Tax Burden Shifting: Exemptions

Exemptions are a subtle scourge on our public institutions and a devious tax avoidance scheme written into state statutes by corporate lawyers working alongside on-the-take state legislators. This corporate welfare is yet another scam of planners, site selection experts, business interests, and others who falsely claim that without such an exemption certain businesses would be unable to accomplish a host of things -- remain profitable, support a certain level of workforce, etc. The key to getting an exemption is showing your business is benevolent in some fashion or another. But, as with such vague statutory language, this loose definition has been twisted to the benefit of businesses being able to avoid taxes with far-fetched explanations of what makes them benevolent, and also unfairly subsidizes them competitively against another similar business not receiving the exemption. Another way to get an exemption is to simply have your lawyers and lobbyists pressure state legislators to simply write it into the statutes (sections 70.11, 70.111, and 70.112).

Nearly a third of all the property in the City of Milwaukee is exempt -- roughly $6 billion worth of property that is not taxed! Barbara Miner informs, "Wisconsin now has approximately 16,000 exempt private properties, with a value of $21.7 billion."

The Wisconsin Department of Revenue, in State Tax Incentives For Economic Development In Wisconsin, details the numerous tax incentives available in Wisconsin.

Annysa Johnson reports, “The Congressional Budget Office estimated the value of tax exemptions for hospitals nationally in 2002 at $12.6 billion.” A report by the Institute for Wisconsin’s Future found, “billions of dollars worth of property goes untaxed because it is owned by not-for-profit hospitals and medical centers…many of these hospitals generate millions of dollars in annual income and pay their top executives salaries comparable to corporate executives.”

The Wisconsin Public Service Corporation explains, “Commerical customers with residential electric or natural gas [a storefront with an apartment above it] are tax-exempt from November through April for the portion of energy used for residential purposes…Non-profit organizations [operated for religious, charitable, scientific or educational purposes or for the prevention of cruelty to children or animals] are tax-exempt year round for electric and natural gas use.”

Credit Unions are tax-exempt institutions. As even the Wisconsin Bankers Association states, “To the extent that credit unions use their tax exemption to lower home lending rates, federal and state income tax exemptions are subsidizing borrowing by high-income households.” They find this exemption will cost, over the next 10 years, $400 million in Wisconsin, and $31 billion nationally.

A few of those with property tax exemptions written right into the state statutes are: machinery and equipment used in manufacturing, farm inventories, computer hardware and software, and tax increment districts. In a recent decision, City of LaCrosse v. Wisconsin Department of Revenue and Gundersen Clinic, the Wisconsin Tax Appeals Commission ruled that a host of categories of computerized medical equipment is exempt from property tax.

Those enjoying sales tax exemptions: manufacturing machinery and equipment; manufacturing consumables; pollution abatement, waste treatment and recycling equipment; production fuel and electricity. Steven Walters notes, “The sales tax [in Wisconsin] is expected to bring in $4.2 billion this year. It is the second biggest source of state tax collections, trailing only the $6.4 billion personal income tax.” He also lists the costs of certain exemptions: computer services $136 million; legal services $113 million; advertising $103 million; personnel services $79.4 million; architectural engineering and surveying services $69.2 million; management consulting and public relations $64.1 million; and accounting $59.5 million.

The importance of a good manufacturing base to our economy is obvious, as is the importance of recycling to our environment, etc. But if the market has decided that these aren’t important things and the government must support these endeavors, then we should at least also be guaranteeing these are well-paid jobs with health care and pension plans. If we’re going to be in the business (of whichever business we might be subsidizing), we should have it on our terms and have these be solid jobs that allow the workers to be happy, productive, and fairly compensated. Consequently, they are able to support their local economy (through purchases). This multiplier effect of locally earned and spent money ripples through the economy and creates jobs and stable communities.

There are a host of “business incentives” (welfare for the rich) in Wisconsin: Economic Development Zones with development zone credits, Tax Incremental Districts with infrastructure improvements financed by tax increments, and Technology Zones with tax credits for high-technology businesses locating in the zone. Granted some of this development would not occur without the subsidy. Therefore, that is a good investment if it occurs in a blighted or declining area. But sadly too often developers, real estate magnates, and builders use this welfare to line their pockets rather than making a catalytic investment (reproducing through the local economy), which would be much better for the long-term health of their city and economy. They build whatever is easiest and will return the quickest buck. They're looking to line their pockets with the largest amount of money in the shortest period of time. They're not trying to develop a sustainable, bustling, safe city environment.

The inequity in the tax burden is at a breaking point. Workers cannot bear the brunt of this burden much longer. The economy is in a recession as this is being written, and we may be headed for another 1929-style depression. Corporations have written the tax code to their benefit. Their share of taxes is minuscule and declining. Their, in essence, looting of public dollars has ramifications on our ability to maintain: parks, libraries, public transportation, sewage, wetlands, pollution, poverty, and employment – to name a few. It has ramifications on everything we do and how we live.

This is the workers' money they are stealing. Without the productive capacity of all the workers in the world applying their craft there would be no product or service to sell. They make the profits and standard of living we all deserve possible. Sadly, they are being exploited. I’m sure we’d all prefer a higher floor for the least among us, rather than a subsidized ceiling where the already-rich take from those working their asses off to make ends meet. Our inattentiveness and inaction with regards to this growing inequality is to our own detriment. Even the middle class is now being squeezed into a paycheck-to-paycheck lifestyle. This is a dismal fact and an abomination for a wealthy, highly-educated country like America.

Why is this? To recapitulate -- about a third of the land and property the rich/well-represented own is exempt from taxation. Capital gains, which are mostly claimed by the rich, are taxed much lower than income. The tax code has a hoard of loopholes, deductions, and write-offs, which benefit the rich. So, the basic story is: workers are working longer, harder, and producing more; but they aren’t sharing in the gains. And all those gains the CEOs and executives are making off Labor’s production are not being completely or fairly taxed, if at all. So we’re making less and having to pay for more while a few greedy bastards stockpile the treasure of our exploited labor.

Jack Norman calculates, “Thirty years ago, residential property accounted for half of all state property taxes. Today, homeowners pay 70 percent of all property taxes, as the business contributions have dropped…The poorest homeowners (incomes below $15,600) paid more than 14 percent of their income in state and local taxes. The richest homeowners (incomes above $70,000) paid about 10 percent of their income in state and local taxes.”

Fred Mohs, former regent with the University of Wisconsin System currently on the board with Madison Gas and Electric, in Barbara Miner's Tax Exempt Milwaukee Magazine article, contends, "The only people left to pay were the peasants and the merchant class, and they eventually solved the problem by cutting off the heads of a lot of people."