January 2011, Cover Stories
Building Business
Scott Walker promises to put Wisconsin back in business with a reform agenda targeted at company growth and job creation
We must lower the tax
burden that prevents
businesses from investing
in facilities and payrolls.
—Gov. Scott Walker
The Great Recession hit Wisconsin hard. The state has lost 155,000 jobs since 2008 and efforts to recapture those positions have had marginal success. But newly inaugurated Gov. Scott Walker has outlined a plan to help put Wisconsin back in business.
Walker intends to declare an “economic emergency” this month and call the state legislature into a special session to develop strategies aimed at creating 250,000 new jobs and 10,000 new businesses.
In a recent conversation with Corporate Report Wisconsin, Walker went into greater detail about his reform agenda and what the proposed changes may mean for Wisconsin businesses.
Lower the tax burden
“We must lower the tax burden that prevents businesses from investing in facilities and payrolls,” Walker says.
As the state’s manufacturing base crumbled during the recession, it became increasingly apparent that small businesses were the engines keeping Wisconsin’s economy running. For this reason, much of Walker’s plan focuses on businesses with 50 employees or less.
“Projections show that up to two-thirds of all new jobs are likely to be created in the state’s small businesses,” says Walker.
He says he plans to encourage the legislature to reduce the state income tax by one percentage point for businesses with 50 or less employees, which could represent up to a 20-percent decrease on their taxes, depending on the owner’s tax bracket.
“We chose companies with 50 employees or less because it’s really not fair, in my mind at least, that a business owner whose company employs 20 people is taxed under the same tax rates as a Fortune 500 company,” he says. “This is a way to put greater emphasis on small businesses, where the majority of the jobs are created. It’s about putting more money back into the hands of employers who can turn around and reinvest it into their businesses and put more people to work.”
Make health care affordable
Another barrier to job creation is skyrocketing health care costs. Walker is proposing a state income tax deduction for Health Savings Accounts (HSAs) to help business owners address this concern.
HSAs are allowed with plans that have deductibles of at least $1,200 for individual coverage and $2,400 for family coverage. Companies can opt to put money into these accounts for employees to use for health care expenses. However, the state currently taxes employees on any funds placed in these accounts.
“We are one of four states that still tax HSAs,” says Walker. “If you are a small company and you want to provide that option, that dollar doesn’t go as far because there is a state tax attached to it.”
While Walker admits it’s no panacea, he says repealing this tax will help businesses find affordable health insurance. “When you’ve got a small shop, it’s often very difficult—if not impossible—to get an affordable plan to buy into. This gives companies another option.”
Of all the reasons a business may
have for
not creating new jobs, bureaucratic
hassles should never be one of them.
—Gov. Scott Walker
Spur economic development
Walker also intends to restructure the Department of Commerce to maximize time spent on economic revitalization. Currently, this department’s mission is not only to drive retention and create jobs, but also sample and test petroleum products and tank systems, manage the state’s largest environmental fund, regulate laws related to buildings and structures, oversee ground water protection and more.
“Currently, the Department of Commerce is more about regulating commerce than promoting it,” he says.
Walker seeks to replace this department with a public-private entity focused entirely on economic development. He cites the state’s seven regional economic development efforts, including those of The New North, Thrive and Milwaukee 7, as models for this change. Public-private entities, he says, can be more flexible and act more quickly than government models.
“Indiana did this several years ago, and they are now able to respond to market needs and give companies answers quickly, as opposed to weeks if not months later.”
Cut the red tape
Navigating bureaucratic red tape also stands in the way of job creation, Walker maintains, which is why he also hopes to streamline business regulations.
Walker indicates business owners express frustration over the state’s often complex and confusing regulations. For example, Wisconsin enacted a wind-bracing regulation requiring contractors to erect structures built to hurricane standards. “The previous standards mandated structures that could withstand high winds and tornadoes. In Wisconsin, do we really need to build to withstand a hurricane? This is a prime example of a regulation that is costly to business and leaves people scratching their heads.
“Of all the reasons a business may have for not creating new jobs, bureaucratic hassles should never be one of them,” he adds. “These changes can be a real advantage that makes it easier to do business in Wisconsin.”
Recruit new business
Because attracting new companies also represents new jobs, Walker’s plan addresses business recruitment as well.
He proposes waiving taxes for two years for corporations electing to relocate to Wisconsin. “They don’t pay corporate income taxes here right now, so we’re not losing anything,” says Walker. “But this could be a major attraction that helps bring a business to Wisconsin.”
Small businesses moving to the state might also receive benefits. Walker says he’d like to see a 50-percent tax credit that can be spread out over 10 years to help defray expenses associated with moving here.
Walker also proposes enhancing Wisconsin’s “ready, set, build” concept, currently a web-based, statewide inventory of all available development sites. He says he would like to see state government team with local governments to take the permitting process as far as possible before anyone purchases the land. “We could prepare this land in advance so that if a company from Indiana says, ‘I’d love to come to Wisconsin,’ we can show them available sites that are teed up and ready to go.”
These plans are just the beginning for Walker, who says he hopes to do much more in his gubernatorial role.
Recently, Walker told an audience of 300 commercial real estate professionals that government can be a burden or an advocate for economic development.
“I want it to be the latter,” he says. “We will start taking immediate action [toward that end] in January, but there will be more things long-term as part of our quest to help the employers of our state create new jobs.”