Wrong emphasis?

Political Beat

Wisconsin is among seven states that saw their economies contract during the last three months of 2015, according to the Federal Reserve Bank of Philadelphia.

Five of the states – North Dakota, Wyoming, Mississippi, Louisiana and Alaska – were hurt by plunging oil and natural gas prices. Statistics for Wisconsin and Illinois were impacted by a sluggish manufacturing sector, according to reports. Hours worked in manufacturing and employment levels are two of the factors in the study.

Wisconsin’s economy has long been tied to manufacturing. Some studies have indicated we have had the fourth highest manufacturing levels among the 50 states.

Gov. Scott Walker’s administration has focused on helping the manufacturing sector with tax credits that dramatically lower how much large manufacturing firms are required to pay in corporate taxes. The governor also has sought to convince firms to move into Wisconsin.

The personal income tax, something that impacts corporate leaders, has been reduced and the old alternative minimum tax has been scrapped.

But a new study by the Washington, D.C.-based Center on Budget and Policy Priorities is asking whether the focus on reducing income taxes or trying to lure firms to the state is the correct approach for state governments. Its authors, Michael Mazerov and Michael Leachman, suggest another alternative.

“To create jobs and build strong economies, states should focus on producing more homegrown entrepreneurs and on helping startup and young, fast-growing firms already located in the state to survive and grow – not on cutting (income) taxes and trying to lure businesses from other states,” they write.

The new firms are more likely to produce jobs than older, mature companies. And those starting new businesses are more concerned about property taxes than income taxes, they suggest. Cutting corporate and top personal income taxes has little impact on the fast-growing startup companies “because they generally have little taxable income,” Mazerov and Leachman say.

Public investment to build a skilled workforce is the better approach, they assert. They cite an Inc. magazine study of the 150 fastest-growing companies in the country, which showed the leaders of those firms focused on the availability of an educated workforce and quality of life factors in deciding where to locate.

-Matt Pommer is the “dean” of Capitol correspondents in Madison. His column is published with permission from the Wisconsin Newspaper Association, but does not reflect the views or opinions of the WNA or its member newspapers.

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