Tomorrow's Assembly Ways and Means Committee meeting had an interesting last-minute addition to it, and it involves a huge business tax giveaway that you may have thought was dead.
You may remember me referencing this "economic substance" bill when they tried to jam it through a public hearing last month. At the time, the Wisconsin Department of Revenue estimated that it would cost the state up to $384 million a year, which is certainly not anything that can be done when there's only $64 million of breathing room in the budget over the next 17 months. The bill seemed to be put underground after that.
Well, it's BAAAACK! As far as I can tell, the only change is a "clarifying amendment", which apparently gives more definition over what constitutes "economic substance", but doesn't seem to change much of the actual details of the bill. According to the Joint Survey Committee on Tax Exemptions, the clarifying amendment made the fiscal effect of most of the bill as "indeterminate," and apparently that was good enough for the 6 GOP-associated members of the 9-person committee. They signed off on the bill as "appropriate public policy," while the 3 Dem-associated members voted no, and now the bill is back at the Committee level, where it can be voted on tomorrow.
Simple question- what if the DOR is right and the GOPs on the Tax Exemption survey are wrong, and this clarifying amendment doesn't prevent this from being a massive giveaway? Then this budget that already will likely need a repair bill due to the slowing economy will need to have further cuts put upon it.
Maybe we should put this thing away until there's actually room in the budget for it to fit (if it should ever be considered at all)...if there ever is room again any time in the near future.
Thanks for pointing out that this is being voted on tomorrow. When I looked at the committee's agenda this morning I was specifically looking for this bill, and it wasn't listed.
ReplyDeleteAs for the "economic substance" provision, the substitute amendment makes a major change, and I suspect the revised fiscal estimate is accurate that it eliminates the cost. The original bill referenced the federal law about "economic substance, which would have been find, except the federal definition includes a provision saying that it does not apply for purposes of state and local taxes. The substitute amendment corrects that, so it lines up state and federal law.
Overall, I think the amended version is vastly better (or far "less bad"), but there are still a couple of trouble spots. For example, beginning in 2017 it would end the state's contract with the Multistate Tax Commission. The MTC is a way of doing multistate audits that can keep large national and international corporations from hiding revenue & telling different things to different states. Ending our participation in those audits is expected to cost $1.25 million per year, and I worry that that number could grow much larger as some of the largest corporations get much more aggressive in using gimmicks and deceptive practices to hide their Wisconsin income.
Thanks for that clarification, John. If it's simplifying the definition of "economic substance", it's probably not too bad.
DeleteBut by the same token, it can't be trusted. There's little doubt in my mind some lobbyists came up with these ideas that were slipped into this bill (look at all the self-interested business lobby groups that are in favor of it), and they aren't doing it out of the goodness of their hearts.