The Most "Exemplary" Tax Cut of All.

Republicans reduced how much low income families could receive from the Earned Income Tax Credit and the Homestead Credit because people didn't earn the money they got back, it was just a hand out. Therefore, not a tax increase. Make no mistake, it was a tax increase. And that money went to the rich. This is the most incredible corporate giveaway.

Cap Times: Members of Wisconsin Manufacturers & Commerce toasted state Sen. Glenn Grothman there for spearheading the "most exemplary public policy initiative in support of manufacturing in more than 35 years," a news release says. There's good reason WMC was so excited: The new policy effectively eliminates state income taxes for many of Wisconsin's corporations, factory owners and agricultural producers by the time it's fully phased in. "We had to do something to change the business climate in the state … and this does it big-time," says Grothman, R-West Bend. Slipped into Gov. Scott Walker's 2011-2013 budget at the last moment, the domestic production tax credit will cost the state $360 million in revenue over the next four years and some $130 million each year thereafter, according to the non-partisan Legislative Fiscal Bureau

The credit applies to profits derived from manufacturing or agriculture … As a result, top bracket taxpayers could see their state income tax rate fall from 7.75 percent to less than zero by 2016, when the credit fully kicks in. That's because any unused credits can be counted against other income, like stock dividends, and carried over for up to 15 years.

"It's a total giveaway to the wealthy," says Jack Norman, president of the Institute for Wisconsin's Future. "You've got a guy working at the factory making $35,000, paying his share of taxes. Meanwhile, the guy who owns the factory won't pay any state tax and he can also shelter the income of his wife."

Milwaukee Mayor Tom Barrett mentioned the production tax credit last month when pressed on what Walker policies he might change … Walker jumped on that statement, charging that Barrett is looking to raise taxes on Wisconsin's "job creators." Barrett has countered, "Every tax credit or break must be tied directly to job creation, so everyone in Wisconsin benefits — otherwise the middle-class employees end up paying more, while the wealthy and big business pay less," says Barrett.

The production tax credit was just one of the "gifts" … targeted at corporations, investors, upper-income residents and campaign contributors. Combined, they will reduce state revenues significantly. Making up the difference, opponents argue, will be average Wisconsin families. In a report released this week, the Wisconsin Democracy Campaign calculates the decrease in state revenues will cost the average family of four $235 in higher taxes beginning in 2013 and nearly $300 by 2021 if all the credits and incentives are fully implemented.

One of the most outspoken critics of the production tax credit is Mark Harris, the Winnebago County executive. Struggling to balance the budget in his own manufacturing-heavy county in the face of shrinking state support, Harris has been sounding the alarm … An accountant by training, Harris says the tax credit could lead to companies scrambling to have their business reclassified as manufacturing to avoid paying state taxes … this tax cut is very large and it may threaten funding for K-12 education, the university system and municipalities," he says.

But Grothman maintains "This credit is going to generate so much added economic activity that any cost will be dwarfed by all the new money coming in," he predicts. The fiscal bureau has estimated the GOP tax cuts will cost the state $2.3 billion in revenue over the next 10 years. It's not clear how Wisconsin will make up the difference.

"They keep piling these things on with no idea how they will pay for them," says Dale Knapp, research director of the Wisconsin Taxpayers Alliance.

Harris is skeptical … Drawing upon his years in the private sector, Harris says business owners hire based on whether adding staff will increase profits — not on tax policy. "My gut feeling is that any tax cut will just go back into the owner's pocket," says Harris, who also holds a law degree from the University of Michigan.

The Wisconsin Democracy Campaign, in its report titled "Special Interest Smorgasbord," says the production credit and capital gains cuts are the largest of 55 policy changes that collectively will cost the state $335 million in 2013 and at least $439 million by 2021.