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Last week's article talked about the Wisconsin state budget and the short sighted, politically motivated band-aids being proposed. Real, long term, sustainable budget solutions are possible. Wisconsin doesn't have to go through these battles every two years. But this would require real leadership and a willingness to address the actual causes of the fiscal problems.
For too many years the state budget problems have been kicked down the road by both parties. No one wants to address the simple fact that essential public services (sewers, water, law enforcement, courts, roads, schools, and necessary regulation of business, etc.) must be paid for. Costs of these necessary services increase with inflation. Public services are needed all the time, not just during good economic times. Many costs, like maintaining good schools and roads, will be lower when addressed on a steady ongoing basis instead of managing by crisis. It is cheaper to do bridge maintenance each year than to defer needed work until the bridge collapses.
What are the long term solutions? What is needed is a restructuring or our priorities and tax polices. The Wisconsin Budget Project says, “For too long, we’ve all been told that there’s not enough money in the budget to help our communities thrive. That is not true. Actually, there is enough. Making a budget is about making choices. Lawmakers can choose to help private special interests that rig the system, or lawmakers can choose to promote the common good.”
According to the Wisconsin Budget Project closing only TWO unnecessary tax loopholes can provide $900 million to the budget to invest in our communities. The Manufacturing and Agriculture Tax credit costs the state $285 million per year but is not targeted to job creation. Any manufacturer with profits can qualify for the credit, regardless of whether they are adding or CUTTING jobs. They quote Department of Revenue figures showing that 11 tax filers with incomes of $35 million and above are expected to receive an estimated combined income tax break of $21.5 million in 2017 from this credit. Only 0.3 percent of Wisconsin tax filers received the credit, with nearly 80 percent of the credit going to individuals earning over $1 million.
The other loophole is taxing capital gains at a lower rate than earned income. This means workers often pay a higher tax rate on their wages than speculators pay on the profit from flipping stocks or real-estate. Again the Wisconsin Budget Project says the top 2% receive almost half of the capital gains tax breaks. Eliminating this loophole would provide about $164 million per year for vital public needs.
This kind of blatant corporate welfare is why we have budget problems. In addition, as I have suggested in prior articles, real budget solutions would include:
1. Collect unpaid taxes from the deadbeats! Wisconsin loses an estimated $1.6 billion every year in uncollected taxes. This includes: individual income tax ($746 million), sales tax ($536 million), corporate income tax ($113 million), cigarette tax ($44 million), and underpayment of taxes ($164 million). Collecting taxes due is not an increase in taxes.
2. Collect taxes from the 60% of corporations operating in Wisconsin who pay NO income taxes. These companies benefit from the roads, police, fire, and other public services. They should contribute. I think GE or Bank of America could afford to help out before we cut our schools.
3. Stop contracting out government services. We pay more, for less service, when private, for-profit companies replace public employees in providing services. It is not true that the private sector can do it better or cheaper. Harper’s magazine sites studies that the federal government pays 87% more for contracted work.
4. Cut the counterproductive spending. It is well known that preventive social services such as prenatal care, Head Start, and youth after school programs save money in the long run. It is better to provide education than to fill up prisons. Health care is cheaper than illness.
5. Control medical insurance costs. Government in Wisconsin spends billions of dollars for public health care programs and employee health benefits. Controlling these costs and the extremely high cost of health insurance would provide large savings for the state budget.
6. Setting better budget priorities. Budgets are about setting priorities and making choices. We can put people first with public investments and services that build vibrant communities and a more stable economy.
The Wisconsin Budget Project, along with a number of other advocacy groups, has proposed a budget that does invest in people, fixes budget problems and builds a strong economy. Google “A Wisconsin Budget for All: How We Can Invest to Help Wisconsin Communities Thrive” to read the details.
We know the solutions to our budget problems. We have blueprints for better priorities that build jobs, stronger families, and better communities. All we need is leadership that will put the common good above political expediency.