If Wisconsin’s economy was compared to a hospital patient, the patient would be on life support and the family would be gathering to consider end of life treatment issues. We have serious problems facing our economy, and policymakers continue to promote legislation that makes many of those problems worse.
It’s time to call a halt.
Objective measurements of Wisconsin’s economy indicate a continuing trend toward deterioration of our economic base. Forbes Magazine’s annual report, The Best States for Business, recently ranked Wisconsin’s business climate 48th among the 50 states. Only Michigan and Rhode Island trailed our performance.
Wisconsin’s ranking was down five slots from last year’s 43rd ranking. This year even the business climates of Vermont and West Virginia ranked ahead of Wisconsin. That is not the kind of company we can afford to keep.
Ironically, our best ranking in the Forbes report is quality of life, which measures issues such as quality of schools and health care, crime, cost of living and poverty rates. However, the lowest ranking came in the category of growth prospects, the very means to pay for quality of life: projected job growth, income and gross state product growth, as well as business openings and closings, and capital investment. Wisconsin is in an economic race to the bottom, and it will impact the quality of life for all of our citizens when we can no longer afford to provide adequate government services.
The Wisconsin State Legislature is at a midpoint in its biennial schedule of deliberations. What they have produced, so far, is higher business taxes when businesses are facing unprecedented economic challenges, and an array of higher taxes and fees on individuals.
Using the cover of the recession, the Legislature and governor imposed $2.1 billion in new taxes, with over $1 billion of that amount coming from businesses and investors, and increased state spending by 6.2 percent. More modest spending would have negated any need for higher taxes.
On the regulatory side, things coming out of the Legislature aren’t any better for the business climate. To date, the Legislature and governor have dramatically expanded penalties for employment discrimination claims, and the governor is recommending a package of state environmental regulations directed at global warming that will prove costly for both businesses and consumers.
Legislative committees are currently moving bills to regulate employers’ ability to monitor office computers they own and are only provided to their workers for business purposes, create new protected classes of workers under state discrimination laws and a host of other bills that will negatively impact manufacturers and retailers. Legislation to index the state minimum wage passed the State Senate early on, and it is rumored legislation is circulating to resurrect the ill-conceived liability expansion provisions that were removed from the governor’s budget bill very late in those deliberations. Not one of these bills will create or retain a job in Wisconsin.
In the midst of all of this, Wisconsin’s Unemployment Insurance (UI) Trust Fund is running a deficit, which is likely to continue for several years as the economy recovers. It will be difficult to resolve the UI system’s solvency problem internally through tax and benefit adjustments alone. What is really needed to return the UI system to solvency is solid economic growth coming out of the recession, with more Wisconsin workers receiving higher wages. Currently, we do not have state tax and regulatory policies that will achieve that. To the contrary, the Forbes business climate study says we are among the poorest positioned states for economic recovery.
It is bewildering when listening to the Legislature deliberate bills that evidence so little concern for the impact of higher taxes and expansive regulations on the business climate. Ironically, there appears to be no focus among the majority party leadership on job creation initiatives – the party that often presents itself as representing the interests of workers. The recent Forbes release looking at a broad range of economic factors that impeded job creating in Wisconsin is a wake up call like no other.
Fortunately, it is not too late for business climate change in Wisconsin, but the governor and Legislative leaders must call a halt to expanding regulations on business, and reconsider the increased tax burden on business and capital formation imposed earlier this year. Draft legislation is circulating to roll back some of the more onerous tax provisions adopted earlier this year, and to create hiring incentives for Wisconsin employers. These measures deserve bipartisan support and prompt legislative consideration.
Next year’s election is shaping up to be a referendum on Wisconsin’s business climate, and specifically on the willingness for Wisconsin’s businesses and industry to create and retain jobs. Every legislative vote cast this session on a tax increase or additional business regulations will be the fodder of political debate across the state, both for the open gubernatorial office, and for all of the State Assembly seats, and the half of the State Senate who will stand for election in 2010.
Unless the actions of lawmakers change in the remaining days of the legislative session, a year from now, Wisconsin could be at the bottom of the Forbes business climate ranking. Business climate change must begin now.
Jim Haney is president of Wisconsin Manufacturers and Commerce (WMC), which represents 3,500 businesses in Wisconsin.
