Combined reporting emerges as issue for Wisconsin governor’s race

Milwaukee Mayor Tom Barrett, a Democratic candidate for governor, says Harley-Davidson executives told him that the company wants to resolve its cost issues with its employees internally and does not want the process to be “politicized.”

However, it’s probably already too late for that.

Once it became public knowledge that the company is trying to reduce the cost of its Wisconsin operations by $54 million a year, several Republicans, including gubernatorial candidates Milwaukee County Executive Scott Walker and former Congressman Mark Neumann pointed to the state’s combined reporting law as a major example of how state government policy is hurting the state’s business climate.

Harley spokesman Bob Klein acknowledged that the company last year took a $22.5 million charge as a result of the new combined reporting law.

In the second quarter of 2009, Milwaukee-based Rockwell Automation Inc. took a $2.4 million charge as a result of combined reporting, said spokesman John Bernaden.

Brown Deer-based Bank Mutual Corp. saw its effective tax rate increase by 6.1 percent as a result of the combined reporting law, said chief financial officer Michael Dosland.

Based on the company’s 2009 pre-tax earnings, which were down as a result of the Great Recession, combined reporting increases Bank Mutual’s annual tax payments by $1.1 million.

Klein emphasized that Harley’s problems with its Wisconsin operations are a result of internal issues.

But that hasn’t stopped Republicans from criticizing the combined reporting law, which was passed under the leadership of Democrats who control the Legislature and the governor’s office.

“(Combined reporting) is just another form of a tax increase,” Neumann said. “It’s having the impact that a lot of tax increases have, which is a loss of jobs. If you raise taxes, people and businesses are going to have less of their money to spend. If you add another tax, Wisconsin becomes less competitive to attracting businesses and jobs. It’s very simple. It’s economics 101.”

“Policies like combined reporting affect the bottom line of local companies, especially during a tough recession,” Walker said.

Barrett supports the combined reporting law because it closed a loophole that large companies with out-of-state operations used to reduce their Wisconsin tax burden, said Barrett campaign spokesman Phil Walzak.

“Tom Barrett does not support loopholes that allow big corporations to avoid paying their fair share of taxes,” Walzak said. “That is a tax burden that is shifted to small companies and middle class families.”

Walker sharply criticized Barrett’s stance on combined reporting.

“Barrett says he’d do anything to help Harley Davidson, but then he won’t support repealing a $22.5 million tax charge on them?” Walker said. “(Current Gov.) Jim Doyle and Tom Barrett’s destructive policies hurt our employers at a time when government should be helping them. It will take a fundamental change in our tax policy to create a climate in Wisconsin that encourages job providers to stay and grow here. It’s clear that a vote for Tom Barrett is a vote for a Jim Doyle third term – more taxes, bigger government and fewer jobs.”

Barrett has worked with several businesses to bring them to Milwaukee and create jobs in the city and would do the same as governor, Walzak said.

“Tom is always going to listen to a business or company that has a valid concern about their competitiveness,” he said.

Barrett said that when he met with Harley’s senior executives, he assured them that as mayor, the city would be willing to consider options to help the company stay in Milwaukee.

“We are prepared to work with Harley-Davidson,” Barrett said. “(The company) wants to work this out internally. Working with the company’s management and employees, I will do everything I can to ensure Harley Davidson remains a proud Wisconsin company for generations to come.”

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Andrew is the editor of BizTimes Milwaukee. He joined BizTimes in 2003, serving as managing editor and real estate reporter for 11 years. A University of Wisconsin-Madison graduate, he is a lifelong resident of the state. He lives in Muskego with his wife, Seng, their son, Zach, and their dog, Hokey. He is an avid sports fan and is a member of the Muskego Athletic Association board of directors.

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