MADISON, Wis. — A tax credit passed to benefit manufacturers and agricultural producers in Wisconsin is primarily helping millionaires, according to a new report released Tuesday.
Wisconsin Department of Revenue data included in the report by the liberal Wisconsin Budget Project shows 78 percent of the tax credits distributed through the income tax went to individuals earning more than $1 million last year. Those millionaires represent the top 0.2 percent of all tax filers in the state.
The Manufacturing and Agriculture Credit was approved by the Republican-controlled Legislature and signed by Gov. Scott Walker in 2011. It began taking effect in 2013 and is fully implemented in the 2017 fiscal year, when it’s expected to send out $284 million in income tax breaks for manufacturers and agricultural producers. That’s more than double what it was originally estimated to cost.
Critics argue the program is nothing more than a tax giveaway that’s draining the state’s resources.
“Budgets are about choices and Gov. Walker and the Republican Legislature chose to give a $300 million tax break to millionaires and billionaires instead of paying for our schools, roads and universities,” said Scot Ross, director of the liberal group One Wisconsin Now.
But the law’s backers tout the tax credit as a way for Wisconsin to remain competitive with other states, spur job growth and attract businesses.
Jason Culotta, a lobbyist for Wisconsin Manufacturers and Commerce, said the tax credit rewards production that occurs in the state, resulting in job creation. He pointed to an announcement this week by De Pere-based packaging manufacturer Belmark that it was building a new facility in Shawano, thanks in part to the tax credit.
Walker spokesman Tom Evenson said the governor continues to support the tax credit “as a driver of economic growth in Wisconsin.” He did not react to specific findings of the report, but instead pointed to growth in manufacturing employment and a drop in Wisconsin’s unemployment rate, which is at its lowest point in 15 years, as signs that “our reforms are working and our economy is growing.”
The report from the Wisconsin Budget Project cites data from the U.S. Bureau of Labor Statistics showing that the rate of job growth since the tax credit was implemented has not measurably increased.
In the two years before the credit took effect, manufacturing jobs grew at a rate of 2.1 percent in Wisconsin, the same as the first two years of the credit. Overall job growth was 2.9 percent before the tax breaks and 3.1 percent since, based on the BLS data.
The credit is available to farmers and manufacturers who produce a variety of goods. It’s also available to corporations and shareholders of limited liability companies, certain corporations with fewer than 100 shareholders or others who file taxes as individuals and report business income.
Starting this tax year, the dollar-for-dollar tax credit is 7.5 percent of reported income. That wipes out nearly all individual income tax liability, where the highest rate is 7.65 percent. And it also nearly eliminates all corporate income tax, which is taxed across the board at 7.9 percent.
Any unused credits can be carried forward for 15 years.
The Department of Revenue figures for the 2016 tax year show nearly $155 million in credits distributed through the individual income tax will go to taxpayers who reported earning more than $1 million. That is an average of $122,000 per filer.
Those who earn between $300,000 and $1 million, and make up 1 percent of all filers, received 15 percent of the tax cut. Those earning below $300,000, who make up 98.8 percent of tax filers, received 7 percent of the income tax cut.
