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May 19, 2010

The Wednesday Update

May 19, 2010   Volume 4, Number 20 IN THIS ISSUE: Why Tax Credits Don't Work; Don't Tread on Water

Email not displaying correctly? View it in your browser. May 19, 2010   Volume 4, Number 20 In This Issue: 1) Why Tax Credits Don't      Work 2) Don't Tread on Water 3) I Wanna Hold Your Hand   Our New Newsletter We would like to thank the kind souls who emailed us about coding issues last week. We think we have the technical issues figured out.  If you notice any problems in formatting please let us know by sending an email to staff@wicfg.com.  Why Tax Credits Don't Work   Get ready for more talk about tax credits as Harley-Davidson explores ways to meet its cost-cutting needs—needs that just got bigger.   Last year the company took a $22 million tax hit thanks to the Doyle administration’s “combined reporting” tax, used to paper over its unbalanced state budget. Last week brought word that Harley got whacked for another $13.3 million in the first quarter of 2010, because the new health care reform bill eliminated their ability to deduct retiree drug benefits from federal taxes. Those are $22 million and $13 million chunks carved out of the bottom line of a company that lost money last year. There’s a lesson here.   The lesson is that tax credits, breaks, or incentives are irrelevant if the underlying tax and spending policies are not sustainable.   Last week the Business Journal of Milwaukee explained how Harley itself failed to take advantage of a tax incentive concocted specifically to benefit the company.   Wisconsin’s Department of Commerce in 2006 put together $4.5 million in tax incentives for Harley, conditioned on the creation of 200 new jobs in expanded operations. But the economy soured, the expansion didn’t happen, the jobs weren’t created and the credit wasn’t claimed.   While it’s true that a friendlier Wisconsin tax climate would not have prevented the global economic crisis, it’s also true that the root of that crisis was unsustainable government policies. Tax credits in the midst of an otherwise hostile climate are simply inducements to do things common sense says you shouldn’t do. They attempt to buy the sheep’s compliance in its own shearing by promising to leave some wool on the tail.   Don't Tread on Water   Last fall Milwaukee Mayor and aspiring governor Tom Barrett was crowing about the abundance of high-quality water as a selling point to draw business and industry to Milwaukee. Good, clean, cheap water was the thing that would set the city apart from the competition and lure job creators and economic developers. The Mayor asked the Wisconsin Public Service Commission (PSC) to help him come up with a plan. It even got written up in The Wall Street JournaI.    Lake Michigan water was going to work sort of the same way reliable, cheap electricity worked to lure business, until electricity started getting more and more expensive.  And—OOPS!—The folks who presided over the escalation of electricity prices are also the ones who decide how much the city should charge for water. Last seen lobbying aggressively for legislation that would have piled on more double-digit electric rate increases, the PSC has now floated a plan to raise water rates by almost one-third for Milwaukee’s residential and business users, and by half for some Milwaukee suburbs. Now, who uses a lot of water in Milwaukee? MillerCoors comes to mind. The PSC’s rate structure would raise their water bill about half a million dollars a year. Just the thing you want in a town that’s been struggling to hang onto major employers.      Wanna Hold Your Hand Mayor Barrett’s administration has an idea to help businesses cope with road construction and its costly disruptions: Special government hand-holders—sorry, liaisons, to commiserate with afflicted business owners. As of Tuesday morning, almost a week after the “support for business” program was launched, its web site was non-functional. Contact phone numbers appeared as series of Xs and supposedly downloadable materials wouldn’t download.  One feature that caught the eye was the insulting suggestion that “liaisons” would advocate with the Department of Public Works on behalf of neighborhoods—begging the question whether the department would decline to hear from the neighborhoods themselves. The Mayor’s cheery message, however, advised that “It’s time to think of road construction in a new and positive way,” citing the economic benefits of better infrastructure.   And to help local businesses weather the loss of income resulting from construction, the city prepared a handbook with some really helpful suggestions.  Radio talk show host, Charlie Sykes provided his comments in brackets: KEEP YOUR STAFF LEAN   If you anticipate a decrease in customer traffic once construction begins, consider keeping a lean staff. For example, if someone quits just before construction starts, you may want to keep the position vacant until construction ends." [This in a city with one of the worst job losses in the country.]...   "If you anticipate a drop-off in foot traffic, the construction period may be a good time to tackle a remodeling project you've been considering. [Because spending more money when business is down makes so much sense. At least to folks in government.]   SECURE A LINE OF CREDIT [Go deeper into debt. hey, it works for government!]   MAKE FRIENDS WITH CONSTRUCTION WORKERS   You'll be seeing a lot of them for the next few months, so why not cultivate their business... [This might not help if you're selling women's handbags.]   CREATE AND USE SIGNAGE...[Interesting that Tom Barrett would regard this as an innovative idea.] INVEST IN CLEANING   Face it -- dust is a customer turn-off. You may want to allocate more time and money for cleaning to keep window and counter dust at a minimum. [What would we do without advice from government]?   EXPLORE ALTERNATE BUSINESS MODELS   Look at your customer challenges as a business opportunity! If access to your bricks and mortar business becomes an issue, consider expanding your e-commerce capabilities or offering delivery. [Mayor Tom, have you considered changing your business model?] ** Then the next day, the mayor unveiled a massive increase in water costs. Way to go...     You are a subscriber to Wisconsin Club for Growth from a website subscription. Visit http://wicfg.org for more information. Unsubscribe << Test Email Address >> from this list. Our mailing address is: Wisconsin Club for Growth Inc 1223 West Main Street, #304 Sun Prairie, Wisconsin 53590 Add us to your address book Copyright (C) 2010 Wisconsin Club for Growth Inc All rights reserved. Forward this email to a friend and Update your profile