Although most of the priority items on Gov. Scott Walker’s pro-jobs agenda have glided through the Republican-controlled Legislature with little debate, one key plank is being recalled for a major overhaul after drawing bipartisan criticism.
Walker and GOP legislative leaders are reviewing and changing a bill that was chastised by lawmakers as a “dubious giveaway” and “crony capitalism” benefiting insurance companies and other special interests.
The Wisconsin Department of Revenue estimated that the $400 million bill would cost the state up to $590 million over 17 years.
The most controversial portion of the bill is Walker’s Jobs Now Fund, which would provide $200 million in state tax breaks to insurance companies in exchange for $250 million of their own capital. In theory, certified capital companies, or CAPCOs, would use the money from the insurance firms to invest in or lend to Wisconsin businesses.
However, the CAPCOs would be allowed to keep 75 to 80 percent of the profits and would not have to reimburse the state for the tax credits.
“The bill … is the most dubious giveaway I’ve seen since I’ve been in the legislature,” said State Senator Glenn Grothman (R-West Bend).
“The thing about this I consider almost scandalous is unlike a normal venture capitalist who is going to bat with someone else’s money and is returning to you 80 percent of your profit or getting the principal back to you, they just got what amounts to taxpayer money,” Grothman told WUWM.
The bill, as it was written, received a nonpartisan smackdown when veteran business executive Tom Hefty, who has served under both Democratic and Republican governors in Wisconsin, called the Jobs New Fund “the largest special interest tax cut in history masquerading as an economic development initiative.”
A CAPCO was tried and failed in Wisconsin in 1998 and similar proposals have been rejected in neighboring states, Hefty said in written testimony for the Legislature about Assembly Bill 129 and Senate Bill 94.
“The proposal discriminates in favor of large corporate investors at the expense of entrepreneurs and angel investors. The legislation also disadvantages the largest jobs sector in the Wisconsin insurance industry, while favoring a handful of life insurers and out-of state insurance companies,” Hefty said. “It is a tax cut benefiting only a few companies, but it is camouflaged as an economic development program…This bill not only flunks an economic development test, it reflects a legislature which has not even bothered to do its homework.”
Still, Alberta Darling (R-River Hills) co-sponsored the Walker plan. Darling was criticized for that support by Rep. Sandy Pasch (D-Whitefish Bay), who is challenging Darling in a recall election.
“Alberta Darling’s plan is nothing more than a massive giveaway to the large insurance companies, while she also votes to slash education, women’s health care and property tax relief for seniors,” Pasch said. “Everyone must do their part to get Wisconsin through these tough times, and sending huge tax breaks to big corporations isn’t the answer. We can’t balance the budget on the backs of the middle class, and we need a senator who will fight for us in Madison, not the powerful special interests.”