PUBLIC INVESTMENT; PRIVATE GAIN:

A Review of Wisconsin's Corporate Tax Expenditure Budget
from Fiscal Years 1974 to 1994

Michael Rosen
Economics Chair, Milwaukee Area Technical College

May 1995

EXECUTIVE SUMMARY

In fiscal year 1994, the State of Wisconsin spent more than $1.1 billion on "corporate welfare" in the form of tax expenditures that benefit corporations.¹ These tax expenditures included: (1) exemptions, exclusions, deductions, credits and special treatments that lowered firms' corporate income and franchise tax burdens by more than $300 million, and (2) sales tax exemptions that saved firms more than $800 million.

Over the past 20 years, tax expenditures, often characterized as corporate welfare in Wisconsin have grown at the astronomical rate of 1,370% while the state economy has grown only moderately. During the same period, real (adjusted for inflation) average hourly earnings for non-supervisory workers have declined by over 13%. Today these tax breaks (expenditures) cost the state almost twice what it spends each year on cash assistance for low-income families.

Corporate tax breaks are designed to promote economic growth, increase employment opportunities and improve the standard of living for Wisconsin residents. However, while tax expenditures have skyrocketed over the 20 year period, manufacturing job growth has been stagnant and annual wage rates in Wisconsin have dropped to the lowest in the Great Lakes region.

The loss of revenue to the State of Wisconsin caused by massive subsidies to corporations has resulted in a dramatic shift in the state tax burden onto households. From 1974 to 1994, the manufacturing corporations' share of state and local property tax dropped from 15% percent to 5.6 percent while residential property taxes increased from 51 percent to 62 percent of the tax total. Currently, corporate income tax generates just 3.5 percent of Wisconsin's general revenues while personal income tax accounts for 25 percent of state revenues.

Despite enormous public investments in manufacturing corporations through tax expenditures since 1974, industrial employment is not expanding real wages are significantly lower. Loss of corporate tax revenue to the state has resulted in a reduction in public services and a shift in the tax burden to local governments and taxpayers. Closer scrutiny and analysis of tax expenditure policies is necessary to ensure that the public investment achieves the desired public benefits.

NOTE

1. Source of corporate tax expenditure data: "Summary of Tax Exemption Devices: 1995-97." State of
   Wisconsin Department of Administration and Department of Revenue, February 1995.

Rosen, M. (1995, May). Public investment; private gain: A review of Wisconsin's corporate tax expenditure budget from fiscal years 1974 to 1994. Milwaukee, WI: Institute for Wisconsin's Future.

For a printable online version of the full report (PDF*), click here.

*PDF requires Adobe Reader. Download it for free here.

To obtain a printed copy of this report, order online or contact IWF at 414-384-9094 or iwf@wisconsinsfuture.org.

[back to top]

» Back to Taxes Publications

Home | About IWF | Projects | Publications | Calendar | News | Contact Us | Links | Search