Study: Manufacturing tax credit added 21,000 jobs

Report attempts to isolate influence of policy change


Wisconsin’s manufacturing and agriculture tax credit accounted for almost 21,000 new manufacturing jobs since implementation started in 2013, according to a new study from University of Wisconsin-Madison Professor Noah Williams.Manufacturing

The study also concluded the tax credit accounted for 42,000 total jobs throughout the state.

Williams, who also served as an informal adviser to Gov. Scott Walker’s presidential campaign, suggests manufacturing employment would have fallen in the state without the tax credit and previous efforts to gauge the impact of the policy using only statewide job data failed to account for other factors.

“As an economist, I will leave the policy decisions to the Legislature and the governor. However, my research suggests that this policy has helped create substantial job growth in Wisconsin,” Williams said.

The analysis, released through the Center for Research on the Wisconsin Economy, looked at job data in Wisconsin counties bordering other states to help isolate the impact of the tax credit before working toward a statewide estimate. Agricultural jobs were not included because of a lack of data at the county level.

Since 2013, manufacturing employment in Wisconsin’s border counties grew 1.9 percentage points faster than in those counties just across the state line, according to Williams.

He also acknowledged the tax credit “was only one part of an overall attempt to change the business climate in Wisconsin, which included changes in unionization, personal taxes, regulation, and becoming a right-to-work state in 2015.”

The tax credit, passed as part of the 2011 state budget, phased in a series of increasing tax credits each year starting in 2013. It was fully phased in starting in 2016 and leaves manufacturers with minimal state taxes.

Opponents of the tax credit have pointed to Legislative Fiscal Bureau estimates showing the policy has reduced state revenues substantially. The most recent estimate suggests a reduction of $1.4 billion from 2013 to 2019, compared to an original estimate of $617 million.

An analysis by the Wisconsin Budget Project showed the state’s manufacturing sector increased employment by 2.1 percent in the two years before and after implementation of the tax credit, even as job growth in other industries increased faster.

Wisconsin Manufacturers and Commerce, meanwhile, used U.S. Bureau of Labor Statistics data to show the state lost 81,800 manufacturing jobs between 2006 and 2010 and gained 34,200 starting in 2011, when the tax credit was first passed.

Williams says state-level data is colored by a variety of factors, and comparisons to surrounding states don’t account for things like population concentration, industry differences and labor force dynamics. The idea behind using border counties is that the economies are generally similar on either side of the line, allowing for a better comparison.

Tamarine Cornelius, a research analyst at the Wisconsin Budget Project, noted that Wisconsin’s manufacturing sector has increased employment 1.4 percent between September 2013 and September 2016, while the industry grew 2.1 percent nationally.

“While we’ll never know for sure the full effect of nearly eliminating income taxes for manufacturers, we do know that Wisconsin has added manufacturing jobs more slowly than the national average,” Cornelius said.

She also said the tax credit skews towards those with higher incomes and reiterated that it has reduced revenues by more than originally anticipated.

“Wisconsin would do better to use that money in ways that can help businesses, communities and families thrive – such as helping employees develop skills that match employer needs, maintaining a solid transportation network, and delivering effective public services like police and fire protection,” Cornelius said.

She also noted the tax credit doesn’t require companies to create jobs to receive. Scot Ross, executive director of the liberal group One Wisconsin Now, pointed out his organization sought records from the Department of Revenue to back up a claim from Secretary Rick Chandler that the credit was creating jobs. The department said it did not have any records showing jobs created directly by the tax credit in response to an open records request.

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Arthur covers banking and finance and the economy at BizTimes while also leading special projects as an associate editor. He also spent five years covering manufacturing at BizTimes. He previously was managing editor at The Waukesha Freeman. He is a graduate of Carroll University and did graduate coursework at Marquette. A native of southeastern Wisconsin, he is also a nationally certified gymnastics judge and enjoys golf on the weekends.

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