Where Did the Senators Go?

[JiffsMom]

<p>

@justtotalk

Part of the solution is to stop companies from creating tax havens in Delaware. They create subsidiaries where literally the only shareholder is their parent company; transfer all their intangibles; have the subsidiary lease the assets; and deduct these “expenses” for using these assets from their tax bills. All their income gets shifted from our state to Delaware (which has no state corporate income tax).

Okay, so the state cracks down on that and the companies move, jobs and all, to Delaware. *More *taxpayers lost to another state. The question remains: With fewer job-holding taxpayers, where does the money come from to maintain the status quo?</p>

[justtotalk]

<p>

Okay, so the state cracks down on that and the companies move, jobs and all, to Delaware. More taxpayers lost to another state. The question remains: With fewer job-holding taxpayers, where does the money come from to maintain the status quo?

</p>

<p>Err…Moving jobs to Delaware doesn’t lower a company’s income tax bill in WI. They still sell goods in WI regardless of where the workers are. The issue is that revenues earned in WI (from selling goods to WI citizens) gets reported as profit in Delaware. </p>

<p>You’re confusing payroll taxes with corporate income tax. Cracking down on tax havens won’t affect jobs–beyond the extent that any tax affects capital investment.</p>

[barrons]

<p>Bact to reality, the state’s shortfall is not that dire to begin with. According to the NYT Wisconsin is around the middle of all states. Usually the estimated costs to continue allow for increased costs for inflation etc. If you just assume flat budgets with no increases for anything–pay, grants to schools, utilities etc the cost to continue could be half that figure or even less. Many so-called budget cuts are based on the inflated costs to continue models. I just count actual $$$s. </p>

<p>[Week</a> in Review > Image >](<a href=“Week in Review > Image >”>Week in Review > Image >)</p>

[justtotalk]

<p>And we’re talking about 6500 (including 2/3 of Fortune 500) companies incorporating subsidiaries in a small building (1209 Orange Street). So I’m not sure who exactly is moving where, but you’re talking about a pretty big exodus.</p>

[justtotalk]

<p>

Bact to reality, the state’s shortfall is not that dire to begin with. According to the NYT Wisconsin is around the middle of all states. Usually the estimated costs to continue allow for increased costs for inflation etc. If you just assume flat budgets with no increases for anything–pay, grants to schools, utilities etc the cost to continue could be half that figure or even less. Many so-called budget cuts are based on the inflated costs to continue models. I just count actual $$$s.</p>

<p>Week in Review > Image >

</p>

<p>I don’t understand–why should budgets ignore inflation estimates on public workers’ wages and other expenses? Unless you support and believe the freeze on public workers’ wages will pass as it stands in the budget repair bill, then how is that anywhere near reasonable? Even then, you don’t require a voter referendum to tie wages to inflation for state workers.</p>

[barrons]

<p>Read the following and you will understand. I don’t expect any wage increase paid by the state. I don’t expect state aids to schools and local governments to go up one dollar. Do that alone and you wipe out much of the so-called budget gap. Cut spending on Medicaid and welfare by 5% from this year and you will be there. Inflation is very low. Everyone takes a little pain and life goes on. This stunt by Walker is just that. A Trojan horse to completely gut state worker unions and benefits without any negotiations. Maybe the workers would take fewer vacation and sick days and lower retirement benefits rather than lose healthcare coverage. These things are made to be negotiated. </p>

<p>[Analysis:</a> Despite budget woes, state less in crisis now than two years ago](<a href=“http://host.madison.com/ct/news/local/govt-and-politics/article_90196216-3b66-11e0-a327-001cc4c03286.html]Analysis:”>http://host.madison.com/ct/news/local/govt-and-politics/article_90196216-3b66-11e0-a327-001cc4c03286.html)</p>

[justtotalk]

<p>^Interesting read on fuzzy accounting in state deficit projections. It sounds like the numbers change dramatically depending on how much you discount agencies’ required revenues “estimates.”</p>

<p>Regardless of what the exact deficit will be in each of the next 3 years, there’s no mention of assuming wage freezes across the state…And why should we? </p>

<p>The numbers might range between 3.1-3.6 billion in the next three years, but you can’t just start reducing the estimates from there–the balance sheet goes both ways. When they say that retirement pension systems are 97% funded, they’re discounting expected distributions (usually ~8%). Either there will be economic growth in the near future–which justifies that 8% yield on the pension system’s investments–or there won’t. If there is substantial growth (and with it inflation) then how are you going to freeze wages without another massive protest?</p>

<p>And what exactly does a 5% cut in Medicaid mean? The end of BadgerCare? You make it sound so easy but federal and state governments have always treated SS/Medicaid/Medicare as forbidden fruit to cut. </p>

<p>Maybe the exact figures are debated, but I don’t think you can just dismiss the deficit as overblown because it assumes that nominal costs aren’t stagnant. </p>

<p>That said, it doesn’t sound like cutting collective bargaining is any kind of solution (how does this help fiscally in the short run, anyways?). But I’m interested in what you think the alternative solutions will be–the budget will balance one way or another, and I’m not sure what a 5% cut in Medicaid implies.</p>

[JiffsMom]

<p>

@justtotalk

Err…Moving jobs to Delaware doesn’t lower a company’s income tax bill in WI. They still sell goods in WI regardless of where the workers are. The issue is that revenues earned in WI (from selling goods to WI citizens) gets reported as profit in Delaware. </p>

<p>You’re confusing payroll taxes with corporate income tax. Cracking down on tax havens won’t affect jobs–beyond the extent that any tax affects capital investment.

No, I am not. The corporation moves to Delaware, taking the former Wisconsin jobs with it. No more income or corporate income tax paid to Wisconsin. Done and done.</p>

<p>Sources of tax revenue flee the state. The question remains… where is the money going to come from to fund the status quo?</p>

[JiffsMom]

<p>The money isn’t there. Some of you are not understanding that basic fact. Scroll down to “Underfunded pension liabilities” here:
[Wisconsin</a> public pensions - Sunshine Review](<a href=“http://sunshinereview.org/index.php/Wisconsin_public_pensions#]Wisconsin”>http://sunshinereview.org/index.php/Wisconsin_public_pensions#)</p>

<p>-637% of tax revenue may put this into perspective for you.</p>

[barrons]

<p><a href=“http://www.politifact.com/wisconsin/statements/2011/feb/18/club-growth/group-says-wisconsin-state-workers-havent-had-sacr/[/url]”>http://www.politifact.com/wisconsin/statements/2011/feb/18/club-growth/group-says-wisconsin-state-workers-havent-had-sacr/&lt;/a&gt;&lt;/p&gt;

<p>Wisconsin’s state pension funds are in relatively good shape too. I don’t know where you get the idea that the state has issues. Some cities might but the state funds are among the most solid in the US–especially since the market is up substantially since the last report was done.</p>

<p><a href=“http://www.pewcenteronthestates.org/uploadedFiles/wwwpewcenteronthestatesorg/Initiatives/R_and_D/Trillion_Dollar_Gap_factsheets_Wisconsin.pdf[/url]”>http://www.pewcenteronthestates.org/uploadedFiles/wwwpewcenteronthestatesorg/Initiatives/R_and_D/Trillion_Dollar_Gap_factsheets_Wisconsin.pdf&lt;/a&gt;&lt;/p&gt;

<p>Medicaid–just cut the payments to doctors and hospitals a bit and do much more finding fraud which is now estimated at 10% or more and you can easily save 5%. Benefits are far too broad. They can just continue the work they started last year.</p>

<p>[How</a> Wisconsin made big Medicaid cuts with little controversy](<a href=“http://www.stateline.org/live/details/story?contentId=503421]How”>http://www.stateline.org/live/details/story?contentId=503421)</p>

[justtotalk]

<p>

No, I am not. The corporation moves to Delaware, taking the former Wisconsin jobs with it. No more income or corporate income tax paid to Wisconsin. Done and done.</p>

<p>Sources of tax revenue flee the state. The question remains… where is the money going to come from to fund the status quo?

</p>

<p>Stop it. This is silly. You pay income taxes in a state if you do business there. The threshold for classifying as “doing business” is really low. To avoid reporting revenues earned in WI, a business wouldn’t be able to provide ANY services, own ANY property, or even set up a transport/warehouse facility. Anytime you want to sell something you’d have to ship it by common carrier–none of your facilities could be used in the state. This would limit companies to Nevada, Wyoming and Delaware for setting up their warehouses, factories, headquarters etc. Otherwise, they’d pay taxes on earned income.</p>

<p>That’s not even feasible, much less practical. Companies aren’t going to physically move their plants or transportation facilities over a lousy state income tax–which is deductible from federal taxes. </p>

<p>The only reason they don’t pay state taxes right now is because we make them SO EASY to avoid. All you have to do is set up a passive holding company in Delaware and you’re golden.</p>

[JiffsMom]

<p>

@justtotalk

Stop it. This is silly. You pay income taxes in a state if you do business there. The threshold for classifying as “doing business” is really low. To avoid reporting revenues earned in WI, a business wouldn’t be able to provide ANY services, own ANY property, or even set up a transport/warehouse facility.

Exactly. Leave the state. Take the jobs with you. Sell products purchased by those in Wisconsin. Ship by common carrier. Done.</p>

[JiffsMom]

<p>Trivia question of the day… Who said this?

All Government employees should realize that the process of collective bargaining, as usually understood, cannot be transplanted into the public service. It has its distinct and insurmountable limitations when applied to public personnel management.</p>

<p>The very nature and purposes of Government make it impossible for administrative officials to represent fully or to bind the employer in mutual discussions with Government employee organizations.</p>

<p>Particularly, I want to emphasize my conviction that militant tactics have no place in the functions of any organization of Government employees.</p>

<p>A strike of public employees manifests nothing less than an intent on their part to prevent or obstruct the operations of Government until their demands are satisfied. Such action, looking toward the paralysis of Government by those who have sworn to support it, is unthinkable and intolerable.

</p>

[magnaapp]

<p>Fdr …1937</p>

[barrons]

<p>A dead guy from another era.</p>

[JiffsMom]

<p>Yep, FDR, a Democrat.</p>

<p>And as for being from another era, I suppose that means you believe we should repeal FDR’s Social Security Act, as well, barrons?</p>

[barrons]

<p>No, that was actually designed by UW economists and would be fine today if they stuck with the original concepts. . But FDR’s outlook on unions might be more from his patrician background or just his general love of total control. FDR was no saint in many ways. He tried to control the Supreme Court and many other questionable things. </p>

<p>[Social</a> Security: The Wisconsin Connection](<a href=“http://www.wisconsinhistory.org/topics/socialsecurity/]Social”>http://www.wisconsinhistory.org/topics/socialsecurity/)</p>

[Stooge]

<p>I love hearing my tea party supporting in laws scream bloody murder when i suggest reducing social security or medicare benefits. hilarious. it’s always some other guys crap that needs cutting.</p>

[lovemykids2]

<p>Jiffsmom - it’s clear that you have a solid understanding of finance and economics. </p>

<p>My husband graduated from the business school at Madison and is a CFA. He agrees with everything you’ve written and shakes his head at those who listen to communications majors who incorrectly report financial information ( and medical for that matter). </p>

<p>I grew up in WI and now live in IL. My family in WI is thrilled with the new Governor, and I’m hating ours!</p>

<p>Barrons seems to know a lot about admissions at Madison, he should just stop there.</p>