Official magazine of Wisconsin Manufacturers & Commerce
Manufacturer of the Year Award Winners Page 4
Inside: Lead Story: Wisconsin’s Tax Climate p. 22 Minimum Wage p. 9 The Future Wisconsin Project p. 16
April 2014: Issue 10
Modern Experience Matters
Modernize your organization by leveraging existing applications and pair them with modern technologies and a friendly user experience to create an innovative and affordable approach to business.
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WISCONSIN
Business Voice From the Editor
2
Workforce and Energy are Keys to Our State’s Economic Future Kurt Bauer, WMC
4
Wisconsin Manufacturer of the Year Award Winners
7
Repeated Tax Cuts Define the Walker Era
9
Raising the Minimum Wage Will Kill Jobs
Nine Companies Take Home the Honor
Jason Culotta, WMC
Scott Manley, WMC
I remember receiving my very first paycheck from working in my dad’s retail stores. I had done the math on how many hours I had worked at $2.50 an hour so I knew exactly what my check total was going to be and I had plans for what I was going to do with the money.
Need to Have a WISCONversation 11 We Jim Morgan, wmc foundation
But when I opened the envelope containing my paycheck, I was shocked to discover the total was much less than I anticipated. My first thought was that my dad made a mistake calculating my paycheck. When I approached him, I was a bit angry. “That’s the government’s share,” he said. “The government?!” I responded. “Why does the government get a share of my paycheck?!”
Big Business of Tourism in Wisconsin 14 The Stephanie Klett, Wisconsin Department of
I’m pretty sure my dad said “go ask your mother,” but he could have just as well quoted Oliver Wendell Holmes: “Taxes are what we pay for a civilized society.” That quote, incidentally, is engraved on the façade of the Internal Revenue Service Building in Washington D.C. I think most everyone agrees with Wendell Holmes, at least to an extent. We all want good schools, clean water, police and fire protection and well maintained (and plowed) roads. But in Wisconsin, there is no denying our overall tax burden is among the highest in the nation and has been since the 1960s. This edition of Wisconsin Business Voice looks at the history of taxes in Wisconsin and also explores recent tax reforms, like the Manufacturers and Agricultural Tax Credit, designed to make Wisconsin more competitive.
Katy Ryder Pettersen Editor, Wisconsin Business Voice kpettersen@wmc.org
Reform, 2015? Prospects and Concepts 12 Tax Todd Berry, Wisconsin Taxpayers Alliance from the Chamber and We’re Here to Help 13 We’re Chris Reader, WMC
Tourism
Join Together for Jobs and a Competitive Future 16 Let’s Phil Neuenfeldt, Wisconsin State AFL-CIO Companies Help Communities Thrive 20 Wisconsin Pat Simonett, WMC
22-25
WISCONSIN’S TAX CLIMATE: Sunnier Skies Are on the Way
Drug Overdose: An Epidemic 26 Prescription Janie Ritter, WMC/Wisconsin Safety Council 2014. Do You Know What Your Child’s Digital 28 It’s Footprint Looks Like? Steve Benzschawel, WMC/Wisconsin Business World
Entrepreneurship & Economic 29 University-Based Development Jon Eckhardt, uw-madison
Concrete? Well, Sort of… 32 Exporting Mike Shoys, WMC Permanent Polar Vortex (otherwise titled 34 EPA’s “Time to Buy Some Long Johns”) Eric Bott, WMC
Capital 35 Venture By Joe Kirgues & Troy Vosseller, gener8or Memory is a Politician’s Best Friend 36 AJimShort Pugh, WMC
Wisconsin Business Voice is published quarterly by Wisconsin Manufacturers & Commerce. WMC is Wisconsin’s chamber of commerce, manufacturers’ association, and safety council representing businesses of all sizes and from every sector of the economy. Send address changes to WMC, P.O. Box 352, Madison, WI 53701-0352. WMC's physical address is 501 E. Washington Avenue, Madison, WI 53703, (608) 258-3400. This publication is proudly printed on paper made in Wisconsin. Kurt R. Bauer, WMC President/CEO Katy Pettersen, Editor (kpettersen@wmc.org) Jane Sutter, Designer (jsutter@wmc.org)
Reform in Wisconsin: What will it Take? 38 Tax Rep. Chris Taylor (D-Madison) & Rep. Dale Kooyenga (R-Brookfield)
Bonds of a Community: Marinette/Menomonee 40 The IMPACT Anti-Opiate Task Force Jacqueline Boudreau, Marinette Menomonee Area Chamber of Commerce
Workforce and Energy are Keys to Our State’s Economic Future Kurt R. Bauer, WMC President/CEO
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MC has embarked on an ambitious and exciting new effort called The Future Wisconsin Project intended to create a 20year strategic economic vision for our state. Future Wisconsin’s goal is to identify economic challenges and seek solutions from diverse stakeholders (see page11).
In beginning the process of looking into the future, I believe Wisconsin’s two biggest longer-term economic threats are 1) finding the workers our economy will need and 2) maintaining access to affordable and reliable sources of energy. To be sure, there are other threats and challenges as well, but workforce and energy are the most fundamental because they are what an advanced economy is built on. The threat to the workforce has been well documented and is a problem most other states and industrialized nations face. That means whoever solves it first will have a major competitive advantage.
A worker shortage also means a reduced tax base at a time when the 65-and-over population is expected to grow 94.7 percent by 2030. Think about how that demographic trend will adversely impact just about everything local and state government does.
The energy concerns have received far less attention in the media than workforce. But the looming threat to Wisconsin’s electricity supply by the federal Environmental Protection Agency’s (EPA) anti-coal policies is, in my opinion, the biggest underreported economic story in the state. Wisconsin generates nearly 65 percent of its electricity from coal; a cheap and abundant domestically produced fossil fuel. And thanks to technological advances, like scrubbers and filters, burning coal is dramatically cleaner today as evident from the vastly improved air quality in Wisconsin and other coal-burning states. Nevertheless, EPA essentially issued a moratorium last year on the building of new coal-fired plants for electricity generation, which the agency admitted will have a “negligible” positive impact on the environment and public health.
“Natural gas is just as vulnerable to future EPA fiats as coal.”
WMC has dubbed it the workforce paradox; relatively high unemployment when 60 percent of Wisconsin employers say they have trouble finding skilled and/or motivated workers for professional trade and STEM (Science, Technology, Engineering and Math) intensive jobs. The shortage, which will soon become an outright crisis, is caused by a perfect storm of factors.
• The backbone of Wisconsin’s skilled workforce are in their mid-50s and approaching retirement. • State birthrates are barely at replacement levels now and will grow at just 0.4 percent over the next 20 years.
• Younger people are not attracted to, are steered away from or haven’t been exposed to some of the most in-demand careers like manufacturing. • Generous entitlement programs have become a disincentive for some to join or re-enter the workforce. • Wisconsin has had negative migration since 2008.
• Federal immigration policy has made it difficult to attract foreign workers of all skill levels.
The consequences of failing to solve the workforce problem are severe. For example, if manufacturers can’t find workers, they have three choices: they can automate, they can move some or all of their operations to where the workers are, or they can downsize by not bidding for projects and by running fewer shifts.
Later this year, EPA is expected to issue a new carbon sequestration and storage rule that will force the closure of older coal-fired plants because of the prohibitively high cost of compliance. An Obama Administration official said during a recent congressional hearing on the carbon storage rule that it will likely increase rates for coal-generated wholesale electricity by 70 to 80 percent. For those who believe Wisconsin can simply convert its coalfired plants to burn natural gas, unfortunately it just isn’t that simple. Conversion is expensive and the infrastructure to pipe natural gas from producer states to Wisconsin is extremely limited. Pipelines would have to be built and the high cost would be passed on to ratepayers. And as EPA’s anti-coal policies create greater nationwide demand for natural gas, prices will go up. Plus, the environmentalists who control the EPA don’t just hate coal; they despise all fossil fuels. That means natural gas is just as vulnerable to future EPA fiats as coal.
As for non-fossil fuel energy alternatives, they have either been disqualified by the powerful environmental lobby (hydro, nuclear) or are woefully inadequate in both their power generation and storage capabilities (wind, solar). In fact, there will have to be a major scientific/technological breakthrough before wind and solar can compete with fossil and nuclear fuels for affordability and reliability. BV
Follow Kurt on Twitter @Kurt_R_Bauer
Honoring Manufacturing Excellence in Wisconsin This February, nine Wisconsin companies were awarded a prestigious Wisconsin Manufacturer of the Year Award, competing against 34 total nominees. The winners were announced at a black tie banquet at The Pfister Hotel in Milwaukee. Celebrating its 26th year, the MOTY program recognizes manufacturers of all sizes and industries for their contributions to the great state of Wisconsin. The Wisconsin Manufacturer of the Year award winners were selected by an independent panel of judges representing industry, education, and the public sector.
2013 Special Award Winners
Investing Locally, Growing Globally Alliance Laundry Systems LLC, Ripon
Investing in the Future Schuette Metals, Rothschild
Innovation Excellence Realityworks, Inc., Eau Claire
Employee Engagement & Commitment Xten Industries LLC, Kenosha
2013 Grand Award Winners
Workforce Development Category Alto-Shaam, Inc., Menomonee Falls
Small Category Tailored Label Products, Inc., Menomonee Falls
Medium Category Badger Alloys, Inc., Milwaukee
Large Category Masters Gallery Foods, Inc., Plymouth
Annual Manufacturer of the Year Awards Sponsors
Mega Category Mercury Marine, Fond du Lac
MADE IN WISCONSIN Dutchess Bakers' Machinery Co. Inc. 302 Grand Avenue Superior, WI 54880-0039 (715) 394-4444 Year Established: 1886 Number of Employees: 40 www.dutchessbakers.com
Those with a sweet tooth will be intrigued to learn that Dutchess Bakers’ Machinery Company has been manufacturing high quality dough dividers and dough divider rounders for the foodservice industry here in Wisconsin since 1886. Dutchess is the originator and one of the most respected and recognized names in the world for this kind of equipment. Bakers, chefs and cooks across the globe use Dutchess brand equipment to produce a wide variety of popular products including buns, breads, pizza, tortillas, cookies, pies and much more. They also are now proud to offer a bun and bagel slicer which makes slicing delicious products from Coney Buns to French bread easier than ever.
Expera Specialty Solutions Still in its inaugural year, Expera Specialty Solutions may be a new name in the industry, but it is backed by 130 years of rich history. As North America’s largest producer of specialty papers, Expera’s sectors include industrial and technical specialties, food, pressure sensitive release liner, and coated products. Expera’s manufacturing platform includes machines at four mills located in Wisconsin; De Pere, Kaukauna, Mosinee, and Rhinelander. Expera also has a supply agreement for paper produced on a paper machine in Jay, Maine. The diversity of Expera’s products range from food packaging papers such as microwave popcorn bags to specialized applications used in the medical and construction industries.
600 Thilmany Road Kaukauna, WI 54130 (800) 847-8022 Year Established: 1883 Number of Employees: 1,800 www.experaspecialty.com
Mayville Engineering Company
715 South Street Mayville, WI 53050 (920) 387-4500 Year Established: 1945 Number of Employees: 2,000 www.mecinc.com
This Wisconsin-based company is often recognized by our state’s many hunters as the number one Shotshell Reloader in the world, selling over two million reloaders. Mayville Engineering Company (MEC) is a manufacturer that provides a broad range of manufacturing, production fabricating, coating and assembly services to a variety of markets including agricultural, construction, forestry, military, power sports, commercial vehicle, energy, medical and industrial. They manufacture vehicle frames, hoods, grills, handrails, access systems, axle housings, steering columns, swing arms, fenders, air intake, exhaust, engine components, fuel tanks, air tanks, fluid level indicators, tubular frames and more for their many customers. MEC is proud to be a 100 percent employeeowned company that lives by their mission, PRIDE (Personal Responsibility In Daily Excellence) as a way of doing business and treating others.
Wigwam Mills, Inc. Whether we are out shoveling the driveway or skiing down the slopes, one item no Wisconsinite wants to be without is a good pair of warm, wool socks. Located in Sheboygan, Wigwam Mills, Inc. manufactures socks, hats and gloves and is one of the few U.S.-made textile facilities still open. For over 100 years, Wigwam has been enhancing the lives of their customers with superior, technical products. They do this not just through knitting the finest quality socks, but by providing the assurance that the purchase of Wigwam socks supports the company's reputation of honesty and integrity. Wigwam supports wool producers in this country by sourcing their wool almost exclusively from American yarn spinners who buy from American wool growers. They also support domestic yarn spinners whenever possible and work with them to get the best quality natural and man-made fibers and yarn for all of their products.
3402 Crocker Avenue Sheboygan, WI 53081 (920) 783-1000 Year Established: 1905 Number of Employees: 214 www.wigwam.com
TAXES Jason Culotta WMC Director of Tax & Transportation Policy
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Repeated Tax Cuts Define the Walker Era
ver the past year, Governor Scott Walker and the Republican majorities in the Legislature have cut taxes three separate times. This demonstrates a change of policy in Wisconsin to a new focus on reducing the tax burden when state government has a budget surplus.
The 2013-15 state budget, signed into law as 2013 Act 20, set the stage for the legislative session by cutting taxes nearly $1 billion during the current two-year budget period. This round of tax cuts amounted to a net tax reduction of more than 1 percent in 201314, making Wisconsin one of only seven states to do so. The cornerstone of the Act 20 tax cuts was the large income tax reduction, totaling over $320 million of relief across all tax brackets each year and eliminating one of the state’s five income tax brackets. While it is down 0.1 percent, our top tax bracket is 7.65 percent – still too high for businesses organized as pass-through entities. But the trend of reducing individual income tax is headed in the right direction. Act 20 also continued the implementation of the Manufacturing and Agriculture Credit, a powerful incentive that will reduce most state income tax liability for manufacturing and agricultural production in Wisconsin in 2016 and beyond. As the credit phases in, it is expected to generate $32 million of savings to Wisconsin producers in 2013-14 and $71 million in savings the following year. That’s more money companies have available to reinvest in their business. Act 20 also made a number of other significant, pro-growth reforms including: • Allowing a full deduction for health insurance premiums to take effect;
• Extending the R&D tax credit to passthrough entities;
• Adopting federal depreciation and depletion rules (beginning January 1, 2014) and phasing out similar state rules over five years; • Allowing net operating losses for individual income to be carried forward up to 20 years and carried back two years, and;
• Eliminating the state economic development surcharge on pass-through entities.
Following enactment of the state budget on July 1, 2013, state revenue officials projected a further surplus in state tax revenues. So in October, Governor Walker proposed another tax-cutting measure. This time the focus was to reduce K-12 school property taxes by $40 million on the December 2013 (payable in January 2014) property tax bills and by $60 million for 2014/2015 and subsequent years. This legislation was quickly signed into law as 2013 Act 46.
In mid-January, the non-partisan Legislative Fiscal Bureau projected $911 million in additional tax revenue growth as a result of the improving economy. Shortly thereafter, Governor Walker offered yet another taxcutting proposal, trimming both property and income taxes. This tax-cutting proposal, January 2014 Special Session Senate Bill 1, has passed the state Senate and is expected to be approved by the state Assembly by the time this article goes to print. First, the property tax levy for technical colleges will be cut in half, as the state will provide $406 million annually of relief starting with the 2014/2015 bills. Second, Governor Walker lowered the amount of state income tax withholding by $322 million through executive action, which takes effect April 1, 2014. Third, the lowest bracket of the income tax will be reduced by an additional $96 million per year, effective
for 2014.
The Governor’s most recent proposal also includes an offset to the state alternative minimum tax (AMT) for those claiming the Manufacturing and Agriculture Credit and the R&D credit. Wisconsin is one of just eight states still imposing a state-level AMT. As individual income taxes have been cut in Wisconsin, more people and businesses are subject to the AMT. The time to consider repealing this onerous tax is arriving soon. Prior to Governor Walker taking office in 2011, Wisconsin ranked high among states in both income and property tax burden. The typical elected official cites the need to reduce the tax burden and then spends most surplus revenue on new government programs. To the Governor’s credit, he has repeatedly worked with the Legislature to actually lower the tax burden for all Wisconsinites. We look forward to the day when the effects of the new tax rankings become apparent when comparing the 2013 and 2014 data. BV
Follow Jason on Twitter @JGCulotta
WMC Tax Seminar May 21, 2014 Country Springs Hotel, Pewaukee
• Sales tax • Personal property tax • ACA compliance issues Visit www.wmc.org to register.
Wisconsin Business Voice
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OFFICES IN MILWAUKEE, MADISON, WAUKESHA, GREEN BAY AND APPLETON, WISCONSIN AND WASHINGTON, D.C.
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MINIMUM WAGE Scott Manley WMC Vice President of Government Relations
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Raising the Minimum Wage Will Kill Jobs
ary Burke’s support of the proposal to raise the minimum wage to $10.10 per hour might make for good politicking in her campaign for Governor, but her plan would be economically devastating to thousands of Wisconsin workers.
Raising the minimum wage is a lose-lose proposition because it will result in significant Wisconsin job losses, will reduce economic opportunity for younger and lower-skilled workers, will raise consumer prices and will not meaningfully reduce poverty or help the working poor. A recent analysis by the Employment Policies Institute (EPI) found increasing the minimum wage to $10.10 per hour would kill as many as 27,937 jobs in Wisconsin. That estimate is consistent with a projection by the Congressional Budget Office (CBO) that predicted 500,000 lost jobs nationwide if the federal minimum wage was increased to $10.10. So how would raising the minimum wage result in lost jobs? The answer is quite simple.
Increasing the minimum wage will increase labor costs for employers. In turn, employers will respond by reducing their workforce, hiring fewer workers and reducing hours of work for existing employees. That translates into job loss and fewer economic opportunities for workers. WMC recently commissioned a statewide poll to test this issue and found 53 percent of likely scientific voters initially support increasing the minimum wage to $10.10 per hour. However, voters quickly abandon the proposal when told of the projected job losses. Support plummets to 39 percent when voters know raising the minimum wage kills jobs. In order to understand who will be harmed most by a minimum wage increase, it is important to understand who minimum wage earners are. The data show those who stand to lose the most from a minimum wage increase are younger and lower-skilled workers.
According to the U.S. Bureau of Labor Statistics, only 1.1 percent of workers over age 25 earn the minimum wage. That’s because typical minimum wage earners in America are teenagers living with their parents in middle class families. They are not living in poverty nor are they earning a wage that is responsible for sustaining a family. Wisconsin is no exception. According to the EPI analysis, the average household income of Wisconsin families impacted by raising the minimum wage to $10.10 per hour is $58,812. That's
actually higher than Wisconsin's median household income of $52,627.
Clearly, the majority of minimum wage earners are not the working poor, but are instead young people entering the workforce with little experience and very few skills. They are people who desperately need entry-level jobs to begin the process of climbing the economic ladder by acquiring skills that lead to better jobs with higher wages. Unfortunately, increasing the minimum wage places the bottom rung of the economic ladder out of reach for many of these workers by eliminating entry-level positions that help workers gain the experience needed to advance in the workforce. At a time when employers are already struggling to find skilled employees, the adverse impacts from a minimum wage increase could not happen at a worse time. We need more, not fewer, workers in our state who are gaining those entry-level "soft skills" that will help employers make the decision to invest significant resources into training them for a long-term career.
Those who advocate a minimum wage increase as a means to reduce poverty are on the wrong side of history. Increasing the minimum wage has proven to be an ineffective policy in terms of reducing poverty. The U.S. Census Bureau recently released a report that found 59.7 percent of working-age people in poverty do not work. It is difficult to imagine how increasing the minimum wage will help lift people out of poverty when roughly 60 percent of those in poverty aren't even working in the first place. The empirical evidence also suggests raising the minimum wage simply does not impact poverty levels. Between 2003 and 2007, a total of 28 states increased their minimum wage beyond the level of the federal minimum wage. A study done in 2010 by Joseph Sabia and Richard Burkhauser focused on the minimum wage and poverty found no evidence the minimum wage lowered poverty rates in any of those 28 states.
Increasing the minimum wage is a poorly conceived economic policy that would cost Wisconsin thousands of jobs. It misplaces focus on the small sliver of the workforce (2.5 percent) who earn the minimum wage, while simultaneously making it harder for entrylevel workers to get ahead. Politicians should instead focus on how we can improve our state’s business climate to attract and retain high-wage jobs like those in our manufacturing sector.
Follow Scott on Twitter @ManleyWMC Wisconsin Business Voice
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Business Day in Madison 2014 “Wisconsin is headed in the right direction” was the rallying cry at this year’s Business Day in Madison. The theme resonated through every presentation delivered on that bitter cold February morning at the Monona Terrace in Madison. From the morning’s opening remarks by emcee Charlie Sykes, WTMJ Radio, to the closing keynote speaker, Governor Scott Walker. The crowd of nearly 1,000 attendees heard presentations from Rob O’Neill, former Navy SEAL and Team Leader, as he walked attendees through every terrifying moment of the Captain Phillips rescue mission; A.B. Stoddard, Associate Editor and columnist for The Hill gave her predictions on the coming elections; Dan Christman, Retired General and Senior Counselor to the U.S. Chamber of Commerce President delivered remarks on today’s global economy; and a lunchtime address from Charles Payne of Fox Business News included insights on the challenges America’s economy is facing right now. Business Day in Madison is the largest annual gathering of Wisconsin’s business leaders and is produced by WMC and the following partners: • American Council of Engineering Companies of Wisconsin • Consumer Rights Wisconsin • Independent Business Association of Wisconsin • Midwest Food Processors Association • National Federation of Independent Business • Plumbing and Mechanical Contractors Association of Milwaukee and Southeastern Wisconsin • Sheet Metal and Air Conditioning Contractors’ Association of Milwaukee • Wisconsin Association of Health Underwriters
• Wisconsin Builders Association • Wisconsin Economic Development Association • Wisconsin Hospital Association • Wisconsin Insurance Alliance • Wisconsin Motor Carriers Association • Wisconsin Paper Council • Wisconsin Restaurant Association • Wisconsin Retail Merchants Association • Wisconsin Utilities Association
March 4, 2015 www.businessdayinmadison.com
A.B. Stoddard gave candid remarks about what’s in store for the 2014 Election cycle.
New caption. Attendees couldn’t stop talking about Robert O’Neill’s inspiring stories.
Charles Payne’s lunchtime address covered “America at the Crossroads.”
Mark Your Calendar Business Day in Madison 2015
Charlie Sykes delivered his humor and insights as the day’s emcee.
A great crowd enjoying lunch at BDIM!
The UW-Madison Naval ROTC Color Guard kicked off the main event.
Major Sponsors
Governor Scott Walker took a snapshot with representatives from Marshfield Clinic and Security Health Plan before his remarks.
ECONOMIC DEVELOPMENT
Jim Morgan WMC Foundation President
We Need to Have a WISCONversation
T
wenty years ago… There was no iPod
or WiFi. There were no social media directors or cloud computing services. And, words like blog, Google, millennial, cyberstalking, staycation and hater didn’t exist.
Baby Boomers were not hitting 65 at a rate of 10,000 a day. The number of incoming kindergarteners still exceeded the number of graduating 12th graders in Wisconsin. The unemployment rate was holding steady at 4.5 percent. And troubling demographics and Wisconsin’s business competitiveness were not front page news.
But what if they had been? What if someone had been looking out 20 years trying to decipher Wisconsin’s demographic changes and its competitiveness? Would we be better positioned today? I would argue yes.
In a world where so many people are focused on the next year, or maybe the
The
Future Wisconsin Project
Who is in charge of Wisconsin's economic future? That question, asked at last year's WMC Board of Directors’ Retreat, helped spark The Future Wisconsin Project, a new initiative designed to create a 20-year vision for the Wisconsin economy. The goal of the long-term effort is to identify challenges and threats to the Wisconsin
next quarter, the next election cycle, or maybe just making it to Saturday, they put themselves at a distinct disadvantage compared to those who have a long-term plan. Successful families plan. Successful companies plan. Successful cities plan. And now even states are looking 10, 15, 20 years out. Why not Wisconsin? What will it take for Wisconsin to be competitive 20 years from now in the areas of talent development/retention/ attraction, business competitiveness, global engagement, government effectiveness, life quality and entrepreneurial spirit? We are about to find out.
WMC Chairman Dan Ariens, President & CEO of Ariens Company in Brillion, has provided the vision and leadership for this long-term project. According to Ariens, “The policies of Governor Walker and the fiscally responsible members of the
economy, both now and in the future, and seek solutions from a broad coalition of stakeholders including the private sector, government and academia. WMC has partnered with the Wisconsin Economic Development Corporation, the UW System and the Wisconsin Technical College System as the primary drivers of the project. The Future Wisconsin Project will concentrate on six competitive quality indicators or CQIs. They are: • Talent development/retention/attraction • Business competitiveness • Global engagement • Government effectiveness • Life quality • Entrepreneurial spirit
legislature have provided a sense of stability that allows us as business people to think long-term, instead of focusing too much on the present. This allows us to think strategically about the future of not only our businesses, but the State of Wisconsin.” By engaging thousands of Wisconsinites, The Future Wisconsin Project (see the summary below) will collect, decipher, prioritize and act on initiatives critical to the Badger State’s future. We believe that is a WISCONversation worth having. And, for those of you who are concerned about the rapid rate of change, here is the good news: 20 years ago was a darn cold winter too. BV
Follow Morgan on Twitter @JimMorgan1960
The first step of the process was a series of focus groups involving all 16 technical colleges, completed in February and March this year. The next step will be engaging the local chambers of commerce, followed by strategy sessions for each CQI involving experts in each of those six areas. All the data collection will culminate with The Future Wisconsin Economic Forum on December 3 at the Wisconsin Center in Milwaukee. The conference will include “WISCONversations” about the state’s strengths and challenges, and a collective prioritization of the most pressing issues and action steps to address. Stay up-to-date on The Future Wisconsin Project: www.FutureWI.org Wisconsin Business Voice
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Tax Reform, 2015? Prospects and Concepts By Todd A. Berry
W
ith treasuries again in the black, several states are actively exploring major tax reform. Wisconsin is not currently among them, but there are signs of interest for the first time in years.
An early sign came last summer with enactment of a two-year $650-million income tax cut. Although welcome, what was most encouraging about the change was the simplification it contained. After years of cluttering tax law with needless provisions, state lawmakers aligned several features of state and federal code and jettisoned many little-used, form-cluttering credits. Importantly, some of these changes enabled further reduction of marginal tax rates. Two additional signs of hope for tax reform came in recent months. Before the holidays, Governor Walker mentioned interest in possible elimination of the income tax, swapping it for a higher sales tax. Economists generally agree that taxing consumption, rather than savings and work, can boost economic growth.
Whether this turns out to be good or bad news for tax reform remains to be seen. If the goal was sweeping reduction or elimination of the income tax, the recent cuts could serve as a down payment. Likewise, if the aim of the property tax change were eventual elimination of taxes levied by technical colleges, it would represent a serious step. The downside of the new "tech college" property tax cut, as well as a similar school tax reduction last fall, is its budget effect. Cuts were accomplished by spending more to aid K-12 and technical education, thereby reducing the projected mid-2015 surplus from over $1 billion to under $200 million, slim for what the state spends. This raises my cardinal rule of tax reform: Career politicians are averse to change if some people face tax increases. The antidote is predictable: Buy off the losers. If budget surpluses are significant, they can be used, at least temporarily, for this purpose. If they are small, the likelihood of reform dims.
With state support just increased, ending property tax funding of tech college operations is plausible and would result, in total, in an average property tax cut of about 6 percent. That is not inconsequential, for the local property tax is by far and away the largest business tax and the highest ranking of our major taxes.
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The move would necessitate major rethinking of expenditures on the state's largest programs - most notably schools, universities, prisons and health care - or a significant sales tax hike accomplished through a combination of higher rates and taxing many goods and services now untaxed. The popular implications of such changes are unsettling for career politicians of either party.
Perhaps another approach merits consideration. Put bluntly, Wisconsin's tax system is out of whack. We make Local property tax is by heavy use of politically unpopular and highranking income and property taxes, while far and away the largest relying less on more widely accepted and below-average sales taxes and user charges, business tax. e.g., tolls and tuitions.
Then, January news of a projected mid-2015 surplus of over $1 billion eventually brought three additional changes: an overdue reduction in income tax withholding, a $100-million reduction in income taxes, and a $400-million "buy-down" of technical college property taxes.
Where does that leave us come next year?
Eliminating the income tax intrigues the Governor for obvious reasons, but the individual and corporate taxes combined represent about $9 billion, or close to 60 percent, of state general purpose revenue. Replacing that is no small task, despite its economic appeal.
Rebalancing the state's revenue portfolio while streamlining overly complex tax law and looking for additional budget efficiencies is an ambitious but achievable goal if major tax reform is desired in 2015. The aim would be to move our 50-state rankings on income, property, and sales taxes, as well as on user-charges, toward national norms. BV Todd A. Berry is President of the Wisconsin Taxpayers Alliance
PROBLEM SOLVING Chris Reader WMC Director of Health & Human Resources Policy
“I
We’re from the Chamber and We're Here to Help
’m from Madison, and I’m here to help.” That’s not a saying that bodes confidence with most Wisconsin employers. It brings to mind images of state bureaucrats looking not at ways to improve their relationships with Wisconsin companies, rather seeking minor infractions of the law in order to levy fines and penalties. Sometimes even well-intended actions by those in Madison can have a negative and costly consequence for employers. Such was the case when lawmakers passed a new statewide electrician licensure law back in 2007. On its face, the law was well intended. It ended a patchwork of local licensing ordinances for contractors, allowing contract electricians to work anywhere in the state without needing permission on a municipality-bymunicipality basis. The law was written to go live on April 1, 2013, giving electricians five years to obtain the license.
As the effective date drew near, some employers became concerned the law would impact not only contract electricians – someone you might hire to fix an issue in your home or to wire an addition at your business – but also in-house staff within manufacturing facilities who routinely work on electrical wiring as part of their jobs. An example is someone who regularly changes electrical wiring while altering production lines to match sales orders. If the law applied to those in-house employees, companies would either have to pay to obtain licensing for the employees, or hire a master electrician to do the work or oversee the in-house work. The manufacturers also believed the law could require costly and time-consuming permits and inspections for routine work that did
not require permits and inspections prior. If true, that onerous requirement could have a devastating effect on production as companies would have to obtain permits and wait for inspectors before regular wiring work could commence.
For manufacturers, those uncertainties were unacceptable. They had employees on staff that knew the jobs and had been doing them safely for years. They saw no need for further licensing from Madison, and they especially didn’t think it should be necessary to hire a contract master electrician to oversee the work of their competent in-house staff. Further, they didn’t think it necessary to slow production in order to obtain costly permits and inspections for routine work. Rather than tackle the issue on their own, those manufacturers contacted WMC to share their concerns and enlist our help. Starting in 2012, we went to work on behalf of those member companies to analyze the 2007 law and attempt to fix it, if possible.
approved Assembly Bill 683, championed by Senator Grothman (R-West Bend) and Representative Larson (R-Colfax), to fix the issues brought forward by our members as well as other concerns that had come to light on the 2007 law. Governor Walker signed the bill into law as Act 143 on March 19. This is good news for manufacturers, as the new law exempts them from the new licensing, permitting and inspection requirements. In other words, it maintains the safe system that has worked for decades. This is just one example of the work we do at WMC for our member companies. When it comes to pushing back against bureaucrats and anti-business laws, we at WMC are in Madison, and we’re here to help. Contact us the next time you need us to go to bat for your company. BV
Follow Chris on Twitter @ReaderWMC
We brought the issue to the attention of lawmakers and the Governor’s office early in 2013, who responded by passing a bill to delay the 2007 law by one year, giving themselves time to consider the concerns we had brought forward. After a year of meeting with legislators and the Governor’s office, inviting lawmakers to manufacturing facilities to hear directly from impacted employers and employees, and negotiating with other interested parties, I’m happy to report that earlier this year the state Legislature Wisconsin Business Voice
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The Big Business of Tourism in Wisconsin By Stephanie Klett
W
hen you think about your summer vacation or weekend getaway, you think fun, relaxation and creating memories with families and friends. When I think about vacation and tourism, I see big business for Wisconsin. The past three years have been outstanding for Wisconsin’s tourism industry. Tourism had a $16.8 billion economic impact on the state in 2012 and it continues to be one of Wisconsin’s most important economic resources. We’ve experienced a $2 billion increase in tourism activity in the two-year period of 2011-2012. One way to visualize tourism’s impact is to imagine that one job is supported and $7,000 is generated in tax revenue for every 250 cars that cross the state line into Wisconsin for a visit.
Original Wisconsin Ducks in Wisconsin Dells started out as an hourly duck boat driver. He accepted more responsibility, became a supervisor, then a manager, and now he is the owner of this successful small business. I hear stories like this all the time during my travels around the state. Another benefit of tourism is the positive perception it gives Wisconsin. Tourism serves as the state’s welcome mat encouraging people to consider moving here or relocating a business here.
At the Department of Tourism, we work hard to market the state as the premier destination for fun, Spending dollars to market Wisconsin to travelers is a “Every dollar we spend on tourism whether it’s using celebrities wise investment for the state. Every dollar we spend who have Wisconsin ties in advertising brings in another $6 in ad campaigns, bringing in the on tourism advertising brings in another $6 in tax revenue. More visitors mean more money to fund our nation’s top travel writers to tax revenue.” schools, health care and other essential services. experience our destinations, tapping into new international Keeping Wisconsin on the mind of travelers requires spending markets, or attracting lucrative sporting events, meetings and money to make sure our advertising message is heard in this conventions. In addition, we operate the TravelWisconsin.com competitive market where states like Michigan are out-spending website, offering travelers the most comprehensive resource available us more than 2-to-1. Thanks to the leadership of Governor Walker for planning a vacation in our state. and the support of the state legislature, the Department of Tourism received increases in our promotional budget in the last two bienniums. Our budget to market the state is around $12.5 million, yet tourism activity in the state returned $1.3 billion in state and local tax revenues.
Nationally, tourism generates $14.2 trillion in economic activity – and tourism jobs can’t be outsourced. More than 184,000 Wisconsin residents benefit from employment or business ownership in the state’s travel and hospitality industry. In fact, small businesses are the backbone of tourism in our state.
It is our mission to ensure our tourism industry has all of the tools needed to provide exceptional customer service so travelers will not only vacation here once but many times, strengthening our economy with every visit. BV Stephanie Klett was appointed by Governor Walker to Secretary of the Department of Tourism in 2011.
When it comes to tourism jobs and careers, the opportunities are limitless. I have a great story that illustrates where a career path in the hospitality industry can take you. Dan Gavinski, owner of the
The WMC Foundation is dedicated to building a better future for Wisconsin by providing business and economics education, workforce development initiatives, local chambers of commerce support, safety training programs and business best practices.
Thanks to these Foundation Sponsors 14
Let’s Join Together for Jobs and a Competitive Future By Phil Neuenfeldt
W
hile all companies are faced with tough economic decisions based on cost and pricing, the unique ability to maintain an educated, stable, hardworking and skilled workforce through labor-management partnerships is the key element to success. The playing field of the global economy is shifting, and Wisconsin industrial labor unions are positioned to work with manufacturers across Wisconsin to compete and win back market share and grow family-supporting jobs right here in Wisconsin. Organized labor is a key partner to growing business. When workers organize and have a voice at work they are better able to structure their workplaces for success through smart work processes, investing in educating and training workers, and implementing rapid adaptation to technology. This leads to agile companies positioned to thrive.
The most important shared interest labor and management has is a skilled, productive and competitive workforce. Across every industry, the ability to attract and develop a talent base is critical. Manufacturing is no different.
We know that labor and management can bring the strength of community and political interests together to advocate for sensible local and national economic development policies that attract and expand our manufacturing base. We work together with technical colleges and education systems to train the next generation of workers. We are especially proud of our long standing collaboration with the Wisconsin Regional Training Partnership.
The focus of the Wisconsin Regional Training Partnership is to bring together industry partnerships to develop and implement worker education and skills training programs and strategies - these impact the ability and capacity The competitive advantage of partnership with to compete and grow businesses. workers within their labor organization not “Across every industry, the ofIn companies 2013, the Federal Reserve Bank hosted a only creates innovation in the workforce, ability to attract and develop a series of meetings in Madison and Milwaukee but also economic power and strong with business leaders and elected officials to communities and regions throughout the talent base is critical.” state. When workers have good wages highlight the emerging opportunities to grow the regions’ manufacturing economy. Touting with family-supporting benefits they are more the report “Manufacturing Better Opportunity and a Stronger likely to stay at their current company. That means their wages Economy” by the Center On Wisconsin Strategy, the Federal create a positive force on the entire community, generating local Reserve proudly points to the Wisconsin Regional Training demand for goods and services and spurring economic growth for Partnership as a key economic and workforce development tool the entire region. to grow wealth and jobs in Wisconsin. President Obama’s recent The Wisconsin AFL-CIO believes strongly in labor-management visit to the GE Energy plant in Waukesha shines the light on partnership for both collective bargaining and economic Wisconsin and how we are leading the national movement to build development. We are always ready to protect the rights of workers. America’s manufacturing base for the 21st century. We are entering a new era of economic potential in Wisconsin. When labor and management work together, Wisconsin wins. Employers who do not take advantage of positive relationships and coordination with their workers miss an important opportunity for innovation, growth and expansion. BV Phil Neuenfeldt is President of the Wisconsin State AFL-CIO.
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Company News Ariens Company Acquisition
Ariens Company acquired select assets of three specialty direct marketing brands from W. W. Grainger, Inc. Gempler’s®, Ben Meadows® and AW Direct® are all now part of the Wisconsin-based outdoor power equipment manufacturing and distribution company. “As we grow the distribution side of the business these companies represent strong niche segments that fit nicely with our current portfolio of outdoor brands,” said Dan Ariens, company President and CEO. “This acquisition allows us to build a more diverse distribution platform for the company that will ultimately help offset the inherent seasonality of some of the company’s equipment products such as snow blowers.”
First Business Financial Services, Inc. Hires New VP
Wisconsin Industrial Hall of Fame
B
etween 1958 and 1971 the Wisconsin Manufacturers’ Association, WMC’s predecessor organization, sponsored the Wisconsin Industrial Hall of Fame in order to provide “historical recognition” to individuals who exhibited “ingenuity and initiative.”
During that 13 year period, nearly 80 Wisconsin captains of industry were inducted into the Hall of Fame, including the founders of some of the state’s most iconic companies like Blatz Brewing, Allen Bradley, Case, Patrick Cudahy, Evinrude, Falk, Harnischfeger, Johnson Wax, Kimberly Clark, Kohler, Oscar Mayer, MillerCoors, Pabst, A.O. Smith, Trane and Warner Electric Brake. Some of those companies are still around, while others have been merged into other companies. Bronze plaques commemorating the inductees were on display at State Fair Park for many years and were recently uncovered in the lower level of the WMC headquarters. BV
First Business Financial Services announced Bonnie Van Epps was hired as Vice President – Talent Development Manager. Bonnie comes to First Business with over 16 years of banking experience, and over 10 years of Talent Management experience. Previously, Bonnie was a Talent Development Manager with M&I, focusing on leadership development, employee training and talent management. Bonnie is certified in Myers-Briggs Type Indicator (MBTI) and is licensed in the Korn/Ferry International - Lominger suite of Talent Management solutions.
Mead & Hunt Acquisition & New Location: Mead & Hunt, a Madison-based architectural and engineering firm, is opening a new office in Raleigh, North Carolina to focus on providing highway and bridge design services to municipal and state clients.
Mead & Hunt, Inc. is also significantly expanding its position in the water and wastewater treatment market with the acquisition of H2O in Motion. H2O offers specialized water and wastewater consulting with offices in Marquette and Harbor Springs, MI, and Phoenix, AZ.
2014 State of Wisconsin Business Luncheon Wednesday, October 15 Monona Terrace Community & Convention Center, Madison
Join hundreds of business leaders from around Wisconsin as we discuss the health of Wisconsin's business climate. Learn what leading CEOs, the Governor's office and outside experts have to say about the future of the Badger State.
www.wmc.org 18
Environmental Policy Conference & Business Friend of the Environment Awards Luncheon
May 14, 2014 Country Springs Conference Center, Pewaukee
Visit www.wmc.org for more information and to register.
Flowers Foundation Creates Business Achievement Award
A
s a way to celebrate and promote free enterprise, the Stoughton-based Flowers Family Foundation will present the first annual Wisconsin Business Achievement Award at WMC’s State of Wisconsin Business Luncheon on October 15.
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The award, which includes a $50,000 donation to a Wisconsin-based non-profit organization of the winner’s choosing, will honor an individual or entity that has had a positive impact on the Wisconsin economy. “The purpose is to recognize the winner’s role in support of the Wisconsin economy, hoping that it will encourage others,” explained Rockne “Rock” Flowers, Secretary and Treasurer of the Flowers Family Foundation and past WMC Chairman (1982-84). He said the award could potentially honor activities such as exporting, innovation, entrepreneurship, education, or other similar initiatives. Nomination application forms will be mailed this May to local chambers of commerce and accounting firms across Wisconsin, and will be available on the WMC website. Nominations will close August 1. Winners will be chosen by a panel consisting of WMC’s Kurt Bauer, University of Wisconsin Board of Regents President Mike Falbo and The Wall Street Journal’s Senior Editorial Page Writer Collin Levy. BV
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MEMBERSHIP
Pat Simonett WMC Director of Membership
Wisconsin Companies Help Communities Thrive W
hat better way to get through a winter like this one than with a celebration? This year, 34 exceptional manufacturers from all over Wisconsin put their best foot forward to tell their story to the Manufacturer of the Year Award (MOTY) program judges in hopes of bringing home the award. With thousands of manufacturers in the state, the road to bringing home a MOTY Award is challenging to say the least.
For the MOTY program sponsors - WMC, the accounting and advisory firm Baker Tilly and the law firm Michael Best & Friedrich LLP – this is an opportunity to traverse the state and deliver MOTY nomination plaques to each of the deserving nominees. The meetings allowed us a glimpse into what makes each one of the nominees unique. We were able to experience first-hand the innovation, spirit, passion and how they give back to their community.
Here are just a handful of stories from my stops to some of the companies. During our visit to Empire Screen Printing in Onalaska, their team was preparing for the Annual Empire Charity Chili Cook Off and Bake Sale, where they raise money for the Gilbert
Brown Foundation for Special Olympics. MGS Mfg. Group in Germantown holds educational seminars and tours for the Waukesha County Technical College Students and Super Steel LLC worked hard to promote their industry during October as Manufacturing Month the past couple of years.
The old business saying, “if you not growing, you’re dying” comes to mind but these companies take it to an entirely different level. Not only are they growing but they are competing and winning on a global scale. As unique as each of the nominees’ stories are, a common thread is the value they see in their people. Above all else, it is their people who are the resource they treasure above all.
During the last week in February, the manufacturing community assembled in Milwaukee for the three-day celebration. Events commenced with the Wisconsin Manufacturing Extension Partnership’s Manufacturing Matters Conference which led into the MOTY dinner and awards ceremony, followed by WMC’s Focus on Manufacturing Breakfast the next morning. What does the award mean to the winners? Each one had a compelling story, and every one of them credited their employees as the reason for the company’s success. There was nary a dry eye when award winner Badger Alloys’ President Rob Cowen gave his acceptance speech. He thanked his father for building the business, and told the empathetic crowd his father had recently passed.
The thing we hear from nominees during the Manufacturer of the Year awards dinner is they learn so much about their own organization and others throughout the nomination and awards process. Those who do not win are determined to apply again the following year. They understand manufacturers – and all businesses – are part of a community. When one is succeeding, all are succeeding.
The Manufacturer of the Year Award program sponsoring partners visited Empire Screen Printing to deliver their nominee certificate. L-R: From Empire Screen Printing: Amy Bettis, Jennifer Schloesser, Rebecca Burg, John Freismuth and sponsors Joe Olsen, Michael Best & Friedrich, and Pat Simonett, WMC.
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I will close by saying thanks for your commitment to your employees and your community. As a member of WMC, you are part of the greater community working for the common goal to help businesses in Wisconsin thrive. Thanks for your commitment to Wisconsin’s Chamber of Commerce. BV
Follow WMC on Twitter @WisconsinMC
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West Bend. Insurance you buy when you can’t afford anything less. To find out more, contact an official supplier of the Silver Lining®. Visit thesilverlining.com for the name of the one nearest you.
TAX
22
XES
Wisconsin’s Tax Climate Sunnier Skies are on the Way By Mark Crawford
A
ccording to Benjamin Franklin, “but in this world nothing can be said to be certain, except death and taxes.” This may be true – but at least taxes don’t have to be deadly.
Why so High?
By the late 1940s and 1950s, Wisconsin’s state and local taxes were some of the highest in the country. “Relative to personal income, Wisconsin’s tax burden flirted with being in the top ten, but never quite reached that status,” says Todd Berry, president of the Wisconsin Taxpayers Alliance (WTA).“That all changed in 1963, when the full effect of sales and income tax increases enacted by the 1961 state legislature was felt. Wisconsin’s tax rank jumped from 12th to 5th in a single year.”
WTA indicates that Wisconsin devotes the largest share of its personal income (5.02 percent) to school spending – 14th-highest in the country. Other spending areas and their “…property taxes on a median50-state rankings include public welfare (mainly Medicaid, 15th), valued home decreased for the university and technical colleges first time in twelve years.” (12th), highways (17th), police (12th), corrections (9th), fire (34th) and debt service (24th).
Wisconsin has had quite a tax ride over its history. It all started in the 1800s, before statehood, with the property tax. Back then property tax was intended to be a “wealth tax” that was levied on livestock, equipment and other belongings. Later, to ease the property tax burden, in 1911 Wisconsin introduced the income tax – the first income tax in the nation.
Wisconsin has been in this rarefied topten position, or close to it, ever since. According to the Tax Foundation's State Business Tax Climate Index, in 2013 Wisconsin ranked 43rd (eighth-worst business tax climate).The index includes five areas of taxation that impact business: corporate tax, individual income tax, sales tax, unemployment insurance tax and property tax. Other rankings for Wisconsin in 2013 were 46th for individual income tax, 36th for property tax, 33rd for corporate tax, 25th for unemployment insurance tax, and 15th for sales tax
By most accounts, Wisconsin ranks among the top 10-12 states for highest income tax and property tax burden. In general, this reflects higher demands for services by Wisconsin’s public sector, compared to other states. “For example,” says Jason Culotta, Director of Tax and Transportation Policy for WMC, “Wisconsin has many units of government – over 1900 municipal and county government units not even counting the 400+ school districts and numerous other entities.”
Further, state-local government expenditures claimed 22.1 percent of Wisconsin’s personal income, according to 2011 figures released by the U.S. Census Bureau. This was 5.1 percent above the U.S. average (21.0 percent) and 20th-highest among the states. Wisconsin also devoted the largest shares of income to K-12 education (5.02 percent, 14th highest) and public welfare (4.64 percent, 15th), including Medicaid.
Wisconsin Business Voice
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“Higher spending is the main reason Wisconsin has higher taxes,” says Berry, who notes much of this spending is devoted to education and highways. In fact, Wisconsin’s extensive state and local road system results in transportation spending that is 40 percent higher than the national average. “Approximately 30 percent of Wisconsin’s higher taxes are also due to ‘revenue mix’ – that is, fewer federal and miscellaneous dollars, and lower fees and charges for government services.”
The Big Three
In 2013, total state and local taxes in Wisconsin rose for the fourth consecutive year to $27.4 billion, a 2.1 percent increase from last year. The three biggest taxes are income tax, sales tax and property tax (although Wisconsin has a corporate tax, the vast majority of businesses don’t have to deal with it, in part because the majority of businesses pay as individuals rather than corporations). In 2011, the tax mix for Wisconsin was as follows: • Property taxes. The leading tax was the property tax (4.54 percent of income in 2011), which was 10th-highest among the states and 26.1 percent above the U.S. norm (3.60 percent).
• Individual income tax. At 2.97 percent, income tax was the other major tax, ranking 12th in the nation (28.4 percent above the national average). • Sales taxes. Although claiming 2.05 percent of income, Wisconsin’s sales tax was relatively low, ranking 35th among the states and 16.2 percent below the U.S. average (2.45 percent). WTA indicates Wisconsin businesses paid more than $8.5 billion in state and local taxes in 2011. The largest business tax was the property tax, accounting for 51 percent of the total. Businesses also paid more than $1 billion in sales taxes (16 percent of the total) and an additional $1.1 billion in unemployment taxes. As a percent of private sector output, Wisconsin’s business taxes ranked 31st nationally, although the state’s unemployment, corporate income and property taxes ranked in the top half of states.
Wisconsin’s State Tax Mix
Tax Reform Options
Taxes are needed to pay for important government services such as education, roads and health care. Income tax revenue is placed in the state’s General Fund, which finances major programs like public education, medical assistance, corrections, local assistance and the University of Wisconsin System. “Property tax revenue is used for elementary and secondary school districts, technical college districts, special purpose districts and county and municipal government services, including police and fire protection, sanitation, transportation and recreation,” says Neal Kedzie, state senator from Wisconsin’s Eleventh District, which covers parts of Waukesha, Walworth and Jefferson counties.
Over the last few years, he adds, the legislature has been working to reduce taxes without undermining these core services. In the 2011-2012 session, a property tax freeze was enacted, the first of its kind in state history. “As a result, property taxes on a median-valued home decreased for the first time in twelve years,” says Kedzie. “We also made it more difficult to raise taxes by adopting a bill requiring a two-thirds ‘super-majority’ vote of the legislature in order to raise taxes.” Unfortunately, there is no “silver bullet” tax solution for all business because each company has different needs and priorities. Businesses can be large and small, sub-S corporations and sole proprietorships, start-ups or mature, entirely state-based or global, and laborintensive or capital-intensive. Each of these characteristics will affect individual tax concerns. “For example,” says Berry, “two partners operating a small, equipment-intensive specialty business might worry most about personal income taxes and property taxes. A small computer technology consulting business might be more concerned with individual income taxes and personal property taxes on all their office furnishings. A large, labor-intensive incorporated assemblyline firm might worry more about corporate income taxes, property taxes, unemployment taxes and policies, or aggressive state enforcement of sales and use tax laws. Another partnership might be a real estate investment firm that is concerned about property taxes and real-estate transfer fees.”
State Sources Of General Fund Revenue FY 13 GPR Tax Collections (Total $14 Billion)
Income ($7.4 billion) Sales ($4.4 billion) Corporate ($0.9 billion) Excise Taxes ($0.7 billion) Public Utility ($0.3 billion)
The manufacturing and agriculture tax credit, part of the 2011-2013 state budget, will improve overall profitability for many Wisconsin businesses. “In 2016, when the credit is fully phased in, Wisconsin’s tax code will be more favorable towards manufacturing than the tax code in Texas, making our effective tax rate almost zero,” says Dale Kooyenga, state representative from Wisconsin’s Fourteenth Assembly District representing parts of Waukesha County. Mark Tyler, president of OEM Fabricators in Woodville, agrees.
Insurance Companies ($0.2 billion) Miscellaneous Taxes ($0.1 billion)
Source: www.taxreturn.wi.gov
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S. Mark Tyler
“Reducing the total tax levy from 7.9 percent to 0.4 percent will give manufacturers more freedom to reinvest in their companies, which will also strengthen Wisconsin’s competitiveness,” he says. “When
the credit is fully implemented, our company will be saving about $400,000 to $750,000 annually.” Tax reform ideas being considered by state government include:
• Eliminating the income tax and replacing it with the sales tax. With current laws in place, eliminating the income tax would require an increase of the sales tax to 13.2 percent to make up the lost income. Eliminating some current exemptions could reduce the sales tax to 9.8 percent. Eliminating all sales tax exemptions (including the exemption on food) would result in a 6.2 percent sales tax.
• Enacting a flat tax. To be revenue-neutral, with Wisconsin’s existing tax structure, a flat tax rate of 6.1 percent is required. If major deductions, credits and exemptions were eliminated (standard deduction, personal exemption, school property tax credit, itemized deduction credit, married couple credit and capital gains exclusion), the rate would be 4.65 percent. • Property tax cuts. Property taxes are currently 25 percent above the national average. One approach is combining a property tax cut with a sales tax rate increase (Wisconsin's sales tax burden is 15 percent below the national average). Property taxes are also a key recruitment issue for companies that border states with lower property taxes – for example, the typical Minnesotan pays half the property taxes we do in Wisconsin, which is an added challenge for across-the-border recruiting.
The business community in Wisconsin is increasingly concerned about not having enough trained, skilled labor. Improving this situation requires public sector flexibility, responsiveness and funding.
“A hard question for business is how to think about the governor's $400-million technical college property tax cut,” comments Berry. “That money goes to taxpayers, not the colleges. How do these kinds of decisions and revenue limits on tech colleges, and their implications for training, fit with tax reduction?” Post-secondary education is a key issue for Tyler. He’d like to see additional focus on reducing postsecondary tuition for high-demand fields in advanced manufacturing.
“It continues to be challenging to find skilled workers for manufacturing,” says Tyler. “There just are not enough high-school graduates going into manufacturing careers. Machinists, welders and other skilled workers are in high demand. We need to incentivize high-school students to explore advanced manufacturing career options. One way to do this is by making technical training more affordable.” BV Crawford is a Madison-based freelance writer.
EPA Regulations to Cost State 11,702 Jobs
W
isconsin will lose the most jobs per capita in the nation when new Environmental Protection Agency (EPA) climate regulation takes effect, according to a study done by The Heritage Foundation. The study predicts EPA carbon capture regulations will cost Wisconsin 11,702 jobs by 2023 – or 1,463 jobs in each of its eight congressional districts – compared to a national average of 770. Heritage says no new coal-fired power generation plants will be built and many older ones will be retired due to the compliance costs of the new regulations. Wisconsin gets nearly 65 percent of its electricity from coal, compared to 40 percent nationally. In related news, 11 members of the so-called Doctors’ Caucus in the U.S. House of Representative sent EPA Administrator Gina McCarthy a letter last month challenging the health benefits of added carbon regulations. “As health care professionals who also serve in the…Congress, we have a substantial interest in claims the federal government makes regarding public health as it pursues its regulatory objectives,” the letter states. The physicians said the EPA overstates the health benefits of its rules to justify the high cost of compliance. “There is no precedent for the kind of expense that EPA may impose if it promulgates poorly constructed, infeasible and inflexible rules on carbon emissions.”
WMC has been advocating on many bills during the final weeks of the legislative session. Below are brief updates on a few of the more high profile issues: • Tax Reforms. Governor Walker’s plan to return the $900 million surplus back to taxpayers through income tax and property tax reductions has passed both houses of the Legislature. • Alternative Minimum Tax (AMT). Legislation to exempt the manufacturer tax credit and research and development tax credit from the AMT has passed both houses of the Legislature. • Asbestos Litigation Reform. Legislation to add transparency to asbestos lawsuits and clamp down on double-dipping litigation passed both houses of the Legislature. • Patent Troll Reform. Legislation to crack down on patent trolling with new disclosure requirements passed both houses of the Legislature. • Phosphorus Regulation Reform. Legislation to provide compliance flexibility and reduce compliance costs with the DNR’s stringent phosphorus regulations has passed both houses of the Legislature. • Industrial Sand Mining. Legislation to streamline industrial sand mining permitting and preempt abusive local regulations failed to pass. • Groundwater Permit Reform. Legislation to provide clarity to groundwater permitting and avoid costly permit litigation failed to pass. • Electrician Licensing. Legislation to exempt in-house electricians doing work at their employer’s premise from state certification and inspection requirements passed both houses of the Legislature. • Worker’s Compensation Reform. Legislation to contain worker’s compensation medical costs with a fee schedule and increase indemnity benefits failed to pass. • Voluntary Overtime. Legislation to eliminate a state government approval requirement when workers voluntarily work overtime and waive their right to one day of rest per week failed to pass. These updates are as of the Wisconsin Business Voice print date. Visit www. wmc.org for up-to-date information on these issues and more.
Wisconsin Business Voice
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SAFETY Janie Ritter Director of Wisconsin Safety Council
Prescription Drug Overdose: An Epidemic
F
or the first time since World War II, motor vehicle crashes have lost their reign as the leading cause of unintentional death for Americans ages 25-64. Deaths due to poisoning recently moved to the top.
The Centers for Disease Control and Prevention (CDC) defines a poison as “any substance that is harmful to your body when ingested (eaten), inhaled, injected or absorbed through the skin. If the person taking or giving a substance did not mean to cause harm, then it is an unintentional poisoning.”
The CDC also reports that nearly 9 out of 10 poisoning deaths are caused by drugs; with 75 percent derived from the use and misuse of pain medications; mostly from opium. Commonly known as opioid analgesics, opioids and narcotics, these drugs carry generic names such as hydrocodone, oxycodone, methadone and morphine. Popular brand names include OxyContin, Percocet and Vicodin. Mixing prescription pain medication with alcohol and/or over-the-counter pain medications increases the risk of a fatal overdose. Prescription pain medications, including opioid pain relievers, are used to reduce pain most often from ailments, injuries and surgeries. Along with the pain relieving benefits are risks of misuse, addiction and death. A number of factors have contributed to the increase and widespread availability of these powerful drugs including criticism that physicians were not adequately treating pain, and the introduction of extended-release opioid pain relievers for the treatment of moderate to severe pain. Now, approximately one in 25 adults are receiving treatment of chronic pain with opioid pain relievers. The increase in prescriptions for pain medications resulted in an abundance of these medicines being kept in home medicine cabinets. The accessibility to these drugs has increased the opportunity for theft or misuse. Who is most at risk? Consider this:
• From 2000 to 2010, the drug poisoning death rate increased for both males and females, all races and ethnicity groups, and all age groups. The rate of death in females increased 103 percent; males increased 80 percent. • From 2000 to 2010, drug poisoning death rates increased nearly 140 percent for non-Hispanic whites, compared to non-Hispanic blacks. • Since 2004, the drug poisoning death rate is highest among 4554 year olds.
• From 2009 to 2010, the largest age-specific increase in death rate was among 55-64 year olds, with a nearly 10 percent increase.
How does Wisconsin compare? Wisconsin ranks 33rd in the country for age-adjusted drug poisoning death rates, at 10.9 per 100,000. The Wisconsin Safety Council (WSC) is dedicated to keeping Wisconsin workers safe. WSC, along with the National Safety 26
Council and many leading employers nationwide, focus attention on issues affecting workers not only on-the-job but off-the-job. Studies show that a much greater number of employees are injured outside of the work environment.
Ways to help eliminate the risk of opioid misuse in your home:
• Place all opioid pain medication containers in a locked and secure place to eliminate any chance of access by a family member or visitor to the home. More than 70 percent of people who abused prescription pain relievers report obtaining them from friends or relatives. • Use medications only as prescribed.
• When a pain reliever is no longer needed, dispose of it properly through a community disposal program.
• If an individual suspects or knows a family member or friend is abusing prescription drugs, encourage that person to see a doctor or an appropriate health care facility to begin treatment. Action for Employers:
• Educate employees.
• Expand use of drug testing to include prescription drugs.
• Modify health insurance policies and agreements that may contribute to over-prescribing.
• Develop new processes to monitor the use and misuse of drugs involved in worker’s compensation claims. Non-medical use of prescription painkillers costs health insurers up to $72.5 billion annually in direct health care costs. • Become an advocate/supporter for community disposal programs. BV
Unintentional Deaths
Unintentional Deaths (Trends in Leading Causes - All Ages) (Trends in Leading Causes - All Ages)
50,000
Motor-vehicle
45,000 40,000 35,000
Falls
30,000
Poisoning
25,000
Choking
20,000 15,000
Drowning
10,000
Fire, Burn
5,000 0
‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 2011
Follow WSC on Twitter @WISafetyCouncil
72nd Annual
Wisconsin Safety & Health Conference & Exposition Kalahari Resort & Convention Center, Wisconsin Dells
www.wisafetycouncil.org
er Regist today
April 28-30, 2014 2014 Safety Training April - July 2014
Chapter of
The Wisconsin Safety Council, a division of WMC, is Wisconsin's leading provider of safety training and programming. WSC offers training throughout the year at locations across the state.
MILWAUKEE AREA SAFETY TRAINING
WISCONSIN DELLS AREA
FOX VALLEY/GREEN BAY AREA
May 22
April 28-30
June 24
Supervisor Development: Safety & Health Fundamentals
July 16
Job Safety Analysis
July 23
Safety Inspections
MADISON AREA SAFETY TRAINING April 14-16
Instructor Development Course: First Aid/Adult CPR/AED
May 14
OSHA Construction Breakfast “Workplace Attitudes” May 19-22 Safety Training Methods (STM)
June 17
Hazardous Communication, Train-the-Trainer
72nd Annual Safety & Health Conference/Expo April 28: Pre-Conference Professional Development Courses • Coaching the Lift Truck Operator, Train-the-Trainer • Crisis Management Communication • Effective Team Safety • Electrical Safe Work Practices Compliance (ESWP) • Ergonomics: Managing for Results • How to Create an Effective Workplace Violence Prevention & Intervention Program (Part II) • Incident Investigation: Root Cause Analysis • Leadership through Understanding People, Behaviors & Workplace Demands • Using Direct Reading Instruments to Assess Chemical, Noise & Heat Exposures
April 28-29
OSHA 10-Hour Voluntary Compliance Course for General Industry OSHA 10-Hour Voluntary Compliance Course for Construction
www.wisafetycouncil.org
Incident Investigation: A Root Cause Analysis
WAUSAU/STEVENS POINT/MARSHFIELD AREA May 6-9
OSHA 30-Hour Voluntary Compliance Course for General Industry
New Course Offerings from WSC October 14 – Green Bay Job Hazard Analysis ( JHA)
November 3 – Madison
Selection & Proper Use of Fall Arrest Equipment
December 11 – Summit
How to Handle an OSHA Inspection
BUSINESS WORLD Steve Benzschawel Director of Business World
It’s 2014. Do You Know What Your Child’s Digital Footprint Looks Like?
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e go to great lengths to keep our kids safe. Most of the time, we can look back at our own personal experiences to inform our decisions and judge whether our kids are being safe, smart and staying out of trouble. We remember the excitement and thrill from finally getting a driver’s license, going on a date or many other rites of passage that mark the journey from adolescence to adulthood.
But what about keeping your kids safe in areas we never experienced? Based on student surveys, your kids are likely spending most of their time and attention on social media networks that didn’t even exist five years ago. And based on parent surveys, most adults cannot even name the most popular social media networks. So much for relying on our experience to safely guide our kids along their journey to social media maturity! Prepared or not, your kids are tweeting, snapping, instagramming and facebooking a digital scrapbook of their lives for the whole world to see – future bosses included! Since 1982, the Wisconsin Business World program has remained true to its original purpose – to teach young people about business, economics and entrepreneurism. But over the last 30 years, life has gotten slightly more complicated. Thirty years ago we worried about removing land line phones from dorm rooms, but today we worry about the rapid exchange of “digits”, the creation of an unsanctioned Business World Facebook page, and what might be attached to #businessworldrocks.
Business World has evolved over the years to reflect the changing times and what is expected from employers. One thing is crystal clear: your child’s digital footprint will have an effect on future employment opportunities. The question is, will it help them or hurt them? Unlike any generation before them, your child’s online activity is leaving a digital footprint that will remain in cyberspace long after they hit the Enter or Delete keys. Their digital footprint is like their resume and represents their personal brand. How they behave in the classroom, how they act on the court or stage, and what they post electronically will all play into their employability.
The next generation of leaders could learn all of this by attending Business World! We will be holding two summer programs: Edgewood College in Madison ( June 15-18) and St. Norbert College in De Pere ( June 22-25). At camp, students form companies, create a product and make many of the same decisions as real-world executives. All while living on campus for those few days, giving them a true taste of college life. Kids leave camp with more self-confidence, ambition and new friends from all corners of Wisconsin.
Online registration is now open. Visit www.wibusinessworld.org for more information. BV Follow Business World on Twitter @WiBusinessWorld
2014 Summer Programs June 15-18
Edgewood College, Madison
June 22-25
St. Norbert College, De Pere www.wibusinessworld.org 28
@WiBusinessWorld Wisconsin-Business-World
University-Based Entrepreneurship & Economic Development The Important, Yet Overlooked Role of Human Capital By Jon Eckhardt, Ph.D.
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olicy-makers rightly celebrate academic science when they assess how Universities foster economic development. Science-based entrepreneurship is certainly an important catalyst to commercial entrepreneurship. What is often overlooked is that Universities are a hotbed of human capital that can foster a variety of forms of entrepreneurship beyond the science-based model. First, a concise review of the science-based model. Science-based entrepreneurship is typically centered on university technology transfer offices through which university discoveries are licensed to existing firms and startup companies. As an example, at the Massachusetts Institute of Technology (MIT), recent research indicates during the 1990s approximately 25 companies were started annually through the MIT technology transfer office that were based on MIT science.
Similarly, in Wisconsin, our University research enterprise produces novel technologies that are important seeds-toscience driven commercial entrepreneurship. Companies such as Cellular Dynamics International (NASDAQ: ICEL), and Aurora Spectral Technologies, are just recent examples of how the pursuit of science can foster discoveries that lead to novel products and services that benefit the public and the economy of our state. While science-based entrepreneurship is certainly important, what is often overlooked is a second model, the human capital model. The human capital model
of university entrepreneurship embraces the fact that an immense amount of entrepreneurial activity can be driven by alumni and students who start firms that are not based on University technologies. The statistics – and the opportunities for our State – are striking. At MIT during the 1990s, MIT alumni annually started approximately 900 companies – most of which were not based on MIT technologies. Individually each alumni startup company tends to have a smaller economic impact than a science-based venture. Nonetheless, in the aggregate, the economic and human impact of the population of the companies started by alumni and students is enormously important. An insight of the human capital model is that firms are started, grown and managed by people – not technologies. Therefore, an important driver of success is the successful management of these enterprises, which includes budgeting, contracting, customer development, product development, financing and experiential learning. These entrepreneurial skills can be taught so lessons that are learned from experience are driven by the unique challenges of a specific venture and errors are easily avoided by the trained entrepreneur.
Universities that fully embrace the human capital model of entrepreneurship inspire and enable the entrepreneurial capabilities of the future workforce by offering training in entrepreneurship to students from all majors on campus, including but not limited to science and technology fields. A human capital model replaces misconceptions
and ignorance about entrepreneurship with modern business training on how to start, build and grow companies. Programs include: • Coursework in entrepreneurship and entrepreneurial careers • Experiential activities, such as participating business contests, consulting projects with actual companies and startup classes
• Involvement of the business community as role models, mentors and advisors • A lifelong relationship between the institution and its alumni so when an individual is ready to start a company they can access capital, customers and mentorship through their alumni network
The human capital model is inexpensive. It is also fully compatible with other models of entrepreneurship and with the research and education mandates of modern Universities. The human capital model is an investment that empowers individuals to build the 21st century entrepreneurial economy. BV Jon Eckhardt, Ph.D. is the Robert Pricer Chair in Enterprise Development and the Executive Director for the Weinert Center for Entrepreneurship at UW-Madison. He is also a cofounder of the gener8tor business accelerator, with offices in Madison and Milwaukee, Wisconsin. The views expressed in this essay are his own. He can be reached at jeckhardt@bus.wisc.edu.
Wisconsin Business Voice
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Follow WMC on Channel WMC501 Nearly 1,000 people gathered for this year’s Business Day in Madison.
The Future Wisconsin Project is bringing together business with education and government to build a strategic plan for Wisconsin for the next 20 years.
Grede Foundry was one of last year’s Business Friend of the Environment Award Winners. Attend this year’s Environmental Policy Conference May 14.
WMC outgoing Chairman Todd Teske sat down with WMC to talk recalls, jobs and business climate.
WMC incoming Chairman Dan Ariens talked with WMC about his plans as WMC Chairman including The Future Wisconsin Project.
Speaker Robin Vos (R-Burlington) joined WMC’s Scott Manley to discuss tax cuts and other policy initiatives.
Follow WSC on Channel WISafetyCouncil The Wisconsin Safety Council’s Food Processor Safety Conference featured nearly 75 safety and health professionals from the food processing industry. WSC’s Janie Ritter interviewed Doug Reindl, Professor & Director of the Industrial Refrigeration Consortium at UW-Madison to talk about issues affecting the industry.
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The WSC Annual Safety & Health Conference and Expo will feature more than 50 speakers such as Dave Droster, Briggs & Stratton Corp, speaking about workplace violence, Chris Halverson, M3 Insurance Solutions; and Carrie Parman, Alliant Energy, talking about sharing best practices.
COME TOGETHER. MIKE HAUPERS President Swiss Precision Machining Inc. YEARS ATTENDING IMTS 25 GOAL FOR IMTS 2014 To identify new equipment, tools, and technologies that will enhance our abilities – giving us the competitive edge needed to expand into new markets. After 40 years in the machining industry, I’m still amazed at how much more there is to learn. IMTS is where I go to get smarter.
LEAVE SMARTER. Where else can you meet the minds that are moving manufacturing forward? Nowhere but IMTS 2014. With a focus on success through cooperation, the week will be filled with technology, education, and ideas that we can all benefit from. Join us at McCormick Place Chicago, September 8–13, 2014. Learn more at IMTS.com.
REGISTER NOW • IMTS.COM
COME TOGETHER. LEAVE YOUR MARK.
EXPORTING Mike Shoys WMC Senior Vice President
Exporting Concrete? Well, Sort of…
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pancrete®, headquartered in Waukesha, has been an innovative manufacturer of precast concrete products and equipment for 70 years. Spancrete precast, prestressed concrete products are used in commercial, industrial, institutional, residential and multifamily construction projects.
Spancrete Global Services is the division of Spancrete responsible for the manufacture and sales of Spancrete production equipment and accessories. Spancrete Global Services sells and services Spancrete producers in the U.S. and abroad in more than 20 countries.
In the early 2000's Dubai was the hottest market on earth. Spancrete attended several large trade shows there (namely The Big 5 – International Building & Construction Show) and saw the massive expansion in the United Arab Emirates (UAE) which was serving as the focal point of "Arab capitalism". The market was stable, booming, English-speaking and full of ex-pats serving as key decision makers. It was an easy decision for Spancrete to use the Emirates as their gateway to the Gulf Cooperation Council/Middle East. Spancrete had to convince the local market of their capabilities and ability to adapt to the local business environment. They hired a local representative but it took time and commitment on the ground before they sold their first plant in the region. Spancrete sales of producer plants in Abu Dhabi and Dubai were key successes which helped launch them into the market throughout the Middle East. Spancrete continues their efforts throughout the region including in new emerging markets like Iraq.
All Spancrete equipment is manufactured in the U.S. and exported directly to the purchaser. The customer or local Spancrete producer manages delivery of the final concrete products to the market. Spancrete’s advice to companies considering Middle East markets for their products: Get there, stay there, be patient and make sure you do your due diligence in choosing your local rep, distributor or partner. Relationships are key in the region. BV
Thanks to Kamara Welch, Global Sales Support & Events Manager, Spancrete Global Services for helping with the information on Spancrete.
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Wisconsin Companies Seize Upon Opportunities in the United Arab Emirates Spancrete, Greenheck Fan Corporation, Oshkosh Corp. and The Manitowoc Company, Inc. are among the great Wisconsin companies finding success exporting products and services to the United Arab Emirates (UAE). In 2013, Wisconsin companies exported more than $393 million of goods to the UAE, a 29 percent increase over 2012. The UAE is now the 13th largest export destination for Wisconsin companies, ranking just behind Saudi Arabia. The opportunities for Wisconsin companies are expected to continue to grow – not just in the UAE, but in all six countries that make up the Gulf Cooperation Council (GCC), according to Anne Jafery, the Middle East trade representative Wisconsin companies exported more than $23 billion in for the Wisconsin Economic goods in 2013, an increase of nearly 40% since 2009 Development Corporation.
Wisconsin Exporting Fast Facts
The region is expected to see unprecedented economic growth over the next decade as a result of a growing population, increased urbanization and the relaxation of rules allowing foreign ownership of real estate. Construction developments worth $900 billion already are under way across the GCC between now and 2020. Completed projects in the six countries totaled $81.6 billion in 2013, a 19 percent increase over 2012. For more information on exporting to the Middle East or other parts of the world, visit the Wisconsin Economic Development Corporation’s website at inwisconsin.com/ exporting.
top DEstination For Wisconsin Exports in 2013
33+67 33+11+56 44+7+49 51+4+45 55+3+42 32. 5% CAnAdA
10. 9% MExiCO
7.ChinA2%
4. 1% JAPAn
3.GERMAny 1%
Wisconsin’s top ExportED proDucts in 2013
30+70 30+10+60 40+10+50 50+8+42 58+4+38 29. 5% indUSTRiAL
MAChinERy
9. 9% MEdiCAL/
SCiEnTifiC inSTRUMEnTS
9. 6% ELECTRiCAL
MAChinERy
8. 4% VEhiCLES
And PARTS
4. 1% PLASTiCS
proDucts With signiFicant groWth in Exporting From 2012 to 2013
27. 5% LAMPS And PARTS
19. 9% inTERnAL
COMBUSTiOn EnGinES
8. 2% 11. 9. 8% 4% PLASTiCS VEhiCLES And AGRiCULTURAL SUPPLiES
PROdUCTS
Source: U.S. Census Bureau data as reported by Global Trade Information Services
BUSINESS GROWS STRONG HERE, BECAUSE THE CLIMATE IS RIGHT IN WISCONSIN. To successfully develop a business you need support from a state that celebrates growth. As you look to take your business strategy to the next level, you can count on the programs, resources and opportunities available to you in Wisconsin. From financial incentives to tax policies, we are taking bold action to encourage expansion by offering business development programs customized to meet your needs. We are demonstrating our commitment to our industries by introducing the Wisconsin Manufacturing and Agriculture Tax Credit, which virtually eliminates the tax on income from manufacturing activity in Wisconsin. In addition, we are driving advancements in workforce development and site certification to help meet the needs of your growing business.
As the state’s lead economic development agency, the Wisconsin Economic Development Corporation connects businesses to growth-oriented solutions throughout the state. We collaborate with a highly responsive and dedicated network of local and regional economic development partners to advance business development. To learn more about the programs that help optimize your business growth In Wisconsin®, call 855-INWIBIZ (toll free) or visit Succeed.InWisconsin.com.
®
In Wisconsin® is a registered trademark of Wisconsin Economic Development Corporation.
ENERGY Eric Bott WMC Director of Environmental & Energy Policy
EPA’s Permanent Polar Vortex (otherwise titled “Time to Buy Some Long Johns”)
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onventional wisdom is that the Environmental Protection Agency’s (EPA) war on coal will drive many industrial facilities and utilities over the next several years to switch from coal to natural gas. It’s abundant domestically and competitively priced at the moment thanks to the wonders of hydraulic fracturing and horizontal drilling. Gas’s carbon footprint is less than coal’s so it can slip quietly past the ire of our regulatory masters, at least for the time being.
This got me thinking… what would a modern economy dependent on natural gas look like and what would such a dependency mean for utility rates and reliability? To answer this question, I looked to New England. New England is an interesting case study. Since 2001 its dependence on natural gas has increased from less than 30 percent of generation to more than 50 percent and that trend is only picking up pace. Largely due to EPA’s war on coal, New England is in the process of shuttering several coal plants between now and 2017. Pipeline capacity on the other hand has not kept pace. Last fall, I speculated this rapid shift to natural gas would lead to significant price spikes and New England’s situation could prove predictive for Wisconsin, post war on coal. On the first point, my speculation proved correct. Prices for Henry Hub natural gas, an industry barometer, averaged $4.24/ MMbtu in December, but in New England bidweek prices jumped to $14.52. Bidweek is the time period at the end of a month
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when the bulk of trading on the spot market occurs for the following month. In January, bidweek prices topped $20 and daily spot prices hit close to $80.
Anthony Buxton, council for New England’s Industrial Energy Consumer Group, summed-up the impact of these price spikes in a recent interview with the New Hampshire Union Leader stating, “Electricity prices have routinely doubled this winter… These prices have closed New England mills for weeks on end, strained home budgets and burdened New England's economy uniquely among regions in the nation.” Regarding the second point – that Wisconsin might be hit with similar natural gas shortages in a few years – I proved less prescient. We got clobbered this winter.
January, completely cutting off supply to many employers in Western Wisconsin.
It’s easy to write off January’s service interruptions as unusual events. Polar vortexes and Canadian pipeline explosions are far from normal but they also demonstrate how incredibly vulnerable we are. Without a significant investment in natural gas carrying capacity in this country, the EPA’s war on coal could act as a permanent polar vortex – driving demand for gas through the roof without providing a means for getting it to market. The implications for business are obvious but the threat to Wisconsin’s working poor and middleclass families is just as great. Higher natural gas prices and an absolute crisis in propane supply this winter meant thousands of Wisconsin families had to quite literally choose to heat or eat.
In early January, companies Polar vortexes and across much of few months ago I Canadian pipeline explosions Amight Wisconsin saw have suggested are far from normal but they also that homeowners seek their service interrupted out a Wisconsin-made demonstrate how incredibly for the first outdoor wood furnace or vulnerable we are. time since 1999 pellet stove to hedge against and several large energy unreliable propane supplies but in the users had their natural gas supplies cutoff. middle of the crisis, EPA declared a second Record demand and a sudden drop in the war, this one on wood. Apparently even availability of wind power (wind turbines wood isn’t green any longer. These newly don’t generate electricity when it gets proposed EPA regulations would ban the really cold in part because of gelling of production and sale of roughly 80 percent lubricants within the gearbox) caused a real of the stoves available on the American time market price spike for electricity that market. I guess we all better invest in some peaked around $1,800/Mwh on January high quality long johns. BV 7, 2014 compared to a monthly average of Follow Eric on Twitter @BottWMC $52.63/Mwh. Things only got worse when a pipeline in Manitoba exploded late in
Venture Capital
Finding a New Approach to Building Companies in Wisconsin By Joe Kirgues & Troy Vosseller
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hen it comes to building new companies and attracting venture capital, Wisconsin is failing to perform. According to last year's MoneyTree Report, venture financing in Wisconsin fell to $36 million in 2013 from around $90 million the year before. But considering venture capital is a nearly $30 billion annual industry, the bottom line for Wisconsin is the venture capital big leagues remain a distant goal. Wisconsin's poor performance in attracting venture capital is bookended by its consistently poor rankings on the Kauffman Foundation's ranking of entrepreneurial activity. Whether it is starting new companies or attracting venture financing, we are not positioning Wisconsin to compete.
many would-be entrepreneurs. Additionally, we have found in the digital technology sector, the lack of a robust startup ecosystem has at times made the high-wire act of starting a new company all the more dangerous. This is because there is not a net of similar emerging companies to catch talented entrepreneurs who need a second chance or the confidence that comes from having options within a given startup ecosystem.
To better compete, Wisconsin must re-examine its business fundamentals regarding starting and growing companies. In re-examining Wisconsin's business fundamentals, the leaders of our state’s economic and venture efforts should be first under the microscope. We cannot continue to celebrate economic and venture efforts that fail to produce. Government, academic, economic development, venture and other efforts that purport to foster new company formation and venture financing need to be judged on performance and not press-release sizzle. At gener8tor, we've been clear that our program's performance is dependent on realizing $50 to $100 million in new wealth creation through our investment activities. We encourage our peers to similarly state their performance goals.
Wisconsin's targeted efforts of fostering new startup formation and growth will provide a foundation for sustainable success. As individual venture funds, angel groups, academic efforts and others develop reputations for fostering success, these groups will enter a virtuous cycle where more talented individuals lead to better outcomes. At gener8tor, we tell our companies that even great trees started as seeds. In other words, it is the rate of growth, and not the size of any company measured in terms of revenue or jobs, that matters. Just as we encourage our startups to measure this growth in a granular (in their case weekly) window, similarly Wisconsin should measure the success of any new corporate, venture, angel, academic or government effort by its incremental progress. We understand the results of these initial efforts will be modest successes but we anticipate the ability to hit singles will precede the ability to hit doubles, triples and beyond. BV
Wisconsin's lack of high-growth, venture-financed startups is holding us back. Considering the Kauffman Foundation's finding that all new job creation in the U.S. comes from new companies, Wisconsin risks falling behind in creating jobs and wealth. As creative destruction comes for Wisconsin's legacy corporations and corporations, like people, have finite time on this earth - the problem only worsens. Compounding this problem is the widening skills gap, domain knowledge and capabilities that develop between communities which embrace startups and those, like Wisconsin, that fundamentally do not.
A new approach to starting and building companies in Wisconsin requires different approaches to new company formation and financing. The decision to start and build a company here requires entrepreneurs to judge the likelihood of a successful outcome against the opportunity cost of their next best alternative. As Wisconsin continues to underperform in venture activity, the act of starting a new company remains an irrational activity for too
Community-wide efforts targeting success with small groups of emerging companies holds the most promise for changing Wisconsin's trajectory. At gener8tor we focus on investing our community, capital, mentorship, network and expertise in limited batches of only five companies at a time over twelve-week periods. These companies range from back-of-the-napkin ideas to startups with tens of thousands in monthly revenue, but they are all capable of becoming high-growth companies. We tell these companies they should expect to raise hundreds of thousands in financing from our program based on their success in realizing customer validation, minimum viable product, a model to scale their company and a presentation to investors. We encourage other corporate, academic, venture and angel groups to similarly frame their investment commitments and expectations.
Joe Kirgues & Troy Vosseller are Co-Founders of gener8tor. Visit www.gener8tor.com to learn more.
Wisconsin Business Voice
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GRASSROOTS
Jim Pugh WMC Director of Public Relations & Issue Management
A Short Memory is a Politician’s Best Friend Y ou go to a fish fry on a Friday night and you bump into your state legislator.
As a good business executive, the talk turns to jobs and the economy. Your legislator tells you how hard they are working to make your business more competitive by cutting taxes, cutting red tape and clamping down on frivolous lawsuits. But, because you are WMC member, you know the truth. Your legislator actually has a bad voting record on business issues. And, you kindly set the record straight and urge support for the business agenda. How is that possible?
You read the WMC Legislative Voting Record on WMC’s website and remembered your legislator had a dismal 21 percent voting record on business issues. The new WMC Legislative Voting Record for the 2013-2014 legislative session will be released this summer and published in the October edition of this magazine. Please read it and talk to your elected leaders about their performance on business issues, and be
sure to share it with your employees.
WMC supports Democrat and Republican lawmakers who score 70 percent or better on the voting record. That’s a good benchmark for legislative performance. WMC then presents the “Working for Wisconsin Award” to lawmakers who have that 70 percent or better voting record. The awards are presented in their home districts at the facilities of WMC members.
WMC routinely sends alerts on various issues to our members to keeping them updated on business issues and who is supporting and opposing our agenda. Those issues that matter most to businesses culminate in the WMC Legislative Voting Record released in the summer of election years. The WMC scorecard serves as a guide to WMC members, other businesses, policymakers, the media, and opinion leaders about which lawmakers are pro-jobs and which lawmakers are not.
It’s really simple. If politicians want to claim to be pro-business, they need to vote probusiness.
Who do you know at the Capitol?
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The scorecard is a critical part of WMC’s comprehensive public policy advocacy program. WMC’s Board of Directors approves a broad public policy agenda shortly after each election and before the legislative session. The WMC lobbying team works hard to educate lawmakers and pass the agenda into law, while also opposing anti-business legislation. And, when the session is over the full business voting record is compiled. Please, don’t let the WMC scorecard sit on the shelf. Read it. Remember it. And take action. A call or a letter to your legislator will serve to remind them that job creation is our state’s highest priority. A voter’s short memory is a politician’s best friend. WMC serves our members by holding elected officials accountable on business issues, and reminding the voters back home what really happens at the Capitol. BV
WMC at Home and on the Road
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WMC’s Scott Manley led a press conference held this March to inform people that raising the minimum wage to $10.10/hour would kill 27,000 Wisconsin jobs. Joining the coalition against raising the minimum wage are, L-R: Bill Smith, NFIB; Ed Lump, Wisconsin Restaurant Association; and Brandon Scholz, Wisconsin Grocers Association.
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WMC’s Kurt Bauer, left, and Mike Shoys, right, met with Taiwanese trade representatives to discuss how Wisconsin and Taiwan can build closer economic ties. Mining = jobs. Just ask the Operating Engineers doing bulk sampling work up in the Penokee Hills. The permitting process continues for the proposed iron ore mine that, if approved, would be a jobs gold mine for economically depressed northern Wisconsin. WMC Foundation’s annual Focus on Manufacturing Breakfast boasted a sold-out crowd of more than 230 attendees. Panelists included (L-R): Scott Mayer, President, QPS Employment Group; Dirk Smith, President & CEO, Super Steel LLC; Steven Dyer, President & CEO, Trostel, Ltd.; and Patricia Panchak, Editor-in-Chief, IndustryWeek magazine. WMC Foundation President Jim Morgan moderated the panel.
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WMC is a proud partner of the Posters in the Rotunda program produced by the University System. L-R: Ray Cross, new President of UW System; Tom Still, President of the Wisconsin Technology Council; and Jim Morgan, WMC Foundation President. Lt. Governor Rebecca Kleefisch spoke to the WMC Board of Directors in January. She is pictured here with, L-R: Todd Teske, Briggs & Stratton Corp, WMC Immediate Past Chairman; Bob Kamphuis, Mayville Engineering Company, WMC Vice Chairman; and Dan Ariens, Ariens Company, WMC Chairman.
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Tax Reform i
By Representative Chris Taylor (D - Madison)
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e are all aware that, according to the Bureau of Labor Statistics, Wisconsin comes in at an anemic 38th in the nation in private-sector job creation and dead last in the Midwest. But income inequality also plagues our workforce and impacts our economy.
According to a November, 2013 report from the Center on Wisconsin Strategy (COWS) and the Wisconsin Budget Project, between 1996 and 2010 the income for the bottom 40 percent of Wisconsinites decreased by $2,407. During this same time, the income of the top 1 percent of filers increased, on average, $168,773, or 43 percent. Six out of every ten dollars of income flows to just two of every ten Wisconsin residents, or the richest fifth of the population. Income inequality and the reduced purchasing power of a broad swath of consumers were recently identified by three dozen economists assembled by the Associated Press as slowing the economy and threatening growth.
Lower and middle-income families do not score much better when it comes to tax fairness. The most recent analysis conducted by the Institute for Taxation and Economic Policy shows these families are paying a larger percentage of their incomes in state and local taxes than individuals making more than $100,000 and significantly more than those making over $1 million. Recent laws, including the elimination of the alternative minimum tax and indexing of the Homestead Tax Credit while essentially flat-lining the state income tax so a person making $21,820 has the same income tax rate as the person making $241,190, serve to heighten income inequality. Our role as policy makers should be to create a pathway to prosperity for all Wisconsinites, not just the most wealthy. That includes targeted tax relief in a time of surplus to the people who need it most while requiring the most wealthy to pay their fair share. When low and middle-income families have additional income, they spend it, fueling economic growth and job creation.
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This is why I introduced the Fair Share Tax Act. By increasing the income tax personal exemption for a couple earning under $100,000, for a single income payer earning under $60,000, and for other tax groups, my proposal will result in a tax savings of $610 for a married couple with two children and an adjusted gross income (AGI) of $50,000, which is about the median family income in Wisconsin.
As a person’s income grows, the exemption phases down from $4,310 until it reaches the current standard exemption of $700 for each eligible person. Additionally, I restore indexing for the Homestead Tax Credit and reverse the cut to the Earned Income Tax Credit which will provide even more tax savings for low income earners. My proposal also reduces the bottom rate to 4 percent, while maintaining the 5.84 percent rate for the second bracket and the 6.27 percent rate for the third bracket. For families earning over $218,170 and single filers earning over $163,630, their rate reverts back to what it was prior to the passage of the budget. Families making over $1 million would also have a slightly higher rate.
We need to heed the advice of Mr. Warren Buffett, who stated “[a]nd to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.”
Wisconsin’s economic recovery depends on having a strong middle class. Ensuring everyone pays their fair share in taxes will strengthen our government’s investments in critical programs that grow our economy, such as education and infrastructure. Reducing the tax burden on low and middle-income families, who should not pay a greater percentage of their income in taxes than the wealthiest, puts more money into the pockets of Wisconsin’s working families and stimulates our economy. The Wisconsin Legislature and Governor Walker should start pursuing policies that close the massive income gap that is impeding our economic recovery. BV Chris Taylor represents the 76th Assembly District which includes parts of Dane County. She can be reached at (608) 266-5342.
in Wisconsin By Representative Dale Kooyenga (R-Brookfield)
T
he manufacturing and agriculture credit (MAC), passed in the 2011-13 state budget, should be renamed the “gamechanger credit.” When State Senator Glenn Grothman and I introduced this tax policy change we believed this credit could absorb and replace several outdated tax credits that were not being used to drive economic growth. We knew the implementation of this credit would complement our state’s already strong and educated workforce to produce more economic opportunity. Now in 2014, the question is how big of an impact will the credit have on Wisconsin manufacturing?
The MAC is constructed to phase-in over four years. For taxable years beginning after December 31, 2012 and before January 1, 2014 the credit can offset 1.875 percent of taxable income derived from manufacturing or agricultural activities. The next year the credit will equal 3.75 percent, the following year in 2015 the credit will be 5.526 percent and finally, after 2015 the credit will equal 7.5 percent. Keep in mind, Wisconsin’s highest individual income tax rate is 7.65 percent and the corporate tax rate for the state is 7.9 percent. For the manufacturing and agricultural firms that produce their products in Wisconsin, the effective tax rate will be almost zero. In 2016 when the credit is fully phased-in, Wisconsin’s tax code will be more favorable towards manufacturing than the state of Texas’ tax code! Although Texas does not have an income or corporate tax, manufacturing companies in Texas are subject to the overly complex “margin” tax. This tax does not exist in Wisconsin. The most recent information available from the U.S. Census Bureau indicates Texas and Wisconsin have similar property tax burdens. However, property taxes in Texas are levied on manufacturing equipment and machinery. This is in stark contrast to Wisconsin where manufacturing equipment and machinery is exempt from the state’s property tax. The bottom line is Wisconsin’s tax burden will be noticeably less than a similar manufacturing operation in Texas.
and the GOP Legislature succeeded in their initial reforms: eliminated 17 tax credits, reduced the number of individual income tax brackets from five to four, constrained the expansion of property taxes and lowered all individual income tax rates. My colleagues and I will continue to pursue policies to ensure Wisconsin’s tax burden declines. I believe the best strategy going forward should be to eliminate classes of taxes that complicate the tax code (i.e. alternative minimum tax). The alternative minimum tax leads to higher compliance costs for taxpayers and the Wisconsin Department of Revenue. Another example is in the previous budget – the 201315 biennium budget eliminated the estate tax and the economic development surcharge tax on limited liability corporations (LLCs) and S-Corporations.
The state Legislature should continue to simplify the tax code and accompany this with broad-based tax relief. Wherever possible, the state tax code should mirror the federal tax code to promote simplicity and reduce compliance costs. A great example of the Legislature’s successful efforts on this topic includes the elimination of Wisconsin’s depreciation schedules and the adoption of the federal standards. It is important to remember why the Governor and the Legislature were able to cut taxes. The policies enacted in Governor Walker’s 2011-13 budget provided financial stability and moved the state towards greater budget solvency. Maintaining Wisconsin’s budget solvency will translate to more tax cuts, which in return will keep Wisconsin’s businesses profitable and ensure continued investment, job creation and the opportunity for upward mobility for all Wisconsin workers. BV Dale Kooyenga represents the 14th Assembly District which includes parts of Waukesha County. He can be reached at (608) 266-9180.
Wisconsin’s overall tax burden is still too high. Governor Walker
Wisconsin Business Voice
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CHAMBER CORNER Marinette/Menominee IMPACT Anti-Opiate Task Force
The Bonds of a Community By Jacqueline M. Boudreau
I
n Spring 2013, the Marinette Menominee Area Chamber of Commerce and City of Marinette Mayor’s office organized a fact-finding meeting with Wisconsin State officials on the issue of the rising use of heroin and opiates in the community. This meeting came about after sharing concerns with Mary Ann Lippert, Wisconsin Department of Administration, about the hardships heroin/opiate abuse was having on our local economy. With a fastgrowing economy and limited workforce this epidemic was rapidly shrinking the area’s labor pool and exhausting community resources. Ms. Lippert reached out to Louis Oppor, Wisconsin Substance Abuse Services, Bureau of Prevention Treatment and Recovery with our message. After several telephone conversations with local business and government leaders, Mr. Oppor and his team traveled to Marinette to learn first-hand how this issue was affecting our cities, what counter measures were being utilized and where state and national models and networks might be of use to us.
heroin/opiate abuse. We discovered many of the community organizations, while engaged in pro-active measures of their own, were not aware of or readily informed of the efforts of others. What was needed was an avenue of communication that would enable us to share information on this issue.
Under the Chamber’s leadership, subsequent meetings were held and through collaboration with local, county and state advisors, the IMPACT Anti-Opiate Task Force was launched. The committee encompassed community leaders in five pillar areas of prevention, treatment, law enforcement, harm reduction and business. It was determined the mission of our task force would be to research, advise, coordinate and evaluate best practices in local opiate abuse programs and projects, thereby helping to develop, strengthen and support them. Areas of effective programming and inefficiencies in addressing opiate abuse in our region were identified through conversation and an asset mapping exercise. Connections and alliances began “This epidemic was rapidly forming around the derived information Through this fact-finding platform shrinking the area’s labor pool and resulting in positive actions such as the it became clear many of our area’s exhausting community resources.” sharing of workplace policies through local key stakeholders were already deep human resources groups, the purchase of in the throes of battling this growing new law enforcement equipment, added support problem. At the meeting individuals from for existing community programs/projects and State legislation. government, law enforcement, health and human services, health care and the business community all cited areas of concerns and their As the task force continued to meet, areas of focus for each pillar current efforts in curtailing the problems arising from the increase in group began emerging and direction for each became more defined. For example, the role of business will be to look for support distributing informational literature for employers and employees, developing and sharing drug testing policies, best practices models, educational initiatives such as travel training, gap funding considerations, and second chance programs. Each pillar, or workgroup, is evolving in their own respective area of expertise. In order to continue the connectivity amongst the groups, we are currently exploring the possibility of hiring a task force coordinator. We are making progress and feel optimistic about the future as our efforts continue. The IMPACT Anti-Opiate Task Force, the Chamber and our members are committed to preserving a high quality of life and economic opportunities for all the citizens of the Marinette Menominee area. BV Jacqueline M. Boudreau, IOM is Executive Director/CEO of the Marinette Menominee Area Chamber of Commerce. Follow WCCE @WIChamberExecs
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