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New-look finance committee approves $25 million for WEDC

By   /   August 10, 2012  /   3 Comments

By Ryan Ekvall | Wisconsin Reporter

MADISON – The Legislature’s Joint Committee on Finance met Friday for the first time since Democrats took control of the state Senate after the spring recall elections.

And with control of the Senate came new leadership.

Co-chairman state Rep. Robin Vos, R-Burlington, sat next to new co-chairwoman Sen. Lena Taylor, D-Milwaukee, instead of pal Sen. Alberta Darling, R- River Hills. Darling served as co-chair when Republicans held the Senate majority.

Taylor led the day’s action, with the committee passing several motions affecting taxpayers.

Wisconsin Economic Development Corporation chairman Paul Jadin appeared before the committee to request $25 million in tax credits, aimed at enticing companies to create jobs, make capital investments or sustain a headquarters in Wisconsin. Jadin said WEDC, a public-private enterprise created by Gov. Scott Walker to replace the state Department of Commerce, has allocated $93 million in tax credits over the past three years.

In a recent high-profile example, WEDC struck a deal with Kohl’s Department Store for up to $62.5 million over 12 years in tax breaks. In exchange, the national retailer would have to keep its headquarters in Menomonee Falls and meet capital-investment and job-creation benchmarks.

Just because the money’s been allocated, however, doesn’t mean it has been — or ever will be — claimed. Jadin wrote in a letter to the committee that “71 of those businesses have earned just under $13 million of benefits, through the creation of 1,540 jobs and $275 million in capital investments.”

Of that $13 million, WEDC has no way of knowing how much has been realized because, ostensibly, companies must owe income taxes to take advantage of tax deductions. Jadin noted there was often a significant lag time between the allocation and realization of tax credits.

Vos, though, sang the praises of WEDC, saying “one of the best things the Legislature did this session is change the way we deal with economic development.” He suggested the committee allocate $50 million to the quasi-private corporation, rather than grant them $25 million now and have them come back in December for another $25 million.

Other legislators weren’t so sure.

“When we think about allocations, we need to think about it in the context of the entire budget,” said state Rep. Cory Mason, D–Racine. “Before we rush out and spend another $25 million, let’s not do this in a vacuum.”

Mason pointed to health care, education and workforce training as other areas of investment to spur economic growth in the Badger State.

Critics argue incentives from the state’s economic development organizations distort markets and put a higher burden on businesses that don’t receive the tax benefits.

For example, unless the Legislature cuts $13 million in spending, other businesses implicitly pay a higher tax rate to make up the difference.

“You don’t want government distorting the hiring decisions of companies,” said Chris Edwards, economist at the libertarian Cato Institute. “We want companies to hire the efficient and optimal level of workers. We do not want them to hire too many workers, because in the long run they are not going to be as efficient as they would be.”

Edwards said states should instead focus on the overall business climate — namely taxes and regulation.

Jadin made a similar point at the committee meeting.

“The thing most beneficial in Wisconsin over the past year is we’re able to deal more with the quality of our macro climate largely due to the manufacturing and agriculture credit passed last spring,” he said.

In a few cases, Jadin said, WEDC could not offer “anywhere close” to what another state was offering in terms of incentives, but the company still chose to develop in Wisconsin due to the improving business climate.

In the end, the committee approved the $25 million allocation. Attached to those funds are new stipulations. WEDC will have to provide quarterly reports that include aggregate information on tax credits, loans, bonds and other credits. Annual reports must also be submitted to the Joint Finance Committee – including reporting on the number of full-time jobs retained or created.

Jadin joked he would return Christmas Eve to claim the next $25 million.

Email Ekvall at rsekvall@gmail.com

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  • Brad

    How could WEDC allocate 93 mil. over the last three years? It would only be about a year and a half old at the most, if it was created by Gov. Walker.

  • Joan

    There should be a stipulation that the jobs MUST BE GIVEN to legal Americans.

  • Brad

    I don’t have a problem with that.

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