The other side of Wisconsin’s budget coin

    For most of the last decade, Wisconsin has been told it should be more like Minnesota. In many ways, that’s true. Minnesota has more college graduates, more business start-ups, more venture capital and, not surprisingly, higher per capita income than its neighbor to the east.
     
    Of late, however, the drum beats from across the border have sounded a different note: Minnesota can learn a thing or two from Wisconsin.

    The passage of Wisconsin’s $62 billion state budget has drawn mixed reviews at home, but onlookers from Minnesota and beyond have taken note that policymakers here haven’t abandoned their commitment to fostering a more diverse economy. Recent press accounts in the Twin Cities have noted that a few technology companies are moving to Wisconsin – even if only a few miles over the border – because Wisconsin’s investment tax credits have helped those companies attract “angel” or venture capital.

    Other press reports have noted a loss of jobs in Minnesota’s medical device and equipment sector, which has driven that state’s high-tech economy for decades. Some Minnesota techies say that’s evidence the state has banked too much on one industry, and they point to Wisconsin as a state that is encouraging start-up companies that make medical devices, pharmaceuticals, diagnostics, software, power electronics and much more.

    A Twin Cities health-tech consultant frustrated by the Minnesota Legislature’s refusal to pass investor tax credits such as those in place in Wisconsin since 2005 telephoned Wednesday to lament his own state’s gridlock – and to congratulate Badger state politicos for not crawling under their desks.

    “When I talk to legislators here, I point to the Wisconsin example,” the consultant said. “The list of economic development ideas that made it in this latest budget was impressive.”

    That’s a perspective to keep in mind now that Gov. Jim Doyle has signed the state’s two-year budget into law. While there are reasons to question parts of the budget, such as capital gains tax exclusions that were cut in half, other provisions signal the state is open for business.
    The budget and a related stimulus bill passed earlier this year builds on recent efforts to enhance Wisconsin’s tech-based economy through targeted tax credits, investments in core research projects and other incentives for companies and entrepreneurs. Major provisions signed into law include:

    • An exemption to the sales and use tax for machinery and other tangible personal property used for qualified manufacturing or biotechnology research in the state, effective Jan. 1, 2012. A similar exemption is already available for some software purchases. 
    • Research and development tax credits for businesses that increase R&D by more than 125 percent of the company’s three-year R&D average. The credit would be an income and franchise tax credit worth $1 for each $1 of investment above 125 percent. This provision would take effect Jan. 1, 2011.
    • Investor tax credits that have dramatically increased angel investing will be expanded, also in 2011. The pool of available credits will be tripled and individuals may claim a 100 percent capital gains tax exclusion, up to $10 million, if they invest in a company qualified for the credit program.
    • Other tax credit programs provide incentives for creating or retaining jobs in advanced manufacturing, in renewable energy, for “next generation” agriculture and within so-called enterprise zones.
    • Investments in research projects that promise to create high-end jobs while improving human welfare included $8.2 million for the Wisconsin Institutes for Discovery, $2 million for the Wisconsin Genomics Initiative and $240 million over six years for UW-Milwaukee’s research and engineering expansion.

    Wisconsin’s new budget has more than its share of flaws, which is not surprising given the state of the economy and how the recession has cut into tax revenues. But viewed from outside Wisconsin, where the economic conditions aren’t necessarily better, parts of the budget will read like a state that is continuing to invest in its future.

     

    Tom Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal.

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