Subject: [big campaign] OWN/IOW's 2/3 of WI Corps Pay No State Income Tax: "Mostly True"
From: Aniello Alioto <[email-masked]>
To: [email-masked]
Date: Wed, 11 May 2011 09:47:04 -0400
List-Id: <bigcampaign.googlegroups.com>

Good meme to hammer re: WI... Walker & corporations v. citizens of WI...

---------- Forwarded message ----------
From: Scot Ross <[email-masked]>
Date: Wed, May 11, 2011 at 9:42 AM
Subject: OWN/IOW's 2/3 of WI Corps Pay No State Income Tax: "Mostly True"
To:

OWN's 501c3 partner, the Institute for One Wisconsin, completed a
comprehensive 20-page report in April called "We're Not Broke..." PolitiFact
took on one of our central facts.

http://www.politifact.com/wisconsin/statements/2011/may/11/one-wisconsin-now/one-wisconsin-now-says-two-thirds-wisconsin-corpor/

 "Two-thirds of Wisconsin corporations don't pay state income taxes."

One Wisconsin Now<http://www.politifact.com/personalities/one-wisconsin-now/>on
Monday, April 18th, 2011 in a news release and report
 One Wisconsin Now says two-thirds of Wisconsin corporations don’t pay state
income taxes
Share this story:

Wisconsin Gov. Scott Walker’s push for major cuts in education funding and
state employee compensation rests on his claim of a fiscal emergency he
traces mainly to government overspending.

But Democrats and liberal groups say skewed tax policies favoring the
wealthy and business at the expense of the middle class are big factors in
the state’s budget shortfalls.

Efforts to make that case have often centered on this phrase: "Two-thirds of
Wisconsin corporations don't pay state income taxes."

The liberal advocacy group One Wisconsin Now -- through its affiliated
research arm, Institute for One Wisconsin -- has been part of the effort to get
that phrase before the
public<http://www.onewisconsinnow.org/press/institute-for-one-wisconsin-report-were-not-broke-the-truth-about-the-wisconsin-budget-taxes-and-gov.html>
.

The institute’s April
report<http://www.instituteforonewisconsin.org/reports/IOWtaxReport-WINotBroke2011.pdf>,
"We’re Not Broke," called that two-thirds number "shocking," arguing it was
evidence that businesses here don’t pay their fair share because of tax
loopholes, credits and Wisconsin’s below-average corporate tax rates.

With Walker advocating repealing the corporate income
<http://www.jsonline.com/news/statepolitics/105693663.html>tax
<http://www.jsonline.com/news/statepolitics/105693663.html>altogether, we
thought it was time to get to the bottom of this claim.

When asked to back up the claim, Scot Ross, executive director of both One
Wisconsin groups, pointed to a 2011 Department of Revenue report and an
analysis of corporate taxation by the nonpartisan Legislative Fiscal Bureau.
Both use 2007 data, which state officials say was the latest and best
available as of early 2011.

A quick word about the numbers: The universe we are dealing with is
corporate income taxes paid by regular "C" corporations at the 7.9%
corporate rate -- one of the largest sources of state tax revenue.

The Revenue Department study intentionally excludes "S" corporations and
limited liability companies that pass through income to multiple owners or
partners. They are taxed at lower rates under the *personal i*ncome tax
system, rather than* corporate*.

Officials at both agencies report this: Of 52,497 corporate returns, 17,564
had a tax liability totaling almost $703 million.

By our math, that’s 66.5 percent of the corporations with no liability  --
the two-thirds in the claim.

We wondered if this was a one-year spike.

It’s not.

Revenue Department officials ran a special report for
us<http://media.jsonline.com/documents/Five+year.pdf>.
It showed the same 66% figure with little variation in 2004, ’05, ’06 and
’07.

They threw in a bonus year, 2008 -- and the share of corporations that
didn’t have any tax liability jumped to 69 percent in that year. (The 2008
data was not available when the Institute for One Wisconsin did its report).

In fact, the two-thirds mirrors things at the federal level.

The Government Accountability Office reported that at least 60 percent of
all U.S. companies -- including many small ones -- reported no federal
income-tax liability from 1998 to 2005, according to a Wall Street Journal
article from 2008 <http://online.wsj.com/article/SB121858559939134899.html>.

How can it be that at least two out of three corporations pay no tax? Part
of the answer lies in the same Revenue Department table.

Very close to two-thirds of those 52,497 Wisconsin corporate filers reported
zero net income or a net loss in 2007 -- leaving them with no tax liability.

"Just because some corporations are large and profitable, it does not follow
all corporations are large and profitable," said John Koskinen, chief
economist in the state Department of Revenue. "Most corporations are very
small with little or no profit."

The president of Wisconsin Taxpayers Alliance, a research organization, put
it this way:

"It’s worth stating the obvious -- if a company is making no money after
expenses, it will not pay taxes," said Todd Berry. "Depreciation is such an
expense (deduction) -- and one that is generally accepted."

Additionally, some companies are inactive in a given year, noted Stephanie
Marquis, spokeswoman for the state Department of Revenue.

A significant number of individuals -- as opposed to corporations -- also do
not have a tax liability. Some 31% did not owe income taxes, according to a
2009 revenue department figures. But that understates the number who didn’t
owe taxes, possibly by a large amount, because households with low incomes
do not have to file, according to our calculations based on census data.

We asked Ross, among those who have cited the number, why he called it
"shocking" that firms with no net income would not pay taxes.

Ross pointed to the multitude of tax credits and deductions. When used, they
can take a profitable firm and reduce its bottom line to zero for tax
purposes.

The state revenue report confirms the phenomena: A small number of
corporations had net income, but still didn’t owe any state income taxes.

In total, 390 profitable firms that paid no state income tax claimed enough
in tax credits that reduced their tax liability to zero, the Revenue
Department report notes. So that means tax credits allowed 2% of firms with
net income to avoid taxes.

But that’s just a slice of how many firms got tax preferences to reduce
their corporate income taxes.

In addition to the dozen or more tax credits for corporations, state records
list more than 20 other breaks in the form of deductions, exclusions and
special treatment, a state report shows.

The total tax break for all the preferences was more than $254 million in
2008, according to that Revenue Department
<http://www.revenue.wi.gov/ra/09sumrpt.pdf>report.

So it’s clear that tax breaks can have a big impact on corporate tax
collections, which in Wisconsin rate in the middle of the pack or lower
nationally, a Journal Sentinel investigation found in 2010.

Proponents of business tax breaks say it’s important to give incentives for
business expansion and improvement. Critics say their pro-business impact is
unclear.

Despite the controversy over the whole issue, no comprehensive study exists
to quantify why firms report no net income. State officials say that  would
require an individual review of tens of thousands of tax returns.

Finally, it’s worth noting two developments that limit the usefulness of the
state’s data in drawing conclusions about the business tax climate.

No. 1: It’s common now for start-up businesses to form as partnerships
instead of "C" corporations. So part the picture is missing, because the
state does not pull out tax-payment data on these firms, many of which are
small. State revenue officials still say their data on "C" corporations is
worthwhile, given the large dollars at stake.

No. 2: A relatively new change called "combined reporting" could increase
corporate tax revenue collections in the years ahead. No data is yet
available on that, however.

What’s the bottom line?

The liberal Institute for One Wisconsin used state data to assert that
two-thirds of Wisconsin corporations pay no state income taxes. The
two-thirds number is solid, the trend is long-term and it is reflected by
federal tax data as well.

For some corporations, tax breaks reduce the bottom line to zero in tax
liability. But the group failed to note that some share of those non-paying
businesses simply don’t make enough to pay taxes. We can’t say how
significant that detail is because the data doesn’t exist.

On the Truth-O-Meter that rates as Mostly True.

-- 
Aniello Alioto
National Political Director
[email-masked]
o: 202.756.4109
c: 502.664.2420

AZ: Arizona Progress
CA: Courage Campaign
CO: ProgressNow Colorado
FL: Progress Florida
MI: Progress Michigan
MN: Alliance for a Better Minnesota (ABM)
NE: Bold Nebraska
NH: Granite State Progress
NM: Progress New Mexico
NV: ProgressNow Nevada
OH: ProgressOhio
PA: Keystone Progress
TX: Progress Texas
WA: Fuse Washington
WI: One Wisconsin Now (OWN)

Twitter: @ProgressNow
Facebook: ProgressNow

www.ProgressNow.org

-- 
You received this message because you are subscribed to the "big campaign" group.

To post to this group, send to [email-masked]

To unsubscribe, send email to [email-masked]

E-mail [email-masked] with questions or concerns
 
This is a list of individuals. It is not affiliated with any group or organization.