Another Wisconsin Corporate Welfare Failure

Harley-Davidson plans job cuts amid decline in quarterly earnings

Here's a link to Harley-Davidson's subsidy bonanza over the years.

Wisconsin gave Harley a $25 million subsidy (corporate income tax credit, rebate or reduction) in 2010.

Sadly (for journalism), the article mentions nothing about the millions in subsidies given to Harley-Davidson.

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Negative Income Tax For Corporate-personage ... It's The Wisconsin Way

Hey, all you hard-working, under-compensated Wisconsin folks: How would you like to pay a state income tax rate of 4.3 percent? Or, if that's too much, how about 2.2 percent? Still too rich for ya? Well, then, how about a Wisconsin state income tax of NEGATIVE ONE PERCENT? Yes, the state would PAY YOU a refund on zero taxes owed! Wow!

Why Visit Milwaukee?

From Twenty-Something Travel:

• Old Fashioneds
• Al Fresco Dining
• Harley Davidson
• Cool Architecture
• The Milwaukee Art Museum
• German Culture
• Summerfest

Home Team

Poor Harley Davidson has only seen a $91.4 billion profit over the past two years. Makes a lot of sense to see them threatening taking away jobs from cities if they aren't given a handout, and threatening their unionized employees with job loss.

In other local, prideful, business news, A.O. Smith (a company that has been moving jobs to Mexico since the early 1990s) saw its earnings rise 42 percent.

Two great examples of local corporate interests whose actions are directly responsible for the loss of many good paying jobs in America. All the while, they are raking it in alongside subsidies from the government.

It's class warfare alright. And the uber rich are winning.

Do As I Say, Not As I Do

Yet another great example of the hypocrisy in our public discourse. We hear all the time about how inept government is, how spending is out of control, and how the market and operating "like a business" is the magical route to a world of happiness.

Harley-Davidson participated in $2.3 billion from the Fed. (Harley's many subsidies have been well-documented.) As the Journal Sentinel reported, "Area banks, Harley-Davidson took help from the Fed." This is typical of most anti-government mouthpieces. They belittle aid to the poor, to federal and state programs, and to pretty much anything that doesn't directly benefit their balance sheet. But, they simultaneously always encourage and have their hands out for government largess if it benefits them.

Not to pick on Harley, but it would be nice to hear some of these same corporations that get hand-outs actually acknowledging the important role our government plays in the market and economy. Maybe we could actually start having an adult discussion about this. The government plays a crucial role in the legal and financial operation of the country, and they also maintain the infrastructure that allows business to function.

Instead we get douchebags like Ron Johnson moaning that the government doesn't create jobs and that it should stay out of the market. Yet he forgets to mention the handouts and low-interest loans that allowed his own job and company to grow. And this is Wisconsin's newly elected Senator whom is going to lead us down the path to prosperity? He is going to usher in a new era of honesty and sound accounting? Still waiting for the day when we can discuss the equally important roles of the public and private sectors like adults.

For Further Reading:
Blackmailed Into Oblivion
Combined Reporting
Harley Subsidies
Rumbling For Dollars
The Subsidy Game As Corporate Strategy
To Deny Corporate Demands

Blackmailed Into Oblivion

The Journal Sentinel thinks Harley-Davidson was justified and correct in blackmailing the State for $25 million and decimating many well-paying middle-class jobs by unnecessarily demanding contract concessions.

The Journal wonders, "Is it a win if these actions mean fewer jobs? Are state incentives worth it?"

And, of course, to both questions, they answer, "Yes."

Maybe this repeated bribery by corporations of state taxpayers would make for good front-page stories in the newspaper. Maybe governors and local media could make this a federal issue, draw attention to this corporate welfare, and help bring an end to this economic war among the states.

The Journal also opines, "State government should do all it can to retain its base of existing companies and help them to grow." Isn't this the same paper that often writes about an overpaid, inept, inefficient government? When did it become the government's job to insure private sectors businesses remain successful? Doesn't the provision of clean water, roadways and other transportation, educational institutions, and legal entities already assist private corporations in their day-to-day operations?

Does the Journal really feel we, as a nation, should allow companies to blackmail any community of millions of dollars whenever the mood strikes them?

The State nor the Department of Commerce is here to kiss the ass of big business. The Journal's suggestion of such shows how far we, as a country, have drifted. This is class warfare, disguised and homogenized by the local media, sold as a prescription for what ails us and, somehow, deemed the only logical choice we have available.

As discussed earlier, the State (and its departments) provides the ground-rules which aid all business and allow them to, supposedly, compete on a level playing field. The more we give-in to private business blackmail, the more we allow state incentives to alter the market and distort free enterprise and fair competition. And isn't that what the conservatives always claim they want? To let the market decide?

It's one thing to improve parking for downtown businesses. It's another to build a parking garage for one specific business. The larger point being, I understand the government doing something to enhance the environment, the quality of life, the school system, and such to buttress the attractiveness of a city and to allow a city to be better positioned to provide what private businesses desire.

To simply be paying off bribes to companies threatening to leave is criminal. This is not cost-effective economic development. Rather than the newspaper just acting as a PR shill, they could make this corporate blackmail a major issue for discussion and possibly assist in ending such inefficient and wasteful policies.

For Further Reading:
Accountability For Development Subsidies
The Failures Of Economic Development Incentives

Taken For A Ride

Another example of the Journal Sentinel's loathing of everyday workers, in the case of Harley-Davidson holding the state hostage for subsidies by threatening job loss, the Journal feels the workers just have to take it. And, they add, "We don't doubt Harley's struggles."

As usual, their analysis is lacking. Maybe they should doubt Harley. Maybe they should question whether these contractual concessions are necessary. Maybe rather than just listening to whatever a CEO tells them, the Journal could do some research and put the issue in the correct socioeconomic context. As Milwaukee Magazine's Eric Gunn writes, the favorably-business-biased, screw-the-worker attitude is typical of the media over the past few decades.

Luckily Jack Norman has actually looked at the facts of the situation. He found, "Harley made $104 million in profits in the first six months of 2010. It did have a $55 million loss in 2009, a strategic choice resulting from a $126 million write-down for discontinued operations. Before that, the company had made at least $100 million in profits for 15 straight years."

In previous work, Norman discovered, "Harley's Wisconsin taxes have dropped dramatically, according to data from the Wisconsin Department of Revenue. Its state income tax bill plummeted from nearly $23 million in 2005 to under $1 million in 2008 (the most recent year with data). Its pre-tax profits fell much, much less, from $1.5 billion to $1 billion...Harley's effective tax rate - Wisconsin income tax as a percent of global profits - went nearly to zero. In 2005, the company paid 1.5% of pre-tax profits in Wisconsin income tax. By 2008, that had dropped below 0.1%."

If workers making $30 an hour are dragging the company down, can't the same be said for executive salaries in the millions? Norman discovered, "Last year, Harley's CEO (a job split during the year between James Ziemer and Keith Wandell) took home $8,864,919 in extras over and above base salary of $1,105,169. In 2008, the bonuses totaled $6,201,323. That's over $15 million in bonuses the past two years to the CEO of a company that cries "crisis" to justify lower wages and benefits for production workers...Members of Harley's board of directors (if they aren't already employees) each collected an $80,000 fee in 2009, plus $50,000 worth of stock. During this "crisis," board members never lost their $1,500 annual allowance for clothes and accessories, nor their free use of a motorcycle."

Pennsylvania was hung over a cliff by Harley last year. After threatening job loss and possibly moving production out of state, Pennsylvania gave Harley $15 million in subsidies. Wisconsin, in similar fashion, is offering Harley $25 million.

This is typical economic development. It's a subtle class warfare. Taxpayers funding their own salary reduction and/or job loss, alongside increasing corporate profits. We need federal action to stop this economic war among the states.

For Further Reading:
American Socialism
Equitable Development
Industries Find Surging Profits In Deeper Cuts
Legalized Bribery
Spuriously Invoking The Tax Boogeyman

Rumbling For Dollars

The economic war among the states is alive and well. Good to see this inefficient, zero-growth, overbidding continuing. [Recall Mercury Marine.] Just the kind of job "negotiations" we need to see during a recession. Nothing like blackmailing one community against another to see which one will cough-up millions of ill-gotten dollars. Way to go, Harley!

Combined Reporting

Local media, Republican legislators, and business blowhards are doing all they can to inflate the idea of onerous taxation possibly pushing Harley-Davidson from Wisconsin.

Some things never change.

They won't be happy until they [business] no longer pay taxes. (Even then, I'm not so sure.) This time, the culprit is combined reporting.

The Journal, alongside their co-conspirators, would have us believe combined reporting is an anomaly, a burdensome taxation specific to Wisconsin. Yet, combined reporting is a practice common among the majority of states.

Businesses typically create subsidiaries (in low-tax states) and allocate profits to such to avoid taxation. The New Rules Project has a great summary of this scheme and swindle.

In February 2009 the Institute for Wisconsin's Future released a report chronicling the tax avoidance and nefarious intentions which combined reporting would end for Wisconsin businesses.

Harley-Davidson paid no state income tax in 2007. So, we have a large corporation paying no state income tax, yet, some want to claim taxation is making them less competitive. Add this to the fact that the State of Wisconsin gave Harley-Davidson $4.5 million in 2006. The City of Milwaukee has given the company $868,000; while Tomahawk has given the company $3,042,000. From 2000 through 2006, Harley-Davidson had received $3,910,000 from the Wisconsin Department of Commerce.

Not only does the tax burden on Harley-Davidson seem to be minimal, the State (along with certain localities) is subsidizing the company. These hand-outs and favorable tax treatment are the case for Harley-Davidson operations in other states, too. The company also has no qualms about asking the Feds for "help," either.

One interesting tactic the Mayor or the Governor could use in exposing this bribery is televising the discussion with company executives. (All economic development discussions using public dollars should be televised to expose these toxic dealings to the light of day.) If an executive (or one of the anti-tax crusaders) could justify, on camera, why they should not pay their fair share of taxes...by all means, don't pay. I just want to, finally, hear a plausible explanation.

For Further Reading:
Class Warfare
Doyle Says Combined Reporting Not To Blame For Harley's Woes
Falsehood Fabrication
Legalized Bribery
Luring Lunacy
Miller Pork
Site Selection Shenanigans
Spuriously Invoking The Tax Boogeyman
Welcome to Walmart