Now that Wisconsin has fallen out of the dubious ranks of the nation’s top 10 highest-taxed states, it’s time to call attention to the fact that other business costs here are competitive and likely to remain so.
Wisconsin has long labored under the perception, not to mention the reality, that it’s a high-tax state. Taxes as a percentage of income climbed steadily throughout the 1980s, remained high in the 1990s and began to recede slowly over the past five years. In 2006, the latest year for which there are complete figures, state and local taxes represented 12.3 percent of personal income. That compares with the U.S. average of 11.6 percent.
Falling to No. 11 on the 50-state tax list is probably no cause to celebrate. But it’s a lot better than third, Wisconsin’s all-time high. It also reflects a bipartisan political commitment to hold the line on major state taxes (sales, personal income and corporate income) while helping to slow the increase in local property taxes, perhaps the state’s biggest tax annoyance.
Corporate income taxes in Wisconsin rank in the bottom third among the states, sales taxes rank in the middle, excise taxes and fees are among the lowest in the nation, and recent business tax reforms have helped put Wisconsin on a competitive platform with other states.
Beginning in 2006, Wisconsin began phasing in a new system for taxing companies that open new offices or expand here. Instead of a formula based on property value, payroll and sales, Wisconsin joined most states in taxing in-state sales only. The "single factor" change reduced corporate income taxes by $45 million for Wisconsin companies in 2006 alone. More important, it began phasing out a de facto tax on new jobs.
The state’s ranking could bounce back into the top 10 overnight, however, if other states more aggressively reduce their tax burdens or Wisconsin raises its general tax rates in hopes of making budgetary ends meet.
That’s why it’s important to seize the moment to talk about Wisconsin being a cost-effective place to do business. Some examples:
- Electric rates – which are often the largest infrastructure cost in tech-based facilities – are below the U.S. average, according to a survey by the Edison Electric Institute using 2008 rates in 19 states.
- Land and construction costs are extremely competitive, according to various industry surveys, especially compared to the East and West coasts.
- Quality labor is available at fair prices. The good news if you’re hiring: Wisconsin’s average wages are below the national average, according to the U.S. Bureau of Labor Statistics.
- Worker’s Compensation premium rates are among the lowest in the country. Risk and Insurance, a national trade magazine, has called Wisconsin "a worker’s comp utopia."
- The average Wisconsin employer pays about 2 percent of taxable wages in Unemployment Compensation taxes, well below the U.S. average.
- Commercial and industrial water and sewer rates are among the lowest in the nation.
- Wisconsin’s homeowner and auto insurance rates rank among the lowest in the United States.
Taxes are part of any state’s business tax portfolio, but so are other factors that may mean as much or more to a company’s bottom line. Wisconsin is heading in the right direction when it comes to taxes, and it’s already on the right track for other business costs.
Tom Still is president of the Wisconsin Technology Council, an independent, nonprofit science and technology advisory agency serving the governor and the legislature of Wisconsin.