Special Session of Wisconsin Legislature Promises Important Gains
During his campaign for the Wisconsin governorship, Scott Walker pledged to create 250,000 new jobs by November 2014; reduce the tax burden for Wisconsin families and businesses; and return the state to a sound fiscal footing. In order to accomplish this ambitious legislative tripartite, Governor Walker called for an emergency legislative session, which commenced early last week and is the Walker administration’s first opportunity to implement these legislative initiatives and restore the trust of the Wisconsin electorate.
The only legislation allowed to be proposed, discussed, and enacted during the special session is that which relates to spending, taxes, job creation, and balancing the state budget. The two greatest obstacles plaguing the Walker policy agenda in the upcoming legislative session are the $2.2 billion budget deficit and an unemployment rate of 7.6 percent. Leaders from both major parties recognize the challenges facing the Badger state and are committed to putting their partisan differences aside in order to restore economic prosperity.
At the time of this writing, legislative leaders have worked together to draft a myriad of legislative initiatives that create jobs and restore economic prosperity. Two of those initiatives include tax cuts for small businesses and individuals, as well as increased funding for local economic development. With the state of Wisconsin mired in an economic recession and thousands of citizens out of work it is paramount that legislative leaders put their partisan differences aside and work to return the state to a sound fiscal footing.
Tax cuts for individuals and small businesses. Governor Walker and state legislative leaders from both major parties reached an agreement this past week on a plan that would cut taxes for small businesses (those whose annual income is less than $500,000 in gross receipts) and every Wisconsin resident. Scott Bauer of the Associated Press noted that Walker had to diverge from his initial plan of providing tax relief to businesses with fewer than 50 employees because, in Wisconsin, businesses are taxed based on annual income and gross receipts, not total employees. Governor Walker’s initial proposal was estimated to cost $40 million annually; the annual cost of the new tax cut program, however, has yet to be released by the Wisconsin Department of Revenue.
Though short on specifics, the tax cut legislation was approved unanimously by the Senate Finance Committee. Despite facing liberal opposition in the Assembly Jobs, Economy, and Small Business Committee, the legislation was sent to both houses of the legislature for final approval. Liberals in the legislature were supportive of some of Governor Walker’s tax cut proposals but hesitant to support the small business tax credit until more information is made available. Still, legislative leaders on both sides of the political aisle are in agreement that tax cuts for small businesses are the most viable solution for creating jobs and restoring economic prosperity. The Walker administration has yet to release the specifics of its tax cut plan for individuals and families, but the plan is likely to “send a message of change, reducing the tax burden in Wisconsin, lessening regulation and reducing the costs from litigation.”
Increased funding for local economic development. In addition to tax cuts for small businesses and individuals, legislative leaders from both parties supported a legislative initiative last week that would significantly increase funding for economic and rural development. With the vast majority of Wisconsin municipalities and counties facing enormous budgetary shortfalls, and since the national economic climate has been challenging, business development has been moribund for the past two years. Thus, the Walker administration has worked in conjunction with county and municipal officials to build an economic development package that assists local governments in luring major corporations into their communities.
Under this legislation, credits for local economic development will be increased by $25 million annually. This legislation, much like the tax cuts for small businesses and individuals, was passed unanimously by several State Senate committees, including the Committee on Economic Development and Veterans and Military Affairs. Conversely, several leading Democrats on the Assembly Jobs, Economy and Small Business and the Rural Development and Rural Affairs Committees opposed this legislation.
While state aid is important for economic development, county and municipal governments should reduce the property tax burden and design tax breaks and financial incentives for local businesses. Several Wisconsin counties have already taken steps to increase business growth in their communities. In Outagamie County, for example, former State Treasurer and County Executive candidate Jack Voight is working with business leaders, economics experts, and political analysts to create a Fox Cities Business Leading Authority, whose sole function will be to create jobs and attract business to Outagamie County. This Authority, a public-private partnership, would provide local businesses with the capital necessary to create jobs and expand their base of operations. Governor Walker has pledged to work with leaders from each of Wisconsin’s 72 counties on developing sound business development strategies in localities across the state.
Controversial elements of the Walker agenda. Despite the unprecedented display of bipartisanship that has been embraced thus far in the capital during the special session, liberals are committed to opposing certain provisions. Among the panoply of initiatives introduced in the legislative special session, two have drawn the fiercest criticism: the restructuring of the Department of Commerce and the elimination of income taxes on Health Savings Accounts.
According to Bauer, the plan for restructuring the Department of Commerce involves “[replacing] the state agency with a public-private hybrid composed not of unionized state employees but of private workers. It would be run by a 12-member board appointed by the governor.” Liberals hotly oppose this. Representative Gary Hebl, (D-Sun Prairie) said of Governor Walker’s decision to appoint members to this new hybrid committee, “It is almost like a dictatorship, or total control by a king. It’s way beyond what our democracy calls for.”
Governor Walker points out, however, that the Department of Commerce in its current form is unable to carry out its foremost objective: creating jobs and attracting businesses to Wisconsin. Instead, the Department of Commerce has become wasteful and intrusive: for example, it has recently taken over the regulation of amusement park rides and elevators to petroleum tanks. Fundamentally, though, the melee over this bill is purely ideological. Conservatives want to lessen the size and influence of the state bureaucracy, whereas liberals want to increase government oversight and protect unionized employees. Despite their opposition, liberals do not have the votes necessary to prevent the restructuring of the Wisconsin Department of Commerce.
The second major issue that has drawn unanimous liberal opposition in the special legislative session is the elimination of income taxes on Health Savings Accounts. Rather than eliminating taxes on Health Savings Accounts, liberals contend that BadgerCare should be extended to all Wisconsinites who are currently without health insurance. In general, liberals in the legislature fervently oppose the implementation of any health care legislation that does not increase government oversight.
But this legislation not only reduces income taxes for those who currently possess Health Savings Accounts; it also provides citizens with monetary incentives if they agree to establish new ones. These allow individual citizens to control their own personal well-being and livelihood. Furthermore, they create a culture of ownership by keeping control of health insurance out of the hands of the government and in the hands of individuals and families.
Conclusion. If the special session is a sign of things to come, the regular legislative session might be one of the least polarizing and most productive in state history. In spite of disagreements over Health Savings Accounts and the restructuring of the Department of Commerce, conservatives and liberals are united behind the themes of job creation and economic revitalization. Additionally, members on both sides of the aisle have pledged to make balancing the budget and job creation foremost priorities in the current legislative session. Legislative leaders should make improving the quality of life for all Wisconsin citizens their priority. By shrinking the size of government, reducing taxes for small businesses and individuals, and exercising fiscal restraint, legislators can ensure Wisconsin will once again become an engine of economic growth.
The Wisconsin section of the Weekly Political Forecast is authored by PAI’s Deputy Policy Director.