More impactful to the current situation in Libya is that of these fighters, 3.4% come from Misratah (aka Misrata), 23.9% from Benghazi and 60.2% from Darnah, all being current strongholds in the anti-Gadhafi rebellion.

As reported, Gadhafi himself has recognized the dangers of the city of Darnah as being a hotbed for Al-Qaida and has tried to convince the world AQ is the reason for the uprisings against him.  The international community has rightly disregarded his assertion.  However, the facts derived from the Sinjar reports and West Point’s analysis are important to keep in mind as U.S., NATO and UN military operations continue and possibly grow in scope.

Dissimilar to the Egyptian rebellion, where Al-Qaida was absent in the movement and had little to no foothold in the country, the United States and NATO allies must be cautious in the progression of their involvement in Libya with a known radical foothold.   With Gadhafi vowing a long, drawn out fight to the death, there will be significant differences in the ideology of the people fighting, and the longer fighting continues, the higher the possibility that AQ and other extremists with resources and weapons will gain influence when Gadhafi is out of power.

As the debate unfolds on whether or not to arm a large Islamic faction, about whom we know very little, the United State and her allies would do well to recall the lessons learned from arming rebels in a 1980’s Afghanistan.  Nothing is more important than foresight during operations like these.

This commentary and analysis was written by Michael Hopfersperger, Global Security Intern at PAI, and Drew Davis, Executive Director, PAI.  Reach the authors at global.security.intern@paxamericanainstitute.org and execdirector@paxamericanainstitute.org.

This special report identifies 55 clear violations of international law by the Islamic Republic of Iran:

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Nuclear Program/Proliferation Violations: 18

8 IAEA Resolutions,

6 UNSC Resolutions,

4 Treaties/Agreements;

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Crimes Against Humanity: 30

21 UNSC Resolutions,

3 Treaties,

6 G.A. Resolutions;

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Human Rights: 7

7 All Treaties/Agreements;

Each of the below cited conventions, treaties, resolutions, statutes, and agreements was examined individually, assuring reviewers that the sources and information are accurate and were not derived from corrupt or inaccurate online, print or television reports.  It should be noted this report does not evidence every violation of the cited conventions, treaties, resolutions, statutes, and agreements between 1948 and 2011, as entire books have been written on the collusion between the Islamic Republic of Iran and its terrorist proxies Hezbollah and Hamas. This report is intended to provide reviewers with a comprehensive framework with which to judge the actions and declarations of the government of the Islamic Republic of Iran.

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Download SPECIAL REPORT: Iran’s Violations of International Law 03-2011

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Executive Summary

Since the Iranian Revolution of 1979, the relationship between the United States and Iran has transformed from staunch allies to intractable opponents.  Today, Iran’s nuclear ambitions, support of terrorism and blatant violations of human rights constitute some of the most complex and pressing challenges facing the United States.  This problem is exacerbated by growing pessimism about whether the international community’s diplomatic efforts can compel Iran to comply with its obligations under international law.

This report draws on diverse branches of substantive international law and shows that Iran is in violation of over 50 international laws.  While diplomacy has failed to gain traction, Iran continues to blatantly violate the rights of its citizens, support international terrorism, and advance its nuclear program to the point where it is now well within striking distance of having a nuclear weapon.  Clearly, Iran’s violations of international law pose a grave and pressing threat to the United States and the international community as a whole.

Nuclear Non-Proliferation

As a non-nuclear state party to the Nuclear Non-Proliferation Treaty (NPT), Iran owes a legal duty to the international community to refrain from manufacturing and acquiring nuclear weapons.  These obligations are interpreted by the NPT’s enforcement agency, the International Atomic Energy Agency (IAEA), to also require states to provide credible assurance regarding non-diversion of nuclear material and the absence of undeclared nuclear material and activities.

Iran’s systematic violations of the NPT are well documented.  Despite Iran’s insistence that its nuclear program is exclusively for peaceful purposes, the evidence shows beyond a reasonable doubt that Iran’s nuclear work is not consistent with any other application than the development of a nuclear weapon.  Iran continues to conceal its nuclear program and conduct enrichment-related activities, in violation of the NPT, the IAEA Safeguards Agreement, all subsequent IAEA Safeguards Resolutions, and numerous United Nations Security Council Resolutions.

Crimes Against Humanity

Iran’s incitements to commit genocide are not only preludes to tragedy, but are crimes in themselves under international law.  Pursuant to the United Nations Charter, the Genocide Convention, and the Rome Statute of the ICC, Iran has a legal duty to refrain from the threat of genocide or force against members of a group or the political integrity of any other state.  Iran’s public call for Israel to “wiped off the map” is a state-sanctioned call to genocide that threatens the territorial integrity of Israel and contravenes its obligations under international law.

Iran has also violated numerous United Nations Security Council Resolutions relating to the state-sponsorship of terrorism.  At least thirteen Resolutions have reaffirmed the obligation of Member States to deny all forms of support to terrorists and those supporting terrorism.  As this report will detail, there is compelling evidence that Iran provides training, financial support, and arms shipments to terrorist organizations in Iraq, Afghanistan and elsewhere.  This is in clear violation of the Security Council resolutions and poses a serious threat to international security.

Human Rights

As a party to several human rights treaties and as a Member State of the United Nations, Iran is legally obligated to protect the civil, political and religious rights of its citizens.  Since the Iranian Revolution in 1979, Iran has been involved in large-scale abuses of human rights, including systematic persecution of religious minorities and severe restrictions on the freedoms of expression and assembly.  This report will detail the failure of Iran to comply with numerous international covenants to which it is a signatory.

Iran in Iraq

Iran’s Qods Force, a wing of the Revolutionary Guard Corps, provides funding, training, weapons and other lethal support to Iraqi militant groups that target Coalition and Iraqi forces.  Despite President Ahmadinejad’s pledge to cut off such support, the United States Department of Defense continues to assert that there has been no identified decrease in Iranian training and funding of illegal militias in Iraq.

Iran’s support of Iraqi militant groups is contrary to six United Nations General Assembly Declarations and thirteen United Nations Security Council Resolutions which prohibit all Member States from using force against the political independence of any other state and impose the duty upon all Member States to refrain from supporting terrorist activities.  Iran’s failure to comply with these obligations remains a significant impediment to stabilizing Iraq.

The proposed budget would increase federal spending and the budget deficit just as the American economy has finally begun to stabilize, threatening future prosperity at just this decisive moment.  Perhaps most disconcerting about the Obama budget is that it fails to address in any way the single greatest menace to economic prosperity in the 21^st century and beyond: entitlement spending.  The budget deficit already stands at a staggering $14.1 trillion and continues to grow; as long as entitlement reform continues to be neglected, the American economy will keep moving toward the precipice of insolvency.

The Obama Budget in brief.  The FY 2012 federal budget as proposed by President Obama does next to nothing about the looming entitlement crisis and actually increases non-defense, domestic discretionary spending.  In a press statement on Monday, President Obama sang the praises of his budget proposal, claiming, “Rather than fight the same tired battles that have dominated Washington for decades, it’s time to try something new.  Let’s invest in our people without leaving them a mountain of debt.”

But this very budget actually makes the mountain higher.  J.D. Foster, a budgetary expert at the Heritage Foundation, writes of President Obama’s budget proposal, “Under the President’s budget, the deficit in 2011 will hit a new record of $1.645 trillion, and the national debt held by the public over the next 10 years would nearly double, rising by $ 7.2 trillion.”  In addition, the Obama budget increases domestic discretionary spending by $31 billion in 2012 and total government spending by 49 percent in the next decade.

The colossal spending increases proposed by President Obama—again—will have a calamitous effect on American economic prosperity.  This dangerous trend is unsustainable in the long-term and counterproductive even in the short-term.

Federal spending.  The White House and the Office of Management and Budget agree that their $3.73 trillion budget proposal will raise this year’s budget deficit to $1.65 trillion.  This means that the deficit will reach nearly 11 percent of the national GDP—a figure not seen since WWII.  At the time of this writing, the annual budget deficit is already a whopping $1.48 trillion.  President Obama’s budget proposal would increase the annual budget deficit by 12 percent in FY 2012 alone, and it estimates yet another $1 trillion+ deficit the year after that.

Representative Paul Ryan (R-WI), Chairman of the House Budget Committee and Senator Jeff Sessions (R-AL), the ranking member of the Senate Budget Committee, contend that government spending will increase by a mind-boggling $46 trillion over the next 10 years if President Obama’s budget proposal is enacted.  To put this in perspective, America’s entire GDP is a little under $15 trillion.  It is plain that President Obama has little interest in following through with his pledge to reduce government spending and the federal budget deficit.

Tax Increases.  Just two months after working with Republicans to extend most of the Bush tax cuts for another two years, President Obama proposed a federal budget that is laden with tax increases—some of which appear to be intentionally camouflaged.  For example, he proposes to extend the top tax rate on capital gains and dividends to 20 percent from 15 percent, but the budget describes this as a “tax cut that reduces revenues” by $124 billion in the next ten years.  That’s right: the Obama budget proposes a tax hike but calls it a tax cut that, by its own estimate, will cost the government money in the long-run.  This is nonsense.

As another example, President Obama’s budget proposal prevents the Alternative Minimum Tax from increasing in 2013.  But instead he proposed a $321 billion tax hike to offset the cost of not raising the Alternative Minimum Tax.  Here is another example of reneging on his campaign promises.

Representative Paul Ryan and Senator Jeff Sessions contend that President Obama’s fiscal year 2012 budget would impose a $1.6 trillion tax hike on America’s families and workers.  Contrary to the president’s assertions and liberals’ philosophy, no one can afford these tax hikes right now as the nation emerges from recession—especially considering that their purpose is not actually to balance the budget but, instead, to further expand government spending.

Political opposition to President Obama’s budget proposal.  Leaders from both sides of the political spectrum are angry with President Obama’s unwillingness to reduce government spending and taxes or propose changes to the entitlement system.

Several leading Democrats have criticized President Obama for his unwillingness to reduce federal spending for FY 2012.  “Senator Chris Coons [D-DE] said Obama should have followed through on the recommendations of his own debt commission, which in December proposed nearly $4 trillion in cuts over the next decade that included reforms to Medicare, Social Security, and the tax code.”  Erskine Bowles, former chief of staff to President Bill Clinton and head of President Obama’s debt commission, severely criticized the president’s proposed budget.  Mr. Bowles said that the Obama budget proposal goes “nowhere near where they will have to go to resolve our fiscal nightmare.”  Kent Conrad (D-ND), the chairman of the Senate Budget Committee, said that he could not accept the budget proposal in its current form unless the administration provided him with a specific plan for serious deficit reduction.  Conrad, in an interview with The Hill, said of his reservations about Obama’s budget proposal, “It cannot be the answer that we are going to have a debt of over 100 percent of the GDP.”  Several other Senate Democrats, including Ben Nelson of Nebraska, Joe Manchin III of West Virginia, Bill Nelson of Florida, and Debbie Stabenow of Michigan, have expressed their consternation with President Obama’s budget proposal.  The lack of Democratic support for President Obama’s budget in the U.S. Senate provides Republicans an opportunity to offer major revisions.

This week, House Republicans began drafting their own version of the FY 2012 budget.  At the time of this writing, few specifics of that proposal have been released.  What is clear, however, is that Republicans intend to cut $100 billion in discretionary spending for the upcoming fiscal year.  In addition, the Republican budget proposal will likely include entitlement reform, a drastic reduction in the capital gains and alternative minimum taxes, and significant reductions in the long-term structural debt.

Discussing the need to address the entitlement crisis, Representative Paul Ryan (R-WI) said, “You have to do entitlement reforms if you are serious about this budget, if you are serious about this debt.  The sooner we tackle it, the better off everyone is.”  The Republican caucus in the House is still divided over the intricacies of their budget proposal.  Speaker of the House of Representatives John Boehner will have to ensure that everyone is united whatever revisions they propose.

Conclusion.  President Obama’s proposed budget for FY 2012 fails to address the gravest threats facing the nation in the years ahead: out-of-control spending, as large a budget deficit as we have ever had, and an entitlement system that is breaking the bank.  In November 2010, the American people made it abundantly clear that they had had enough of the reckless spending, tax hikes, and job-killing legislation that define the agenda of Congressional liberals and President Obama.  Syndicated columnist Charles Krauthammer put it well: “A more cynical budget is hard to imagine.”  It is paramount that conservatives in Congress ensure that legislative revisions to the budget include a real reduction in non-defense domestic discretionary spending, the eradication of Congressional earmarks, and drastic alteration to our archaic entitlement system.  Failure to address these problems that the president ignored will simply make the financial crisis worse as it continues to grow.

The National section of the Weekly Political Forecast is authored by PAI’s Deputy Policy Director.

Liberals have directly caused this tremendous increase in filibusters and the inevitable breakdown in bipartisanship.  The Senate leadership, especially Senate Majority Leader Harry Reid, has relied heavily on a procedure known as “filling the Amendment Tree”, a rule that provides the majority with the ability to block amendments proposed by the minority party.  Senator Reid has employed this extreme procedure a whopping 44 times in four years.  The previous six majority leaders combined used this procedure just 36 times in 30 years.  Constantly prohibiting conservatives from offering amendments has left them little choice but to resort to filibustering as practically their only means of influencing the proceedings.

Changing the Senate rule to make filibustering more difficult would do long-term damage to the legislative process beyond whatever short-term, hamstringing effect such a change would have against conservatives.  Mostly, such a change would solidify power even more centrally within the Senate in the hands of only a few—a dangerous trend no matter which party might compose its majority and clearly antithetical to the Founders’ intentions for that body.

The origins and legality of the filibuster.  The filibuster is a debate by one or more Senators intended to delay consideration of a bill or nomination.  Today, the filibuster is most commonly used by the minority party to block appointments, prolong debate, defeat legislation, and prevent the majority party from usurping excessive amounts of power.  Furthermore, the filibuster serves to empower individual members to participate in the process and for the American people to have their say.

In recent months, Harry Reid and his liberal colleagues in the Senate have branded the filibuster as “unconstitutional and un-American.”  But this is simply false.  The Constitution permits each house of the legislature to determine the rules of its proceedings, and the Senate rule creating the filibuster was passed by a two-thirds, procedural vote long ago.

Senate Rule XXII, created by the Senate in 1917, provided the minority party with the authority to prevent votes on bills, block controversial legislation, and vote against nominees deemed unfit for service.  Heritage Foundation analyst Brian Darling writes, “This tradition is important because it enables all Senators representing all 50 states to participate in every piece of legislation and nomination.  If the Senate jettisons its tradition of extended debate, it will likely cease to be a deliberative body, and the majority party will have unfettered power to pass legislation and confirm nominees with little to no debate.”

Considering a rules change.  The exponential rise in the number of filibusters in recent years has precipitated the Senate’s decision to seriously consider a rules change.  Senator Reid is of the opinion that eliminating or altering the filibuster rule will create greater efficiency.

What Senator Reid fails to mention, however, is that his disinterest in permitting conservatives’ amendments is the direct cause for the increase in the number of filibusters.  Senator Lamar Alexander (R-TN), one of the Senate’s most outspoken critics of a change to the filibuster rule, said of the Republicans’ willingness to use the filibuster, “The demise of the Senate is not because Republicans seek to filibuster. The real obstructionists have been the Democratic majority which, for an unprecedented number of times, used their majority advantage to limit debate, not allow amendments and to bypass the normal committee consideration of legislation.”  Harry Reid’s unwillingness to accept Republican amendments on seminal legislation is the chief reason why the number of filibusters has significantly increased in the two previous legislative sessions because the filibuster is the minority party’s only defense against the Majority Leader’s Filling of the Amendment Tree.

The U.S. Senate was not designed to be a forum for partisan ramrodding of pet agendas at the expense of liberty.  Nor was it intended to be efficient: Senators were once appointed (not elected) by the states to be deliberative elders and to check the popular sentiments expressed in the proceedings of the House of Representatives.  The filibuster is one of few remaining protections of national minority interests.

At the time of this writing, three Senators—Jeff Merkley of Oregon, Tom Udall of New Mexico, and Tom Harkin of Iowa— have drafted legislation that would alter or eliminate the filibuster.  Under each of these proposals, the majority party would be able to exercise unanimous authority over floor debates, committee markups, and the amendment process without interference from the minority.

The Merkley Resolution.  Of the three filibuster reform proposals set to be considered by the Senate later this week, the Merkley Resolution has received the least media attention.  The Merkley Resolution would eliminate all filibusters on motions to proceed to a bill and amendments to bills.  To block nominations, ten filibustering Senators would have to file a motion with the Senate to block a simple majority vote and would have to actually debate in order to continue a filibuster.

The flaws with the Merkley Resolution are threefold.  First, it takes power away from backbench Senators and gives sole authority to the Senate leadership and members of the majority party.  Second, this resolution suggests that debate by members of the minority party is the greatest threat to governing and seeks to severely limit it; this resolution entirely ignores and attempts to override the original purpose of the Senate.  Third, it fails to place any restraint on the majority leader’s authority to Fill the Amendment Tree, the real source of the increase in minority filibustering.  Says Darling, “Senator Merkley’s well-intentioned proposal to fix many of the perceived problems with the Senate falls short of effective reform that would allow the Senate to function properly and enable all 100 Senators to actively participate in the legislative process.”

Rather than restraining the minority party, and preventing them from offering amendments, the personal power of the majority leader should be the target of any rules changes.  The Senate should reject any change to the rules that prohibits all 100 Senators from participating in the legislative process.

The Udall Resolution.  The Udall Resolution argues for repeal of the filibuster on procedural, legal, and Constitutional grounds.  Senator Udall contends that Rule XXII of the Senate Operating Rules is unconstitutional and violates the intent of the Founding Fathers.  In testimony before the Senate Rules Committee, Udall said of the filibuster and Rule XXII, “I believe that the requirement in Rule XXII for two-thirds to vote and end debate on a rules change is unconstitutional, is contrary to the Framers’ intent, and violates the longstanding common law principle that one legislature cannot bind its successors.”  But these objections clearly have little basis in fact and strike of mere partisanship.

Udall’s proposal is simple: he wants a one-time vote now to reduce the Senate threshold for passing all legislation.  He would do away with the three-fifths vote for new laws and the two-thirds vote for rules changes in favor of simple majority votes for all proceedings.  Brian Darling, describing Senator Udall’s position on this issue, writes, “To argue that all supermajority thresholds for votes are unconstitutional is inconsistent with a common understanding of the Constitution.”  

The Framers never intended for the Senate to operate like the House of Representatives, with pure majority rule.  Rather, the Framers saw the Senate as a superior body in which members would be forced to put their partisan differences aside and work together for the betterment of the Republic.  If the Udall Resolution were to pass, the Senate would effectively become nothing more than a second House of Representatives, directly subject to the whims of popular opinion and almost certainly less effective at producing truly good legislation.  The Udall Resolution is the most polarizing and least likely of the three resolutions to attract bipartisan support.

The Harkin Resolution.  Senator Harkin’s proposed change to the filibuster rule, despite being the most accommodating, is fundamentally flawed too.  Much like the Merkley and Udall Resolutions, Senator Harkin’s proposal inhibits the minority party from participating in the legislative process, offering amendments, and having adequate time to debate.  Senator Harkin’s proposal intends to progressively lower the filibuster threshold after a series of successive cloture votes.  In a recent press release, Harkin’s office wrote of the proposal:

“On the first cloture vote, 60 votes would be needed to end debate.  If one did not get 60 votes, one could file another cloture vote and [two days] later have another vote.  That vote would require 57 votes to end debate.  If cloture was not obtained, one could file another cloture motion and wait two more days.  In that vote, one would need 54 votes to end debate.  If one did not get that, one could file one more cloture motion, wait two more days, and 51 votes would be needed to move the merits of the bill.”

In 1995, when Harkin first proposed this precedential alteration to the filibuster rule, it was overwhelmingly rejected by members from both political parties.  Lamar Alexander (R-TN), the Senate’s most vociferous critic of filibuster reform, explains, “On the first day of the new Republican majority [in 1995], Senator Harkin proposed a rule change diluting the filibuster.  Every single Republican Senator voted against the change even though supporting it clearly would have provided at least a temporary advantage to the Republican agenda.”

The Harkin Resolution, if passed, would provide Senator Reid and other Senate liberals with unprecedented and immediate new authority.  Senator Alexander best sums up the culture of the Senate: “The reform the Senate needs a change in its behavior, not a change in its rules.”  An important first step for creating better consensus and greater continuity in the Senate is to prevent the majority leader from usurping supreme authority over the legislative process.

Conclusion.  It appears likely at the time of this writing that only the Harkin Resolution will be brought to the Senate floor for a vote.  Members on both sides of the aisle have expressed their dismay with all three reform proposals, but the Harkin Resolution will probably be debated anyway.  All 47 Republicans, as well as six Democrats and Independent Joe Lieberman have stated that they intend to oppose any change to the filibuster rule.  Senators from both sides of the aisle should vote against filibuster reform and instead place a more profound emphasis on changing the behavior and culture of the “world’s most exclusive club.”

The National section of the Weekly Political Forecast is authored by PAI’s Deputy Policy Director.

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.

But any repeal effort would have to also pass in the U.S. Senate and override a certain veto from President Barack Obama.  Even if the House of Representatives were to vote for repeal, this would be dead upon arrival in the Senate.  Due to the current composition of the Senate—52 Democrats, 47 Republicans, and two Independents who usually caucus with the Democrats—full repeal of ObamaCare seems highly unlikely.  In fact, just two Senate Democrats (Ben Nelson of Nebraska and Joe Manchin of West Virginia) have stated that they intend to vote in favor of repealing ObamaCare.

Despite this, important changes could be made that would significantly repair at least some of the existing flaws in ObamaCare and which could prove to be much more realistic to expect.  Private insurance companies could be given greater incentives to build subsidiary companies that offer lower premiums for those who are currently uninsured.  The unconstitutional individual mandate and directly dependent provisions of the legislation could be eliminated. Perhaps most importantly, states could be permitted to opt of, or nullify, this legislation if the needs of their constituents are unfulfilled.  Outright repeal appears highly unlikely, so it will be hypercritical for conservative lawmakers to do what they can to revise ObamaCare in the most important ways.

Repeal Likely in the U.S. House of Representatives.  The House of Representatives appears poised, probably within the next week, to vote to repeal ObamaCare entirely.  Political analysts and policy scholars on both sides of the aisle are in agreement that the House of Representatives has the votes necessary to repeal ObamaCare.

Still, in March 2010, 34 House Democrats voted against ObamaCare, but only 13 of these were reelected in November.  At the time of this writing, just one Democrat, Representative Dan Boren of Oklahoma, has pledged to vote in favor of repealing ObamaCare, and Representative Heath Shuler (D-N.C.), one of the most conservative Democrats in Congress, told The Hill this week that the GOP’s plan to repeal ObamaCare is “immoral.”  But even if every Democrat in the House were to oppose repeal, the Republican majority has the votes necessary for passage.

The House Republican Caucus is united behind the repeal of ObamaCare.  Throughout the duration of the 2010 midterm election campaign, Republicans pledged to make repeal of ObamaCare their foremost legislative priority in the 112^th Congress.  With 242 members, Republican leaders have more than enough votes for repeal.  Representative Michele Bachmann (R-MN), one of the stars of the Republican Party, writes of ObamaCare, “It is already harming the economy and killing jobs.  Employers are seeing their costs for providing health insurance skyrocket, and that’s causing them to hold off on hiring and job creation.”  In the days ahead, expect a vitriolic debate to ensue over all aspects of ObamaCare.

Repeal Faces Obstacles in the U.S. Senate.  The full repeal of ObamaCare will almost certainly fail in the Senate, as Republicans only have 47 members in their caucus and two likely Democrats as allies.  However, Senators Joe Manchin and Mike Johanns (Nebraska’s junior Senator) have introduced legislation that would repeal ObamaCare’s 1099 mandate, which requires businesses, charities, and churches to file an IRS form for any transaction greater than $600.  Senator Manchin, in a press release, writes of his position, “As small businesses struggle to make ends meet, we can’t force them to take on any additional burdens that any reasonable person would reject.”  But even with the support of Senators Manchin, Johanns, and Nelson, the full repeal of ObamaCare will fail.  Due to the fact that the Senate and White House are controlled by Democrats, Republicans will be unable to achieve their goal of repealing this unconstitutional and costly legislation in full.  As a result, Republicans will have to work with their Democratic colleagues to drastically revise and curtail specific provisions of ObamaCare.  Due to the difficulty of outright repeal, America should embrace instead a three-pronged approach to reform.

Strategy #1: Provide health care companies with incentives to reduce premiums or create subsidiary companies.  Throughout the debate over ObamaCare, liberals pilloried insurance companies and held them responsible for the spike in health care costs.  Liberals seem not to realize that insurance companies are businesses and have to make a profit in order to survive; this fact alone should not be considered a point against them.  Rather than demonizing the insurance industry, liberals should have honed in on the real problems: excessive government regulations and mandates, to some extent, but especially the bloated entitlement programs.  The cost of health care is increasing exponentially due to the burdens placed on the medical industry by government.  These cost burdens trickle down from the medical equipment manufacturers to the drug companies, hospitals, insurance companies, and ultimately, to the patients.  The skyrocketing costs of medical care have forced the nation’s leading health care providers, like Humana, Arise, Network, and Affinity, to drastically increase the cost of health insurance premiums, but these costs partly arise from artificial, government-guaranteed increases in economic demand.

If the government is serious about providing every American with access to affordable health care, it should provide the aforementioned insurance companies with incentives to increase, rather than decrease, competition, innovation, and quality in customer service.  Incentives (like tax breaks) could encourage these companies to create subsidiary companies designed to provide lower premiums for those currently without health insurance.  Political leaders from both parties have refrained from discussing this idea, perhaps partly due to the adverse affects that support for “big insurance companies” can have on their reelection prospects.  Congressional leaders should place the well-being of the electorate ahead of their reelection prospects.  Americans are opposed to government-run health care and being coerced into purchasing a government-approved insurance plan.  As a result, lawmakers should replace government-run health care with a plan that provides individual companies with incentives and promotes market diversity.  Individuals and the private sector are better suited to deal with health care policy than the federal government.  Replacing the government-run option with this strategy would be politically advantageous and allow individual citizens to control their own personal well-being.

Strategy #2: Eliminate the individual mandate and directly dependent provisions of ObamaCare.  At the time of this writing, 20 states have filed lawsuits against the federal government on the grounds that the individual mandate provision of ObamaCare violates the Tenth Amendment.  The individual mandate provision specifies that nearly every American will be required to purchase government-approved health insurance by the year 2016.  Never before in American history has Congress required individuals to purchase a private product to qualify as a law-abiding citizen.  Last month, Harry E. Hudson, a judge on the United States District Court for the Eastern District of Virginia, ruled that the individual mandate and directly dependent provisions of ObamaCare were unconstitutional.

Judge Hudson’s ruling will most likely lead to further legal challenges.  Hudson’s ruling is the first major step in a lawsuit that is almost certainly destined for the U.S. Supreme Court.  Conservatives at all levels of government fervently oppose the individual mandate and directly dependent provisions of ObamaCare.  In the upcoming legislative session, Republicans should offer a series of amendments and revisions to remove the unconstitutional provisions from ObamaCare.

Strategy #3: State Nullification.  With the Senate and White House controlled by the Democratic Party, repeal of ObamaCare is virtually impossible and the above-described changes difficult.  Thus, the only viable solution for preventing ObamaCare from taking full effect is for state legislatures to enact legislation that nullifies ObamaCare.  Nullification is a process by which individual states attempt to invalidate a federal law or legislation that it deems unconstitutional.  Even if the U.S. Congress fails to repeal the entire law (which would almost certainly require overriding a presidential veto), the states could effectively undermine its execution one piece at a time.  At the time of this writing, eight states—Arizona, Florida, Michigan, Missouri, Ohio, Pennsylvania, Virginia, and Texas—have already introduced legislation that nullifies ObamaCare, and one state—Arizona—has passed a state Constitutional amendment that nullifies ObamaCare.  Overturning ObamaCare probably has to start at the state level in order to be practical.

Conclusion.  In the weeks ahead, national media attention will be fixated on the Congressional and judicial drama that is set to ensue over ObamaCare.  The House of Representatives is scheduled to vote for repeal of ObamaCare early this week, which will likely be the next act in the drama, but the legislation stands little chance of passing in the Senate.  So long as ObamaCare remains the law of the land in its current form, health care quality can only decrease, the budget deficit will soar, employers will cut their labor force, and the American economy will be hamstrung.  The 112^th U.S. Congress should pass a health care revision that encourages private sector competition, free-market capitalism, and protects individual liberty, and the states should be unafraid to defend their Constitutionally-guaranteed sovereignty.

The National section of the Weekly Political Forecast is authored by PAI’s Deputy Policy Director.

By filing suit against the federal government, the State of Wisconsin and Governor Walker have pledged to protect state sovereignty, prevent government intrusion into the lives of individual citizens, and uphold the core tenets of the Tenth Amendment.  ObamaCare, in its current form, also violates the “Commerce Clause” of the U.S. Constitution by requiring that every American purchase a government-approved health insurance policy by 2016.

Background.  State Attorneys General throughout the United States have filed suit against the Patient Protection Affordability Care Act of 2010 on the grounds that the legislation violates the Tenth Amendment of the U.S. Constitution.  The Tenth Amendment states, “The powers not delegated to the United States by the Constitution, nor prohibited to it by the States, are reserved to the States respectively, or to the people.”  The Constitutionality argument against ObamaCare proposes that the Tenth Amendment prohibits the federal government from enacting any legislation that coerces citizens or states into purchasing goods or services.

The most controversial element of ObamaCare, and the subject of the aforementioned lawsuits, is the individual mandate provision, which specifies that nearly every American will be required to purchase government-approved health insurance by the year 2016.  Failure to comply will result in a monetary penalty of $750 (the “tax,” as it is referred to by the Obama administration, is expected to reach this monetary value by 2016) or two percent of one’s income.

Attorneys General from both major parties are in agreement that the individual mandate provision of ObamaCare violates the Tenth Amendment.  Former Florida Attorney General Bill McCollum, a Republican, and Louisiana Attorney General Buddy Caldwell, a Democrat, are in agreement that the individual mandate provision is an unprecedented exercise of state power.  Never before in American history has Congress required individuals to purchase a product to qualify as a law-abiding citizen.

State Nullification of ObamaCare.  In addition to filing suit against the individual mandate provision of ObamaCare, several state Attorneys General have advocated the nullification of the entire ObamaCare program.  Nullification is a process by which individual states attempt to invalidate a federal law or legislation that it deems unconstitutional.  Even if the U.S. Congress fails to repeal the entire law (which would almost certainly require overriding a presidential veto), the states could effectively undermine its execution one piece at a time.

At the time of this writing, eight states—Arizona, Florida, Michigan, Missouri, Ohio, Pennsylvania, Virginia, and Texas—have already introduced legislation that nullifies ObamaCare.  On November 2, 2010, the voters of Arizona overwhelmingly approved Proposition 106, a state Constitutional amendment that effectively nullified ObamaCare.  Proposition 106 was approved by a resounding margin, 55% to 45%.  Arizona is the only state so far that has passed legislation and a Constitutional amendment to nullify ObamaCare.  In addition to filing suit against ObamaCare on Constitutional grounds, another option for the Wisconsin leadership would be to consider pursuing nullification measures.

Action in Wisconsin.  Scott Walker, throughout his gubernatorial campaign, pledged that if elected, he would challenge the legality and Constitutionality of ObamaCare, and his instructions to Van Hollen came only hours after his inauguration this week.  In his letter of instructions, Walker stated that the individual mandate provision was unprecedented and unconstitutional.  Bill Cosh, spokesman for Attorney General Van Hollen, told reporters on Monday that no decision has been made yet as to whether or not Wisconsin would join the lawsuit filed by twenty other states or even file its own suit.  But due to the difficulty and cost associated with filing an independent suit, it appears likely that Wisconsin will join the existing group action. 

Van Hollen is therefore poised to challenge the Constitutionality of ObamaCare on the grounds that it violates state sovereignty guaranteed under the Tenth Amendment, and it appears that the Republican-dominated Wisconsin government is also in a good position to initiate nullification procedures even if U.S. Congressional resistance fails.

Conclusion. Drastic changes should be expected in the political culture in Madison.  Among the foremost priorities of the new administration is filing suit against the federal government in regards to ObamaCare’s violation of state sovereignty.  Governor Walker and Attorney General Van Hollen are poised to challenge the federal government’s usurpation of power and fight for individual liberty and states’ rights.  In the upcoming legislative session, Governor Walker should consider urging legislators to prevent the federal government from interfering with state affairs and the individual freedoms of Wisconsin citizens.

The Wisconsin section of the Weekly Political Forecast is authored by PAI’s Deputy Policy Director.

Is the Tenth Amendment to the Constitution the reason for States to regain control of their destiny, putting an end to the myth (believed by too many) that money from the Federal government is ‘free’ money?  Will the unfunded mandates from the Federal government to the States come to a common sense rightful end?

Will Article 1, Section 8, of the United States Constitution (specifically the commerce clause) be upheld as the founding fathers intended and Congress passed?  Or, will the United States Supreme Court rule differently in regard to health care reform?  An example of how ridiculous this could turn out to be is: The government is part owner of an automobile company.  Does that mean we all must buy only those cars?  Common sense tells us that this would be outrageous.

Will the greatest document ever written, the Constitution of the United States, be returned to its initial goal of establishing a government that secures the Blessings of Liberty to us and our posterity?  We can thank a group of Americans who recently came together to fight for the meaning of this document, to protect it, honor it, and to demand respect for it from the elected officials who took an oath to uphold it.  This group adopted the name “Tea Party” and this movement spread across this nation.  No one can ignore their impact in the 2010 election and should not ignore the impact they will continue to have in future elections.  Elected officials work for the people.  It should only be common sense to expect this.

Will common sense and conservatism be applied and used again?  Common sense is good sound, practical judgment derived from experience rather than study.   Conservatism will keep this country on the right course of liberty and the pursuit of happiness.

The year 2011 will become a great year if conservatism and common sense influence the decision making of this great nation.

Submitted by Dave Swarthout, Commentary Associate

Download PAI Summary & Analysis of WI Dept. of Workforce Development Report

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PAI

WI Dept. of Workforce Development Sends Mixed Signals on the Growth and Stability of the State’s Economy

The Wisconsin Department of Workforce Development released a report indicating that unemployment in Wisconsin decreased from 7.8 percent in October to 7.6 percent in November. Secretary of Workforce Development Robert Gassman noted that in November 2010 Wisconsin’s unemployment rate dropped to its lowest level since January 2009.[1] However, with thousands of Wisconsinites out of work, the state budget deficit at an all time high of $3.3 billion[2] and expectations for it to skyrocket to $5.4 billion in 2011[3], the Wisconsin economy remains in a precarious position.

Secretary Gassman, Governor Doyle and liberal Democrats in the state legislature contend that the .2 percent decline in the state’s unemployment rate indicates that Wisconsin is on the verge of economic recovery.  Gassner, Doyle and liberals in the state legislature fail to mention, however, that Wisconsin lost 5,200 nonfarm jobs in the month of November and remains 150,000 jobs shy of its pre-recession (2006) totals.[4] Of the 5,200 jobs lost in the month of November, 4,800 were in the private-sector,[5]and 400 were government jobs.[6]

What is more, in the last twelve months, Wisconsin managed to create just 24,400 new private-sector jobs.[7] This makes governor-elect Scott Walker’s task of creating 250,000 new jobs by November 2015 more herculean than initially anticipated.  Dr. Abdur Chowdhury, a professor of economics at Marquette University, stated that at the current rate of growth (24,400 new jobs in twelve months), governor-elect Walker and the Wisconsin economy would have to create nearly 60,000 new jobs per year if it intends to achieve the goal of 250,000 new jobs by November 2015.[8] The only encouraging news to come out of the report is that 2,600 new manufacturing jobs were created in November 2010.[9]

Obvious Question: How can the unemployment rate decrease but the total number of jobs increase?  John Schmid, a staff writer for the Milwaukee Journal Sentinel, in describing the methods used by the Office of Workforce Development to calculate the aforementioned statistics, wrote, “The government calculates job-creation data and the unemployment rate from two separate monthly surveys.  The two have contradicted each other frequently throughout the recovery, sending mixed signals and suggesting that the labor market is stagnating without clear direction.  Not until the numbers move in tandem will economists be able to discern a clear direction.”[10]

Thus the new job report released by the Wisconsin Office of Workforce Development ends up telling us very little about the vigor of the Wisconsin economy. With thousands of Wisconsinites out of work, the state budget deficit at an all time high of $3.3 billion[11] and expectations for it to skyrocket to $5.4 billion in 2011[12], the Wisconsin economy remains in a precarious position.

In order to restore the Wisconsin economy, lawmakers from both parties should make cutting taxes for small businesses, reducing the corporate/business tax rate, investing more money in business research and development at state universities, and creating a climate of business friendliness the foremost priorities in the upcoming legislative session.  Rather than getting bogged down in the specifics of the state’s economic recession, the remainder of this forecast intends to offer viable solutions for creating jobs, and restoring economic growth, in the Badger State.

Step 1: Cutting taxes for small businesses.

Economists and politicians from both sides of the political spectrum are in concurrence that small businesses are a vital part of the state economy.  In an attempt to create small business jobs and restore Wisconsin’s economic prosperity, governor-elect Scott Walker has pledged to make tax cuts for small businesses one of his chief priorities in the upcoming legislative session.

Late last month, governor-elect Walker announced that he will encourage the state legislature to enact a state income tax reduction of 1 percentage point for businesses with fifty or fewer employees. The Wisconsin Department of Revenue finds that there are 321,300 businesses in the state-owned by sole proprietors category and another 69,400 S corporations comprised of 100 or fewer shareholders.[13] These tax cuts will allow small businesses to expand their labor force, provide Wisconsin residents with greater goods and services, and most importantly, increase the state’s tax base.

Governor-elect Walker, in describing the intricacies of the tax cut, and its impact on the Wisconsin business climate, wrote, “I will call for a tax cut of as much as 20 percent off the small businesses that provide most of the jobs in Wisconsin.  That is money that can be used to hire more workers at small businesses here in Wisconsin.”[14]

Dr. Abdur Chowdhury, a professor of economics at Marquette University, is optimistic that a reduction in business taxes will lead to an increase in statewide employment.  In an interview with Jason Stein of the Wisconsin State Journal, Professor Chowdhury said, “Reducing the tax burden on small businesses would be a good way to encourage them to expand their business and hire more.”[15] The first step to restoring economic prosperity in Wisconsin is to provide job creators with tax relief. A one point reduction in income taxes for small businesses, proprietorships and S corporations, will create jobs, a climate of business friendliness and foster greater economic productivity.

Step 2: Reducing the state’s corporate and business tax rate.

An exorbitantly high corporate/business tax rate is partially to blame for Wisconsin’s struggling economy. If Wisconsin intends to once again become an engine of economic growth it should work assiduously to attract a greater number of Fortune 500 companies to the state.  Scott Cohn, a Senior Correspondent for CNBC News, found that Texas, the nation’s number one state for business in 2010, is home to 64 Fortune 500 companies—more than any other state in the union.[16]

Conversely, Fortune Magazine found that in 2010 Wisconsin was home to a paltry ten Fortune 500 companies.[17] Wisconsin’s exorbitantly high corporate/business tax rate has led several corporations to leave or threaten to leave the Badger State, in recent years.  The U.S. Federation of Tax Administrators found that as of January 2010, the Wisconsin corporate/business tax rate has stood at a markedly high 7.9 percent.[18]

In order to restore economic growth in Wisconsin, PAI contends that the Republican controlled state legislature should do away with the business/corporation tax and, instead, follow in the footsteps of Texas, the nation’s top ranked economy in 2010, and impose a franchise tax.  The United States Federation of Tax Administrators, in discussing the specifics of the Texas franchise tax, wrote, “Texas imposes a Franchise Tax, otherwise known as a margin tax, imposed on entities with more than $1 million total revenues at a rate of 1 percent, or 0.5 percent for entities primarily engaged in retail or wholesale trade, on lesser of 70 percent of total revenues or 100 percent of gross receipts after deductions for compensation or cost of goods sold.”[19]

A two-year freeze in the Wisconsin business/corporation, coupled with the implementation of a franchise or consumption tax has would generate copious amounts of revenue, entice more Fortune 500 companies to set up camp in the Badger State and provide businesses with the capital necessary to create hundreds of new jobs.  If Wisconsin intends to create jobs, attract businesses, and become an engine of economic growth, it should eradicate its corporate/business tax, and instead, install a franchise or consumption tax.  Doing so would drastically improve the state economy, and as aforementioned, exponentially increase state revenue.

Step 3: Greater investment in research and development at colleges and universities.

To spur economic growth and foster a climate of “business friendliness,” the Wisconsin State Legislature should markedly increase expenditures for research and development at colleges and universities. In addition, Wisconsin public schools should expand their business education curriculums by providing students with access to organizations such as Junior Achievement, Students in Free Enterprise, and the National Institute for Economic and Financial Literacy.

The Wisconsin Economic Summit, in its enthralling November 2010 report, entitled Be Bold: The Wisconsin Prosperity Strategy, found that research and development at Wisconsin universities has created new jobs and generated large amounts of new revenue.  In discussing the impact that university research and development has had on the state economy, the authors of the report wrote, “Led by the University of Wisconsin-Madison, academic R&D is a $1.2 billion economic activity in the state, translating into more than 38,000 new jobs.  UW-Madison is perennially in the top three universities in the nation for R&D at more than $900 million, while the M7 region, with the Medical College of Wisconsin, UW-Milwaukee, the Blood Center of Wisconsin and Marquette University, collectively pull in more than $250 million.”[20]

The authors of the report, who happen to be some of the most successful and highly respected business leaders in the state, outline a myriad of strategies for restoring economic prosperity and fostering a culture of business friendliness in the Badger State.  Some of the recommendations made by the authors of the report include: increased funding for research and development on UW campuses; the creation of a strong academic research and development base in Madison; an increase in entrepreneurial literacy in K-12 schools through programs such as Junior Achievement and the Wisconsin-based National Institute of Economic and Financial literacy; and, an increased emphasis on employment-based learning on all college, university, and technical college campuses.[21]

The implementation of the aforementioned recommendations would increase state revenue, boost enrollment at Wisconsin colleges and universities, and provide K-12 students with the information necessary to be informed consumers. Governor-elect Walker and Republicans in the state legislature should make the abovementioned recommendations a foremost priority in the next legislative session.

Step 4: Fostering a climate of “business friendliness in Wisconsin.

Wisconsin Republican leaders should work indefatigably in the upcoming legislative session to foster a climate of business friendliness in Wisconsin.  As aforestated, Wisconsin is home to just ten Fortune 500 companies, enforces an exorbitantly high business tax and is one of the nation’s least-friendly business states.  Forbes Magazine, in its annual ranking of the best states for business, found that Wisconsin ranks forty-third in the nation. Only Vermont, Hawaii, Maine, Michigan, Mississippi, Louisiana, and Rhode Island rank below Wisconsin in business friendliness.[22]

Conversely, Fortune Magazine in a chart entitled America’s Top States For Business 2010 found that in 2010 Wisconsin ranked twenty-seventh in the nation in business friendliness.[23] Among Midwestern states, only Illinois, Ohio, and Michigan were less business friendly.[24] What was more, Fortune found that Wisconsin’s economy is ranked thirty-first in the nation.[25] Wisconsin’s low rating is precipitated by three factors: an exorbitantly high corporate/business tax rate, combined reporting and a high property tax burden.

Combined reporting is demonstrably bad for Wisconsin corporations because it stifles economic productivity.  Rather than paying taxes on just their business, corporations are forced to pay taxes on subsidiary companies or divisions within their corporation. BizTimes, a Milwaukee-based business periodical, found that in the first quarter of 2009, Harley Davidson took a $22.5 million dollar charge as a result of new combined reporting laws.[26] Debra Sadow Koenig and James Phillips in their beguiling article entitled “Wisconsin Adopts Combined Reporting and Other Tax Changes”, wrote, “In general, combined reporting means that each member of an affiliated or ‘combined’ group of corporations engaged in a unitary business reports on a combined report the unitary business allocable income allocable to Wisconsin.”[27]

Governor-elect Walker and Republican legislative leaders have stated they would consider reforming or eliminating combined reporting in the upcoming legislative session.  In fact, State Senator-elect Leah Vukmir (R-Wauwatosa), called for a special session of the legislature to repeal combined reporting.[28] With Republicans firmly in control of both houses of the legislature and the governor’s mansion, it appears certain that combined reporting will be repealed in the 2011-2013 legislative session.

In addition to an exorbitant corporate tax rate and combined reporting, Wisconsin business growth has been stifled by an excessive property tax burden.  Nationally renowned economists Dr. Arthur Laffer, Stephen Moore, and Jonathan Moore, in their book Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index, found that as of January 2010 Wisconsin ranked forty-first in the nation in property tax burden.[29] Wisconsinites are required to pay $41.33 in property for every $1,000 earned in income.[30]

The state’s high property tax value has been demonstrably bad for business development, and economic growth.  In order to create a more business friendly state, PAI encourages the state legislature to replace the business tax with a franchise/consumption tax, eradicate combined reporting for Wisconsin corporations, and most importantly, drastically diminish the property tax burden.

Conclusion:

The release of the November unemployment numbers by the Department of Workforce Development illustrates that the Wisconsin economy remains in a volatile position.  While unemployment dropped to its lowest levels since January 2009, 5,200 nonfarm jobs were shed last month.  Economists predict that the Wisconsin economic situation will continue to deteriorate in the months ahead, as several leading manufactures have stated that they intend to cut back their labor force.

John Schmid, of the Milwaukee Journal Sentinel, noted that the closing of Everbrite, LLC, and NewPage Paper Corporation later this year will cost 400 Wisconsinites their jobs (36 at Everbrite and 366 at NewPage).[31]

The implementation of the strategies outlined in this document will restore Wisconsin to a sound fiscal footing, create jobs, and foster a climate of business friendliness in the Badger State.  Wisconsin’s fate hinges on the enactment of these critical legislative initiatives.  If Wisconsin intends to restore economic prosperity it is paramount that the recommendations outlined in this forecast are enacted into law at the onset of the upcoming legislative session.

[2] Jason Stein, “Wisconsin GOP prepares to hit the ground running on job creation.” The Wisconsin State Journal, November 25, 2010, http://www.jsonline.com/news/statepolitics/110730744.html.

[3] John Schmid, “Wisconsin Continues to shed jobs.  Economy shows mixed signals as 4,800 jobs are lost and unemployment rate dips.”  The Milwaukee Journal Sentinel, December 16, 2010, http://www.jsonline.com/business/112014099.html

[4] John Schmid, “Wisconsin Continues to shed jobs.  Economy shows mixed signals as 4,800 jobs are lost and unemployment rate dips.”  The Milwaukee Journal Sentinel, December 16, 2010, http://www.jsonline.com/business/112014099.html

[5] John Schmid, “Wisconsin Continues to shed jobs.  Economy shows mixed signals as 4,800 jobs are lost and unemployment rate dips.”  The Milwaukee Journal Sentinel, December 16, 2010, http://www.jsonline.com/business/112014099.html

[6] WISN News, “State’s Unemployment Rate Drops, National  Numbers Worsen.” Press Release, December 16, 2010, http://www.wisn.com/money/26163395/detail.html?treets=mil&tml=mil_7am&ts=T&tmi=mil_7am_1_08000112172010

[7] John Schmid, “Wisconsin Continues to shed jobs.  Economy shows mixed signals as 4,800 jobs are lost and unemployment rate dips.”  The Milwaukee Journal Sentinel, December 16, 2010, http://www.jsonline.com/business/112014099.html

[8] John Schmid, “Wisconsin Continues to shed jobs.  Economy shows mixed signals as 4,800 jobs are lost and unemployment rate dips.”  The Milwaukee Journal Sentinel, December 16, 2010, http://www.jsonline.com/business/112014099.html. Note: see pages 1-2 for this information.

[9] WISN News, “State’s Unemployment Rate Drops, National  Numbers Worsen.” Press Release, December 16, 2010, http://www.wisn.com/money/26163395/detail.html?treets=mil&tml=mil_7am&ts=T&tmi=mil_7am_1_08000112172010

[10] John Schmid, “Wisconsin Continues to shed jobs.  Economy shows mixed signals as 4,800 jobs are lost and unemployment rate dips.”  The Milwaukee Journal Sentinel, December 16, 2010, http://www.jsonline.com/business/112014099.html

[11] Jason Stein, “Wisconsin GOP prepares to hit the ground running on job creation.” The Wisconsin State Journal, November 25, 2010, http://www.jsonline.com/news/statepolitics/110730744.html.

[12] John Schmid, “Wisconsin Continues to shed jobs.  Economy shows mixed signals as 4,800 jobs are lost and unemployment rate dips.”  The Milwaukee Journal Sentinel, December 16, 2010, http://www.jsonline.com/business/112014099.html

[13] Jason Stein, “Wisconsin GOP prepares to hit the ground running on job creation.” The Wisconsin State Journal, November 25, 2010, http://www.jsonline.com/news/statepolitics/110730744.html.

[14] Scott Walker, “Emergency Special Session on jobs.” Scott Walker for Wisconsin, November 1, 2010, http://www.scottwalker.org/node/1623

[15] Jason Stein, “Wisconsin GOP prepares to hit the ground running on job creation.” The Wisconsin State Journal, November 25, 2010, http://www.jsonline.com/news/statepolitics/110730744.html.

[16] Scott Cohn, “CNBC’s Top States For Business 2010—And the Winner is Texas.” CNBC News, July 13, 2010, http://www.cnbc.com/id/37642856/CNBC_s_Top_States_For_Business_2010_And_The_Winner_Is_Texas

[17] Fortune, “States, Wisconsin, 2010.” Fortune Magazine, May 3, 2010, http://money.cnn.com/magazines/fortune/fortune500/2010/states/WI.html

[18] United States Federation of Tax Administrators, Range of State Corporate Income Tax Rates, March 2010, http://www.taxadmin.org/fta/rate/corp_inc.pdf

[19] United States Federation of Tax Administrators, Range of State Corporate Income Tax Rates, March 2010, http://www.taxadmin.org/fta/rate/corp_inc.pdf.  Note: See page 2, footnote Z, for the exact quote.

[20] The Wisconsin Economic Summit, Be Bold: The Wisconsin Prosperity Strategy, November 2010, p.5.  The report can be found at: http://www.wiroundtable.org/summit/Resources/BE_BOLD_FINAL_Dec1_2010.pdf

[21] The Wisconsin Economic Summit, Be Bold: The Wisconsin Prosperity Strategy, November 2010, pp. 8-12. http://www.wiroundtable.org/summit/Resources/BE_BOLD_FINAL_Dec1_2010.pdf

[22] Kurt Bladenhausen, “Table: The Best States for Businesses and Career,” Forbes, November 13, 2010, http://www.forbes.com/2010/10/13/best-states-for-business-business-beltway-best-states-table.html

[23] Fortune, America’s Top States For Business 2010, Fortune Magazine, http://www.cnbc.com/id/37516043/

[24] Fortune, Business Friendliness 2010, Fortune Magazine, http://www.cnbc.com/id/37516038

[25] Fortune, America’s Top States For Business 2010, Fortune Magazine, http://www.cnbc.com/id/37516043/

[26] Andrew Weiland, ‘The Hog Tax: Should Combined Reporting be Repealed?” Biz Times, May 14, 2010,  http://www.biztimes.com/news/2010/5/14/the-hog-tax

[27] Debra Sadow Koenig, and James Phillips, “Wisconsin Adopts Combined Reporting and Other Tax Changes,” Godfrey &Kahn, Attorneys At Law, News, Publications & Events, February 25, 2009, http://www.gklaw.com/news.cfm?action=pub_detail&publication_id=809

[28] Andrew Weiland, ‘The Hog Tax: Should Combined Reporting be Repealed?” Biz Times, May 14, 2010,  http://www.biztimes.com/news/2010/5/14/the-hog-tax

[29] Dr. Arthur B. Laffer, Stephen Moore, and Jonathan Williams, Rich State, Poor State: ALEC-Laffer State Economic Competitiveness Index 3^rd ed. (Washington, D.C: The American Legislative Exchange Council, 2010), 120.

[30] Laffer, Moore, and Williams, 120.

[31] John Schmid, “Wisconsin Continues to shed jobs.  Economy shows mixed signals as 4,800 jobs are lost and unemployment rate dips.”  The Milwaukee Journal Sentinel, December 16, 2010, http://www.jsonline.com/business/112014099.html