Doyle Fell For The Scam
by Tony Palmeri
7/23/05
On July 22 Amy Goodman and Juan Gonzalez of Democracy Now! interviewed Greg Leroy, author of "The Great American Jobs Scam: Corporate Tax Dodging and the Myth of Job Creation" and director of the non-profit Good Jobs First. In the segment of the interview reproduced below, Leroy discusses the "single sales factor" tax formula for big business. This is a horrendous corporate welfare scheme that Wisconsin Governor James Doyle, in an effort to gain points with the big business community, advocated heavily and signed into law in the summer of 2003. By the time the formula is fully in place, it will take $45 million per year from the state treasury. The legislation created no accountability standards to determine if in fact the corporations use the tax break to create jobs. When Doyle signed the bill, the Madison Capital Times said, "The governor, when asked about the loophole recently, seemed not to understand how it would work."
In response to a question from Juan Gonzalez, Greg Leroy provides insight toward what Wisconsinites can expect from the loophole.
JUAN GONZALEZ: Let me ask you, of all the examples that you came across in your research, could you give our readers an example of one of the worst in terms of the size and the ridiculousness of the kind of taxpayer subsidy?
GREG LEROY: We go into a particular kind of loophole called “single sales factor.” This is a sweetheart deal, especially for big manufacturing companies in a number of states. And we look at the cases, especially of Massachusetts and Illinois, both of which enacted it in the 1990s. Massachusetts under the threat of losing a big manufacturing company called Raytheon, by basically rewriting the way a multi-state company determines how much of its income gets taxed in each different state. This loophole, this gimmick, called “single sales factor,” radically reduces the amount of income tax that many companies pay in states where they're headquartered or where they have their biggest factories and wa rehouses.
The trouble is there's absolutely no accountability attached to it. There's no requirement that the companies create any new jobs or even retain any jobs. And what we found in cases like Illinois is that even despite the promises and projections made at the time the bill was enacted, the state has actually continued to bleed manufacturing jobs at a terrible rate, and the public coffers have lost a huge amount of money because a small number of companies have gotten enormous corporate income tax breaks. We actually reveal the fact that in many states now, the value of corporate income tax credits is so huge it means that for new factory investments, many companies and many states pay no corporate income tax for years. Some states even allow companies now to buy and sell economic development credits to each other because they've gotten so overgrown and so irrelevant, they don't know what to do with them, so they want to trade them among each other.
At the time Doyle signed this monstrosity, Roger Bybee wrote an excellent analysis for FightingBob.Com. Read it and weep: http://www.fightingbob.com/article.cfm?articleID=74