Wisconsin Governor Scott "Patsy" Walker has repeatedly cited a (hypothetical and nonexistent) looming budget crisis as a justification for everything from ending collective bargaining to having the state pay for his Hair Club For Men Membership.
So it's interesting to note that his policies are costing Wisconsin money, in that they are reducing tax revenues that would otherwise be generated by businesses.
Here's what's going on:
Governor Patsy introduced legislation to give tax breaks for new hires.
Those plans are not widely known yet and not heavily publicized: if you Google "Wisconsin tax breaks for new hires," you'll find as the number one result a Wisconsin Department of Workforce Development page that suggests employers use federal tax breaks, distressed area tax breaks, and the earned income credit as a way to hire people at a lower cost or increase their wages.
That's right: Governor Patsy's own administration is not hyping his programs, and is suggesting Wisconsin employers use the Earned Income Tax Credit... a credit Walker is proposing to reduce almost to nothing.
Apparently, nobody in the Capitol is familiar with irony.
Anyway, a key point of Gov. Patsy's plan is the tax credit for new hires. Here's how that plan is explained by a neutral CPA:
Businesses that hire new full-time equivalent (FTE) employees can now take generous tax deductions while meeting their staffing needs. Companies with gross receipts less than $4 million can take a $4,000 deduction per added FTE employee; those with gross receipts greater than $4 million can deduct $2,000 per added FTE employee. These deductions translate into $300 and $150 in tax savings per qualifying employee, respectively.
So for each new person a company hires, it will save $300 per year if their gross receipts are less than $4 million.
$300 per year.
A new full-time employee will be paid $15,080 per year, not counting the payroll taxes the employer pays as part of Social Security, so the minimum cost of a new full-time employee is $16,233.62; after the tax break, that employee will cost $15,933.62.
Here's the thing, though: Businesses that are hiring aren't even aware of this program. And the ones that know about it don't care.i
Planet Money did a show about Governor Patsy's job creation (listen to it here), and spoke to employers who were actually making new hires, and none of the people they spoke to had heard of the program. They were just hiring people, regardless of whether they got tax breaks or not.
And the companies that did know about the program? Planet Money spoke to the head of Saris Cycling Group; that's the company that served as the stage for Walker signing the tax cuts into law. That man, after outlining how little he'd save under the program, said that the tax breaks aren't an incentive at all.
In essence, the tax breaks are little sprinkles of added flavor to companies that were going to hire someone anyway -- savings that the companies didn't seek out but will still benefit.
Governor Patsy plans on creating 250,000 jobs in four years. At a rate of $300 per job, he will cost the state $75,000,000 over his term in revenues Wisconsin would have had anyway, but which it now won't because Patsy cut taxes for people who didn't ask him to do that and don't know he did.
Further proof that the $300 tax break isn't an incentive is found in the fact that that break wasn't enough to convince City Brewery in LaCrosse to hire people: Governor Patsy had to throw even more money at the company to get them to set up a new line, giving them a $490,000 tax credit to get them to hire 100 new workers here. That's not the same credit he enacted -- it's a credit that's more than triple the credit other, similar companies will get for hiring new people in Wisconsin.
The City Brewery grant itself is not necessarily Governor Patsy's to crow about; one state representative notes that it was the Doyle administration's program that led to the grant, and City Brewery appears to exist at least in part because of corporate welfare -- it got a $250,000 grant in 2008, and a $7 million grant in 2007.
That 2007 $7 million grant, by the way, came from Pennsylvania, and created jobs in Pennsylvania. So Governor Patsy's $490,000 giveaway here helped keep a Pennsylvania company operating.