiting court awards in injury cases, Jan. 27, 2011

Milwaukee Journal Sentinel, Walker signs HSA measure; budget repair bill planned, Jan. 25, 2011

Milwaukee Journal Sentinel, Tax cut for job creators advances, Jan. 25, 2011

Wall Street Journal, Why I’m not lining up for stimulus handouts, Feb. 28, 2009

The New York Times, The stimulus plan: How to spend $787 billion, Jan. 29, 2011

Interview, Ron Shanovich, Wisconsin Legislative Fiscal Bureau analyst, Jan. 31, 2011

Interview, Rick Olin, Wisconsin Legislative Fiscal Bureau analyst, Jan. 31, 2011

JSOnline.com, Walker signs bill that eliminates taxes for relocated businesses, Jan. 31, 2011

Congressional Budget Office, The American Recovery and Reinvestment Act of 2009

Interview, David Riemer, former state budget director under Democratic Gov. Jim Doyle, Jan. 31, 2011

Interview, George Lightbourn, former State of Wisconsin Department of Administration secretary under Republican governors Tommy Thompson and Scott McCallum, Jan. 31, 2011

Written by: Tom Kertscher
Researched by: Tom Kertscher
Edited by: Greg Borowski

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