http://www.wisopinion.com/index.iml?mdl=article.mdl&article=22314

The Secretary of Commerce had a well-written editorial on Wisopinion about the business tax credits included in the budget. 

One thing he forgot, though, was the dates these provisions are effective–that is, the day they can actually be claimed by the taxpayer.

The capital gains increase and income tax increases are effective for tax year 2009–you will pay those retroactively (taxpayers have already incurred them because they’ve worked half the year already).  Those taxes are going to drag on the economy and affect economic growth immediately (or atleast when withholding is changed).  But the credits, not so much. 

The Secretary talks about a payroll tax credit:

This budget provides refundable income and franchise tax credits – essentially like cash – worth up to 7 percent of new, full-time payroll. In some cases, original equipment manufacturers can claim a similar 7 percent of payroll credit if they are making investments to keep jobs here in Wisconsin. These payroll tax credits can combine with an additional 10-percent refundable credit for companies making significant capital investments.

 I think he’s talking about the Jobs Credit.  It may help with jobs, but not until next year, when it goes into effect (tax years beginning after December 31, 2009) (note:  it is true the enterprise zone capital investment credit [which he mentions for companies making significant capital investments] is available for this year).

At the same time these steps strengthen Wisconsin’s manufacturers and other industries, we are taking steps to spur innovation and investment. We can reward investment in Wisconsin start-up companies while improving access to capital for those companies. For example, investors in qualified start-up companies will see a 100-percent capital gains tax exemption.

Sounds good.  But the provision is effective for tax years beginning after December 31, 2010.

This budget bolsters biotechnology by extending the tax exemptions already on manufacturing equipment to research equipment.

I don’t think the property tax exemption extension (that roles biotechnology property into manufacturing property) made it into the budget, but I could be wrong on that (please let me know).  In any case, the sales tax exemption in the budget that now applies to sales and use tax for manufacturing and research and development is effective January 1, 2012.  The income tax credit for qualified research development begins for taxable years on or after January 1, 2011.

These provisions sound good, but these things will have an attentuated effect on business, especially when the imposition of combined reporting meant that many business just lost state credits that they had already relied upon.

I’ll be checking through the accuracy of these dates myself later, but I took this from Deloitte’s budget alert–if I’m wrong, I’ll correct it.

There was an e-mail making the rounds this weekend.  Below, it details the sacrifices that the men who signed the Declaration of Independence endured so that we could have the freedom that we enjoy today. It’s important to note that they were highly educated and had a place in society.  They knew the consequences of dissent and rebellion, and yet, they chose to make a stand, probably over something that they didn’t fully understand or grasp.  While there were many people who went along with the British government, they chose to do something different.  And because they did, we have democracy and freedom. 

Have you ever wondered what happened to the fifty six men who signed the Declaration of Independence? Five signers were captured by the British as traitors, and tortured before they died. Twelve had their homes ransacked and burned. Two lost their sons serving in the Revolutionary Army; another had two sons captured. Nine of the fixty six fought and died from wounds or hardships of the Revolutionary War. They signed and they pledged their lives, their fortunes, and their sacred honor.

What kind of men were they?

Twenty four were lawyers and jurists. Eleven were merchants, nine were farmers and large plantation owners; men of means, well educated. But they signed the Declaration of Independence knowing full well death would be the cost if captured. Carter Braxton of Virginia, a wealthy planter and trader, saw his ships swept from the seas by the British Navy. He sold his home and properties to pay his debts, and died in rags.

Thomas McKean was so hounded by the British that he was forced to move his family almost constantly. He served in the Congress without pay, and his family was kept in hiding. His possessions were taken from him, and poverty was his reward.

Vandals or soldiers looted the properties of Dillery, Hall, Clymer, Walton, Gwinnett, Heyward, Ruttledge, and Middleton.

At the battle of Yorktown, Thomas Nelson Jr. noted that the British General Cornwallis had taken over the Nelson home for his headquarters. He quietly urged General George Washington to open fire. The home was destroyed, and Nelson died bankrupt.

Francis Lewis had his home and properties destroyed. The enemy jailed his wife, and she died within a few months.

John Hart was driven from his wife’s bedside as she was dying. Their thirteen children fled for their lives. His fields and his gristmill were laid to waste. For more than a year he lived in forests and caves, returning home to find his wife dead and his children vanished. A few weeks later he died from exhaustion and a broken heart.

Norris and Livingston suffered similar fates.

Such were the stories and sacrifices of the American Revolution. These were not wild-eyed, rabble-rousing ruffians. They were soft-spoken men of means and education.

They had security, but they valued liberty more. Standing tall, straight, and unwavering, they pledged: “For the support of this declaration, with firm reliance on the protection of divine providence, we mutually pledge to each other, our lives, our fortunes, and our sacred honor.”

They gave you and me a free and independent America. The history books never told you a lot about what happened in the Revolutionary War. We didn’t fight just the British. We were British subjects at that time and we fought our own government!

Some of us take these liberties so much for granted, but we shouldn’t. So, take a few minutes this year while enjoying your 4th of July holiday and silently thank these patriots. It’s not much to ask for the price they paid.

The Journal Sentinel has published an article (available here) indicating that Governor Doyle has been deficient in his required reporting in travel expenses nearly 150 times over the past several years, or about 75% of the time.  What should disturb Wisconsin citizens is not so much the failure to report (we’ve all lost a receipt once in awhile), but the amount of some of the expenditures we are expected to bear for the governor’s comfort.

For example, the governor’s airfare to Ireland for one trip in 2008 cost $5,226. That’s one expensive plane ticket!  It could be someone’s (or several someones’, depending on income level) tax bill for the state for the entire year. State travel policy requires officials to purchase reasonable tickets, i.e. coach. Doyle’s attorneys have justified the expense by saying Doyle needed his rest and the state could not afford to have the governor get sick. I for one was not aware that flying coach posed such a danger to my health.

This problem is symptomatic of the larger spending spree state (as well as federal) government is conducting these days, and hopefully the out-of-control hemmhoraging of our tax dollars will move voters to the polls to elect new leaders who will bring a sense of fiscal responsibility back to Wisconsin.

“Fourscore and seven years ago, our fathers brought forth on this continent a new nation, conceived in liberty, and dedicated to the proposition that all men are created equal”

“[They] say that America is a lie because its reality falls so far short of its ideals. They are wrong. America is not a lie; it is a disappointment. But it can be a disappointment only because it is also a hope.”

The state budget was bad.  And that is the Democrats’ problem.  There is no doubt that our side needs to be yelling about how bad the budget really is, especially for business (as we today see that Briggs and Stratton is moving jobs away from Wisconsin and to states with more friendly business climates).

I would give it about a month.  But after that, I hope that our side starts thinking up some new, fresh policy ideas.  Paul Ryan is doing it; we have the impetus of a gubernatorial race to do it on the state level.  We also have a new think-tank in the MacIver Institute to compliment the WPRI.

One place to start is that state legislators and the governor have been all too often willing to flaunt the law that the state must have a balanced budget and instead raid segregated funds and use bonding as a way to push paying for spending into the future.  I think the real problem with the recently passed budget is that while it unnecessarily increases spending, it pushes the taxes to be levied into the future.  Republicans would do well to find a concrete policy that they can push that would force budget-writers to make all of the hard decisions now.

Another issue to fundamentally look at how we fund and make decisions about schools.  It is foolishness to think that those two things do not go hand-in-hand.  I firmly believe in local control of school districts.  But it is pretty clear that the system that we have now:  school districts have the ability to spend money (but now, without the QEO, have most of their costs imposed by unions or state policies that rewards unions) and the state taxes for 60% of it will not survive.  As state money has funded schools, the state has taken more control over the schools.  But it has done so haphazardly and the legislature and DPI have shown that they are not up to the task.

And the problems to tackle in tax policy!  Our current tax credits are good marketing ploys and make good sound bites, but they are (1) meagre, (2) complicated, and (3) allow the government to choose winners and losers.  They are not good tax policy (yeah, we can get the tax lawyer vote).  Christian blogs about the Public Enemies debacle.  http://www.wpri.org/blog/?p=851

The Sheperd Express apparently was slated to have a little hand out from the state government–a provision in the state budget was going to allow it to print legal notices (although no one was really thinking through why a legal notices should be printed at all instead of being put on Craig’s List, but whatever).

To his credit, the Governor vetoed it.  The story is here:  http://www.wpri.org/blog/?p=849

Dale Kooyenga, who regularly attends our events, had this to say:

From the transformation of General Motors into “Government Motors” to the Troubled Asset Relief Program (TARP) to the American Recovery and Reinvestment Act (ARRA), the last six months have seen government involvement in the private sector rise to historic new levels. The question now on everyone’s mind is, “Will it work?” Oddly enough, clues to the answer of that question may come from an unexpected place: Iraq.

Several months ago, I completed my one-year tour of duty in Iraq. The heart of the counterinsurgency work my unit was assigned focused on creating jobs in order to prevent terrorism. Reducing the number of idle young men roaming the streets without school or employment was viewed as key to reducing insurgent violence and unrest.

Coalition forces employed a variety of programs in an attempt to accomplish this goal. The most familiar was the creation of community security groups commonly referred to as the “Sons of Iraq.” Millions of dollars were also invested in the Microgrant Program. Finally, millions were invested in State Owned Enterprises, or SOEs, large businesses nationalized by Saddam Hussein in the 1970s and ’80s.

The American taxpayers’ return on investment from the Microgrant and Sons of Iraq initiatives were positive. The Sons of Iraq were force multipliers, providing local security without the deployment of additional U.S. soldiers. Microgrants allowed individuals to reopen their shops or create new jobs and businesses, thereby restoring the building blocks of a market economy.

By contrast, the return on investment in state-owned enterprises was negative. The millions spent on SOEs failed to create a single additional job in Iraq.

There are over 190 SOEs in Iraq, and all but a handful are bloated government bureaucracies that have three to four times as many employees on the payroll as show up for work on a daily basis. The basic fundamentals of business are foreign to the management of these companies, since their positions are based more on political connections than market performance, education and experience.

On one particular mission, we visited a SOE that made automobiles. One thing that made an indelible impression on me was that the single framed picture in the CEO’s office was a photo of an over-sized check from the U.S. government. The pride and joy of this CEO was not his product or his people but, rather, his ability to secure “free money” from the U.S. taxpayer to subsidize his business.

As we enter the brave new world of TARP, ARRP and the nationalization of major U.S. industries, we would do well to look at the lessons of a rebuilding Iraq. As our successes in Iraq demonstrate, government can have a constructive role in creating a stable environment in which property rights are protected and the risk/reward transactions of business investment can be safely pursued by free individuals in a free market.

However, we must also realize that excessive government entanglement in the free market can be a recipe for disaster that delivers a poor return on investment for the taxpayer. How many CEOs in our own country can now display a check from the U.S. government in their office? In times when executives should be making sure their products are well-suited for the consumer, is the emphasis instead on securing taxpayers’ dollars?

Our military men and women half a world away are working to rebuild a statist, Third World system into a modern, first-world market economy. Let’s be careful that we are not moving in exactly the opposite direction here at home.

Thanks to everyone who attended the tailgate, and especially to Josh Hoisington who put it all together. The weather was awesome and the game went well.

Yesterday, I had to explain to someone what a “green shoot” refers to:  it’s the first sign that a plant has begun to grow–a seedling.  Originally, people started using it in reference to the economy, referring to a recovery that frankly, cannot get here soon enough.

But more recently, I’ve started hearing “green shoots” in reference to the conservative side of the ledger (although most conservatives run as Republicans, I’m sensative to substituting the two, so I usually use “Our side”, to encompass AFB, CYP, Tosa Taxpayers Alliance, etc. etc.).

It’s early, but things are starting to come around and things are starting to get organized.  If you know your Wisconsin state politics, you know that a bunch of reasons, the outcome of elections in the State Senate and the Assembly will be very important and also very close (despite the losses of 2006 and 2008, Republicans are close to the majority in both). 

And today, we saw another “green shoot.”  Rep. Leah Vukmir, my representative, declared that she’d be running for State Senate in the 5th District against incumbent Sen. Jim Sullivan.  See    www.LeahVukmir.com for more information.

Leah was our speaker back when CYP was very small; in the spring, we’ll undoubtedly have her back.  But beyond being a good sign for Tosa, Brookfield, Elm Grove, West Allis, and parts of Milwaukee (who would benefit immensely from a Senator who doesn’t like to sit on the sidelines and talk about bike trails while taxing the heck out of anything that walks or crawls), this is a good sign for “our side”–people are starting to step up.

It’s going to take quite a bit of work for Leah to overcome Jim Sullivan’s incumbency.  I encourage you to get excited and give Leah some support.  Even just an email to say, “hey, good job and good luck” would be helpful as she starts her great adventure:  Leah@LeahVukmir.com

Happy fathers’ day, especially for our newest father in CYP:  Jake Curtis.

And here’s a good article by John Tornius about the effect of the budget on business in Wisconsin:

http://www.jsonline.com/business/48642002.html

Rep. Scott Newcomer will have more to say at our July 15th happy hour.  See upcoming events for more details.