GRAFT TAX 2005

Playing Peter to Pay Paul

Posted: May 25, 2005
Updated: May 27, 2005

INTRODUCTION

Two years ago, the Wisconsin Democracy Campaign released a series of reports called “The Graft Tax” which showed how much long-standing tax breaks and other handouts approved by state elected public officials for special interest contributors cost Wisconsin taxpayers – $1,358 each.

This report, “Graft Tax 2005: Playing Peter to Pay Paul” is an update on the costly effect campaign contributions from wealthy special interests have on Wisconsin citizens. This report highlights items in Democratic Governor Jim Doyle’s proposed 2005-07 budget, which is being reviewed by the Legislature’s Joint Finance Committee at this time. The report also includes the description of numerous legislative proposals introduced since January by the Republican-controlled Legislature.

All told, the measures highlighted show how state policymakers will clip taxpayers for $458 million, or $118 each a year, if they are approved, in order to benefit wealthy campaign contributors. The proposed 2005-07 state budget alone – the only bill on the list that must be approved in order for state government to operate – will cost state taxpayers $101 each in increased fees and taxes, giveaways to business and more spending to pay for major road projects.

The irony of these cost increases is the way they subtly pick the taxpayers’ pockets while the Democratic governor and the Republican-controlled Legislature ballyhoo proposals to cut property taxes by $3 and $10, respectively.

The cost of some of the proposals is unknown. For example, state analysts say Assembly Bill 208 “would cost at least several million dollars during the initial years of implementation, and it is possible that the cost could be much higher…” Other, consumer oriented measures, such as Assembly Bill 252 or Senate Bill 141, would cost state taxpayers little or nothing, but are aimed at improving or regulating a product or condition to benefit the general public.

Updates on the progress and final outcome of these measures through a feature called “Graft Tax 2005 Scorecard” will be available on the Democracy Campaign’s web site at www.wisdc.org.

CAMPAIGN CONTRIBUTIONS

The special interests that have a stake in one or more of these measures have given Doyle $7.7 million or 84 percent of his large individual and political action committee contributions since 1995. Special interests with a stake in the mostly Republican legislative proposals have given current legislators $18.22 million in campaign contributions since 1993, including $12.65 million, or 69 percent, to Republicans.

PROPOSALS SOUGHT BY SPECIAL INTERESTS

Assembly Bill 100 (Proposed 2005–07 State Budget): Fee increases, major road projects and giveaways to business in Doyle’s proposed budget would cost taxpayers $392.5 million, or a hefty $101 each a year.

This is despite claims not to raise taxes in order to close a $1.6 billion deficit. In truth, Doyle and the Legislature cannot bring themselves to make wealthy campaign contributors share the burden of repairing the deficit because they have refused to even consider closing a fraction of the $5 billion worth of special interest tax credits, property and sales tax exemptions and other breaks enjoyed each year by business, manufacturing, agriculture, construction, transportation, banking, insurance and other special interests.

Instead, Doyle’s budget hikes costs borne by ordinary people by $189.8 million through higher hunting, fishing, state park admission, camping, court and vehicle registration, title and rental fees, retaining the $9 vehicle environmental impact fee and letting telephone companies charge customers higher late fees.

Doyle wants to spend $10.3 million on new development grant and training programs and technology grant and loan program staff and give away $10.1 million worth of no-strings-attached state grants to two Sturgeon Bay area businesses – Palmer Johnson Yachts and Bay Shipbuilding Company.

He also relaxed program guidelines to let substantially higher numbers of businesses become eligible for tax breaks and grants offered by existing Enterprise Development Zone and other Wisconsin Development Fund programs

Wealthy special interests who are intent on preserving the breaks they get at the expense of everyone else contributed $7.42 million to Doyle from 1995 through 2004, including $6.19 million, or 83 percent, since 2002 when he ran for governor.

Doyle also wants to increase state spending to build major highway projects by $64.3 million, to $384.8 million over two years. In addition, taxpayers are also being nicked for about $184 million to pay off the interest on borrowing for previous projects. The cost of bonding has skyrocketed from $44 million a year in 1990 to $184 million in 2005, an increase of 180 percent, or $118 million, over inflation.

Road builders and the two unions that support them, the Wisconsin Laborers District Council and Operating Engineers Local 139, have contributed $389,367 to Doyle.

Assembly Bill 206: The bill would create a third tax credit for corporate research and development that will cost taxpayers $10 million a year. It passed on a 59-36 party line vote in the Assembly with an amendment to appease the anti-abortion lobby that prohibits the tax credit from going to cloning and stem cell research businesses that use human embryos harvested after April 2001 federal deadline.

Backers of the Republican-sponsored measure, including business, manufacturing, utility, telecommunications, transportation and anti-abortion interests have contributed $4.46 million to the current Legislature. Republican legislators accepted $3.61 million or 81 percent of those contributions.

Senate Bill 163: This proposal creates a property tax exemption for restaurant machinery and equipment. The bill is similar to one introduced in 2002 when the cost to taxpayers was put at $4.7 million per year. It was introduced by Republicans, including Rep. Karl Van Roy of Green Bay, a former restaurateur, and Rep. Mary Williams of Medford, who co-owns five Hardee’s restaurants and a pizza restaurant with her husband.

The measure is backed by business interests and the restaurant industry who have contributed $1.68 million to current legislators, including $1.32 million or 78 percent to Republicans. Local government officials who oppose the measure have contributed $40,726 to legislators, including $19,558 or 48 percent to Republican legislators.

Assembly Bill 4:This bill creates a state tax credit for people who want to contribute to an individual health savings account to pay for their health care costs. Supporters say the measure will give a break to people who do not have health insurance through an employer. Critics say the measure does not make health care more affordable, discourages employers from offering health care insurance and is just another tax shelter for the wealthy. The GOP-backed bill was approved 63-33 in the Assembly and awaits Senate action. It would initially cost $4.5 million its first year and increase by about $500,000 a year thereafter, according to state fiscal estimates.

Several powerful special interests have staked out positions on the bill. Labor unions, which oppose it, have contributed $1.8 million to legislators, including $281,834 or 16 percent to Republicans. Supporters of the measure, including the insurance, construction, banking, agriculture, business, manufacturing and restaurant industries, have contributed $8.8 million to legislators, including $7.13 million or 81 percent to Republican legislators.

Assembly Bill 55:This proposal would give owners and operators of private campgrounds immunity from liability from customers who sue them for property damage, injury or death. The proposal was introduced in January by a handful of Republicans in both houses, and has no fiscal estimate as of yet.

The measure is opposed by lawyers, who have contributed $1.23 million to current legislators, including $675,257 or 55 percent to majority Republicans. The bill is backed by campground owners and business interests who have contributed $1.24 million to legislators, including $988,572 or 80 percent to Republicans.

Assembly Bill 101 and Senate Bill 58: These companion bills redefine the standards for defective products and when manufacturers, distributors and retailers are liable for injuries or other problems caused by products they make or sell. Supporters claim the measure will discourage frivolous lawsuits and improve the image of the state’s business climate but critics claim it will make it difficult or a person who is injured by a product to sue for damages. Senate Bill 58 was approved on an 18-14 party line vote in the Senate.

The measures are supported by business, manufacturers, construction, petroleum marketers, agricultural equipment retailers, pharmaceutical interests and the restaurant industry which contributed $4.69 million to legislators, including $3.94 million or 84 percent to Republican legislators.

It is opposed by the AFL-CIO which contributed $1.8 million to legislators including $281,834 or 16 percent to Republicans.

The contributions listed above do not include the $1.23 million made by attorneys because that special interest group is split on the issue. Trial lawyers oppose the bills and corporate attorneys favor the measures.

Assembly Bill 243: This bill provides a 10 percent income tax credit for engine manufacturing and vehicle design research and a tax credit for 10 percent of the amount the company paid to build and equip research facilities for engine manufacturing and design. Fiscal estimates put the increased cost to taxpayers – there is already a 5 percent income tax credit for a broader range of corporate research costs – at $2.5 million per year.

The GOP-backed measure is supported by business, manufacturing, utility, telecommunications and transportation interests which have contributed $4.45 million to legislators, including $3.61 or 81 percent to Republican legislators.

Senate Bill 52:This proposal would cut the corporate income taxes of companies that create 100 or more jobs in a year and keep those jobs for three years by letting them use the single sales factor formula. The new method of calculating corporate taxes was approved by the Legislature and the governor in 2003 but does not fully go into effect until 2008. The proposal was introduced by a handful of legislative Republicans.

The proposal is backed by business, manufacturing, utility, telecommunications and transportation interests which have contributed $4.45 million to legislators, including $3.61 or 81 percent to majority Republicans.

Senate Bill 69:This bill creates an income tax credit for employers that pay wages to an apprentice in two- to five-year industrial manufacturing, service sector and construction trade programs. It allows employers a tax break of up to $1,400 per apprentice per year, and $3,000 in the apprentice’s final year of the program. The measure, which would cost taxpayers $11.2 million a year, was introduced by a handful of legislative Republicans.

The measure is supported by business, manufacturing, construction and road building interests which have contributed $4.61 million to legislators, including $3.94 million or 85 percent to Republican legislators.

Assembly Bill 277: This proposal would exempt some companies from being required to get construction permits intended to reduce air pollution, allow them to proceed on some projects without a Department of Natural Resources review and remove a five-year time limit for companies with air pollution permits to undergo a DNR review. The bill, dubbed part of the “Job Creation Act II” by supporters and the “Dirty Air” bill by critics, was approved 73-25 in the Assembly and awaits Senate action. The proposal received bipartisan support in the Assembly and Doyle said earlier he would sign it into law.

The measure is supported by construction, business, manufacturing, transportation, utility and telecommunications interests and the timber and paper making industries which have contributed $6.03 million to legislators.

Doyle accepted $1.9 million from these wealthy special interests from 1993 through 2004, including $1.56 million, or 82 percent, since 2002 when he ran for governor.

The bill is opposed by lawyers, environmental groups, local governments and the AFL-CIO which have contributed $1.34 million to legislators. These interests gave Doyle $1.69 million since 1993, including $1.17 million since 2002.

Assembly Bill 278: This bill prohibits workers from suing shareholders of a company for wages when a company goes out of business, limits the ability of state and local officials from bringing public nuisance lawsuits against businesses and sets standards for admissible expert testimony in court cases. The Republican measure was approved 56-40 in the Assembly and awaits action in the Senate.

The measure is supported by agriculture, construction, business, manufacturing, transportation, utility, telecommunications and restaurant interests which have contributed $7.02 million to legislators, including $5.75 million or 82 percent to Republicans.

The bill is opposed by environmental groups, local officials, municipally owned utilities and the AFL-CIO, which contributed only $115,025 to legislators, including $23,963 to Republicans.

The contributions listed above do not include the $1.23 million made by lawyers because that special interest group is split on the issue. Trial lawyers oppose the bill and corporate attorneys favor the proposal.

PROPOSALS OPPOSED BY SPECIAL INTERESTS

Assembly Bill 252:This bill substantially increases the minimum amount of coverage insurers must provide for the treatment of nervous disorders, mental illness, alcoholism and other drug abuse. The measure is supported by a small, bipartisan group of legislators. It is opposed by business and health insurers. There will be an increased cost borne by the state insurance commissioner to review those policies but the state could not estimate how much.

Opponents of the bill include business and manufacturing interests which have contributed $2.63 million to the Legislature, including $2.19 million or 83 percent to majority Republicans. Supporters of the bill include local health officials, social service and independent living organizations and nurses which have contributed $75,901 to the Legislature, including $23,580 or 31 percent to GOP legislators.

Assembly Bill 303 and Senate Bill 156:These measures were introduced by a handful of legislative Democrats and drew support from two Assembly Republicans. The bills would repeal a state law that automatically increases the state’s gasoline tax April 1 every year. State highway construction and maintenance projects are paid for with gas tax and vehicle registration fees. This year the tax increased eight-tenths of a cent to 29.9 cents per gallon, one of the highest gas taxes in the country. Since 2001 the gas tax has increased an average of $27.8 million a year. The 2005 increase is expected to cost drivers $32.4 million a year, according to the Legislative Fiscal Bureau.

The bills are opposed by road builders and the Wisconsin Laborers District Council and Engineers Local 139 unions because many of their members work in the road construction industry. Unions have contributed $1.8 million to the Legislature, including $281,834 to Republicans. Road builders have contributed $583,617 to the Legislature, including $505,864, or 87 percent, to majority Republican legislators.

Supporters include the trucking industry and the 1000 Friends of Wisconsin which have contributed $204,561 to the Legislature, including $162,135 to the Republican majority.

Assembly Bill 336:This proposal would create a sales tax break on certain work performed by temporary service agency workers. This measure is strongly backed by business and manufacturers because temporary service agencies would likely pass on the increased cost from the sales tax a state agency has begun enforcing on the industry to the businesses that use their service.

Supporters of the bill include business, manufacturing, temporary service agencies, American Family Insurance, SBC and Wisconsin Physicians Service which have contributed $2.94 million to the Legislature, including $2.37 million, or 81 percent, to majority Republicans.

Opponents of the bill are labor unions and local government officials which have contributed $1.84 million to legislators, including $301,392, or 16 percent, to Republicans.

Senate Bill 141:This bill would prohibit insurance companies from not renewing property or automobile insurance because of claims for damage caused by acts of nature. The bill is opposed by the insurance industry, which claims it excuses people from properly maintaining their homes. Supporters, which include 15 legislative Republicans and Democrats, say the bill is needed to prevent instances where longtime customers with few claims are suddenly dropped by insurance companies for filing claims for weather damage they could not prevent.

The insurance industry has contributed $1.12 million to legislators, including $862,121, or 77 percent to majority Republicans.

Assembly Bill 155: This proposal prohibits local governments from removing nonconforming buildings and fixtures, such as billboards. The measure was sponsored mostly by Republicans and some Democrats.

Supporters include the billboard industry, construction, business, manufacturing, real estate and tourism interests which have contributed $6.13 million to legislators including $5.01, or 82 percent, to Republicans. Opponents of the bill, including environmental groups and local governments, have contributed $46,970 to legislators including $19,558 to the Republican majority.

Assembly Bill 100 (Proposed 2005-07 State Budget):Two key items in Doyle’s proposed 2005-07 state budget are opposed by health maintenance organizations and nursing homes because they would impose new or higher fees on those special interests.

HMO’s oppose a six percent gross revenue assessment designed to qualify the state for more Medicaid matching funds from the federal government that would be passed back to HMOs for the patients they serve. The proposal would cost the industry $88.2 million.

HMOs have contributed $164,621 to legislators including $130,789, or 79 percent, to majority Republicans.

Nursing homes oppose an increase in the monthly per bed assessments imposed by the state on nursing homes and facilities that care for the mentally retarded. The proposal would cost the nursing home industry $52.2 million.

The nursing home industry has contributed $102,088 to legislators including $88,623, or 87 percent, to GOP legislators.

Press ReleaseGraft Tax Scorecard 2005 (pdf file)