Thursday, January 27, 2011

Business Tax Cut Bill Passes, but Republicans and Scott Walker have never told us how they'll pay for it.

Scott Walker got another deficit swelling tax cut passed through the legislature, all before he ever had to explain to voters what he'll sacrifice to pay for it.
In a bipartisan vote, the Senate Thursday approved 25-8 Gov. Scott Walker's tax cut bill for businesses, sending it to Walker's desk ahead of his "state of the state" speech on Tuesday.
This jobs bill will do almost nothing, but what the heck. The only thing that has changed is the Republican chant, from "Wisconsin's bad for business," to "Wisconsin is open for business." Say it enough and we might even convince corporate big wigs they should invest in our state. That's if they can forget how bad we were before when the Republicans bashed the state unmercifully. Politifact:
In Wisconsin, 98 percent of all small businesses will qualify for income-tax relief under my plan, freeing them to expand and create jobs.  Scott Walker on Wednesday, January 5th, 2011 in a news release … Walker provided us state tax-filing data showing that 98 percent of all Wisconsin businesses are under the $500,000 in gross receipts -- and therefore eligible to apply.
The information provided by Walker showed that in slightly more than half of tax returns, the businesses reported minimal gross sales -- somewhere between $1 and $10,000. For that group, there would be negligible tax savings -- based on Walker’s data, it would average just over $1. That’s barely enough for a candy bar, much less a salary for a new employee … there are two problems with the data provided. First, it calculated the tax credit based on an earlier, more generous version of Walker’s current proposal. And second, it doesn’t account for businesses that don’t make a profit.
The state Department of Revenue gave us a chart that projects the average tax credit for personal income tax filers who reported some portion of their income from business. (Most small business owners use the personal-income tax system to report their business income.) The data showed the largest group, with nearly 40 percent of those filers, was under $50,000 in income. The average credit for that group: $37. That’s at the low end … The average credit tops out at $3,205 for a small group of high earners. They make up about 1 percent of those expected to qualify for the credit.
The overall average for all the 252,000 filers who could qualify for the credit -- $145. More than two-thirds would get less than $100 on average.
The problems don’t stop there. Businesses that don’t turn a profit in 2011 would not get a credit -- unless they make money in a future year and take it then … So some percentage of small businesses may be eligible based on gross receipts but won’t qualify for a credit next year because they made no profit and therefore have no state tax liability.
How many is that?  … Walker’s information listed 335,000 business tax returns but revenue officials said a much smaller number -- 245,000 filers -- likely would qualify. So the no-profit issue means those businesses won’t be getting a credit any time soon … Finally, in some cases the tax credit would go to self-employed business people who have no employees. Some critics question how job creation would result from giving them a small credit.
Another small-business group leader, with the Independent Business Association of Wisconsin, said it’s possible that as few as 20 percent of the group’s members would fit under the $500,000 sales threshold.
Let’s return to the bottom line:
Walker said 98 percent of small businesses "will be eligible" for job-creating tax relief under his emergency plan to jump-start the lagging Wisconsin economy. There are that many businesses under the $500,000 threshold -- but that’s just the beginning of the story.
They may all be eligible to apply, but many won’t qualify for a tax credit of any significant size. And the number gets substantially reduced because unprofitable businesses won’t see a credit until they turn around. Even business advocates don’t contend it would help recipients create jobs, as Walker claims.
We rate Walker’s claim False.

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