Wisconsin Governor Walker Lied . . .
In Wisconsin, 98 percent of all small businesses will qualify for income-tax relief under my plan, freeing them to expand and create jobs.
Wisconsin Gov. Scott Walker, a Republican, offered up a tax cut plan for small business, it was reasonable to expect the GOP-led Legislature to approve it with few changes.
Turns out there too many practical obstacles to turning Walker’s campaign tax promise into reality.
Republican lawmakers are have made significant changes to Walker’s proposal which will kill any small business growth and pander to large non-Wisconsin businesses to receive tax cuts, incentives and expand with minimal costs.
In the 2010 election, Walker promised a 1 percentage point income tax-rate cut for businesses with 50 employees or fewer.
After he took office Jan. 3, 2011, he changed and trimmed the plan substantially, proposing a credit targeting businesses with less than $500,000 in gross receipts. Even that scaled-back idea carried an $80 million price tag over two years.
In touting the change, here is what Walker said in a Jan. 5 news release:
“This legislation will provide tax relief to thousands of business owners, freeing them to expand and create jobs,” Walker’s office said. “98 percent of all small businesses will be eligible for tax relief under the Governor’s proposal.”
That’s a broad statement.
- Does virtually every small business in the state stand to benefit from tax relief? And is it enough to spur job growth, as Walker claims?
To back the claim, Walker spokesman Cullen Werwie provided state tax-filing data showing that 98% of all Wisconsin businesses are under the $500,000 in gross receipts — and therefore eligible to apply.
Fact: The information provided by Walker showed that in slightly more than half of tax returns, the businesses reported minimal gross sales — somewhere between $1 and $10,000. Which based on Walker’s data, it would average just over $1. That’s barely enough for a candy bar, much less a salary for a new employee.
Problems with the Data
- First, the calculated the tax credit is based on the more generous version of Walker’s current proposal – which is not an active law or ever will be.
- Second, it doesn’t account for businesses that don’t make a profit.
The state Department of Revenue chart (above) projects the average tax credit for personal income tax filers who reported some portion of their income from business. (Most small business owners use the personal-income tax system to report their business income.) The data showed the largest group, with nearly 40 percent of those filers, was under $50,000 in income.
The average credit for that group: $37.
That’s at the low end.
The average credit tops out at $3,205 for a small group of high earners. They make up about 1 percent of those expected to qualify for the credit.
The overall average for all the 252,000 filers who could qualify for the credit — $145. More than two-thirds would get less than $100 on average.
From both sets of statistics, it’s apparent that — for the majority of those eligible — the tax credit is enough to stock up on a limited supply of paper clips and printer paper, but not nearly enough to create a job.
Walker’s claim that the credit would quickly spur needed job creation is without proof or defined in any data or possible data. No matter how you manipulate the data . . . the small business will have no benefit (hidden or real) with Walker in office.
The bottom Line
Walker said 98 percent of small businesses “will be eligible” for job-creating tax relief under his emergency plan to jump-start the lagging Wisconsin economy. There are that many businesses under the $500,000 threshold — but that’s just the beginning of the story.
They may all be eligible to apply, but many won’t qualify for a tax credit of any significant size. The few that do gets substantially reduced because unprofitable businesses won’t see a credit until they turn around. Even business advocates respond that this will not create jobs, as Walker claims.