MARCH 2018 March 12th Sales Roundtable
Open Format! Bring Your Toughest Sales Challenges!
March 16th Monthly Breakfast Meeting!
Paul Farrow Waukesha County Executive
Inside This Issue:
BARTLETT: TAX CHANGES ARE MORE THAN MEET THE EYE
KITTLE: REPUBLICAN LAWMAKER PROPOSING $200 MILLION TAX CUT BRINGING BACK WALKER PLAN
KEATING: SMALL BUSINESS POLICY INDEX FOR 2018
At AT&T, we know that making connections is critical to success. In Wisconsin and across the nation, we link businesses with their customers and the world through our wireless network with access to the nation’s largest Wi-fi network. It’s just another way we help our customers stay connected. AT&T is proud to support the Independent Business Association of Wisconsin.
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Executive Director Steve Kohlmann President Dan Hansen Secretary Charles Fry Baird Treasurer Tony Palmen Sikich Directors Jim Leef ITU AbsorbTech Ann Barry Hanneman Von Briesen Law Oﬃce John Weber Hypneumat Jeﬀ Hoﬀman Boerke Co. Lisa Mauer Rickert Industries Tom Boelkow BSI Design, Build, Furnish Robert Gross Gross Automation Scott Seroka Seroka Brand Development Tom Parks Annex Wealth Management Jake Hansen Jacsten Holding Scott Hirschfeld CTaccess
IBAW Mission: To advance business prosperity through insightful programming, executive networking and member-driven public policy and advocacy.
Sales Roundtable Monday, March 12th, 2017 | Time: 7:30 a.m. - 9:00 a.m. Location: CTaccess, 740 Pilgrim Parkway, Elm Grove
Back by popular demand! This month we’ll once again host the ever popular Open Format. This is your chance to bring your sales, marketing and branding challenges and get the advise and suggestions from a group of seasoned professionals.
The IBAW Sales Roundtable is a FREE event open only to IBAW members.
Register at IBAW.com
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Friday, March 16th Waukesha County Executive Paul Farrow Paul Farrow Waukesha County Executive Waukesha County is a powerhouse county that continues to show its economic muscle. However, like many counties in Wisconsin it does face challenges. How does it overcome those challenges? This month we'll hear from Waukesha County Executive Paul Farrow on the success of Waukesha County Center for growth, regional opportunities that are occurring and some behind the scenes conversations surrounding workforce issues. We'll also hear from Mr. Farrow on business growth strategy and strategic planning that is making a strong county even stronger. -----------------------------------In 2017, Farrow served as a contributing member for two of the White House’s 2017 Infrastructure Summits in Washington, D.C., along with dozens of other state and local officials from across the country. As the newest co-chair of the Milwaukee 7 Regional Economic Development Partnership (M7) Economic Advisory Council, Paul provides strategic direction for international economic development in the region. The M7 has leveraged regional partnerships to bring business such as Foxconn, HARIBO, Milwaukee Tool, and Colbert Packaging to Southeast Wisconsin. As a member of the Governor’s Council on Workforce Investment, Paul leverages local partnerships to ensure Waukesha County has a robust pipeline to support private-sector job creators. Mr. Farrow recently led a group of private and public sector partners in establishing the Waukesha County Center for Growth, an economic development organization that serves as a one-stop shop for new and expanding businesses in Waukesha County. Paul is also a current member of the Presidential Advisory Council, Carroll U.; Waukesha County Advisory Council for Junior Achievement, Waukesha Co. Business Alliance; Waukesha Co. Republican Party, World Muskie Hunt Board (past pres.). Former member: National Assn. of Home Inspectors; State Fair Park Board.
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IBAW Public Policy Committee Hosts Legislative Roundtable in Brookfield
On the afternoon of Thursday, January 25th, the IBAW Public Policy Committee hosted a Legislative Roundtable featuring Senator Lena Taylor, Senator Chris Kapenga, Representative Rob Hutton and Representative Dale Kooyenga, held at the offices of Sikich in Brookfield. Welfare reform, excessive business regulations and the ever increasing shortage of a competent workforce were the main concerns of business owners. Additionally, the topic of the present state of the city of Milwaukee - crime, unemployment and the state of Milwaukee Public Schools, became quite heated at times. Look for more Roundtables discussions by the Public Policy Committee in the future.
Thoughts On Parkland Steve Kohlmann, IBAW Executive Director A few years back the IBAW held an afternoon clinic on work place violence. This workshop was presented by a Special Agent for the FBI and covered not only what you should do if an active shooting takes place but what warning signs to look for. In this workshop the agent showed a video similar to this one on what to do in the case of a shooting (watch here). It’s sobering stuff. But now we have another mass shooting on our hands and it’s a bad one. This time in Parkland, Florida where a school was shot up and 17 students and adults were massacred at the hands of yet another nut job with some type of ax to grind. We’ve seen it before and unfortunately we’ll see it again. Some are going to blame it on the gun while others talk about mental health. In this particular situation, it looks there were plenty of warning signs and notifications to law enforcement that trouble was brewing, but those warnings went unanswered and a lot of people are dead. While the phrase “See something, say something,” is a great policy, law enforcement has to be pro active and follow it up with “Do something.” At times like this there are calls for more gun control. I’m a pro second amendment guy so I’m not going to even touch the topic of banning guns. If you care to debate this just let me know, I’m happy to do so but you’ll have to get in line. There’s more to this issue than just the gun itself. As an example, in my subdivision there’s no shortage of gun owners but nobody’s shooting up my neighborhood. If we’re becoming a more violent, less tolerant nation because of guns as many media outlets claim, they don’t have to look very far as to why. For example, right after the evening news report on the Parkland shooting, the network cut to commercial. The very next thing on my screen was the promotion for their new show Good Girls. It’s a show that has three women turning to a life of crime (trailer here) brandishing guns and holding up a supermarket threatening everyone in the store. Great transition by NBC. Of course kids (mainly young males) love video games and there’s no shortage of violent games. Take the game Gran Theft Auto. The object of the game is to steal cars and money and to kill people. Here’s a link to the video game which gives you a sample what it’s like to play the game. Fair warning, it’s filled with violence and foul language. This is what our young people are exposed to for recreation? And we ask ourselves how can people be so cold and insensitive they would shoot up a school? Back in my day the most violent video game there was was Pac-Man. Unfortunately, we come a long way. There’s no simple answer to the shooting at Parkland. Mass shootings and the wall to wall media coverage that follows give individuals that are on the edge a sick, twisted, nationwide notoriety they are probably craving. The media and others love to talk about America’s gun violence culture. But the media - be it network TV, the video game industry, or Hollywood, are participants who add to it - whether they believe so or not.
Hollywood makes billions of dollars on violent movies.
Video game Gran Theft Auto’s mission is simple: Kill and create mayhem.
Anti gun advocate Liam Neeson makes a living in movies with gun violence.
NBC’s new show, Good Girls; a life of crime is exciting...and profitable.
Tax Changes Are More Than Meet the Eye Jeffrey A. Bartlett, Managing Director of Finance, vonBriesenOneSource
The Tax Cuts and Jobs Act (the Act) signed into law on December 22, 2017 makes key changes that impact important business decisions made by company owners. • The federal corporate tax rate is cut from 35% to 21%. • The top federal tax rate for pass-through entities (S-Corps, LLCs and sole proprietorships) is cut from 39.6% to 37%. • Pass-through entities are allowed a deduction equal to 20% of qualified business income subject to certain limits. • Capital expenditures are now 100% expensed against taxes in the year they are incurred. • Interest is deductible up to 30% of operating income plus depreciation and amortization. Most of the news is good for companies that are engaged in production activities and we offer the following additional points to consider as part of your business planning for 2018 and beyond.
Corporate Tax Cuts Are What They Appear To Be The federal corporate tax rate reduction from 35% to 21% is permanent. The central intent of the tax law changes was to make U.S. corporations more competitive on a world stage and to encourage more domestic production activity. The Act accomplishes this by putting U.S. corporate tax rates at levels competitive with those of other countries. The 21% tax rate is permanent absent new legislation.
Pass-Through Cuts May Not Be What They Seem First, the top federal individual rate cut from 39.6% to 37% is temporary and expires December 31, 2025. The 20% deduction for qualified business income, that may not be fully available in some situations, reduces the 37% tax rate to 29.6%, and is also temporary. It expires in 2025. For the reduction to be available beyond 2025, Congress must pass and the President must sign (vetoes are rarely overridden) an extension. We simply do not know what the economic or political conditions will be when changes are considered. Without an extension, in 2026 the maximum individual rate will revert back to 39.6%, and the 20% qualified business income deduction goes away. In addition, the 20% qualified business income deduction is means-tested. If a taxpayer is married and has a taxable income under $315,000 (indexed for inflation) then the 20% deduction (driven solely from qualified business income) is intact. If one’s income is higher than $315,000 but less than $415,000 the deduction can be reduced or disappear entirely based upon the level of the company’s total W-2 wages and depreciable assets. In each case, the higher the better. If one’s income is greater than $415,000 then the deduction cannot exceed the greater of: (i) 50% of total company wages; or (ii) 25% of total company wages plus 2.5% of the original cost of tangible property owned by the taxpayer. Obviously, there is some complexity in calculating the amount of the deduction and without it, the tax rate could be as high as 37%. In a business sale, the chances are higher that the wage and asset tests will significantly limit the deduction subjecting the seller to the higher tax rates for ordinary income portions of sale proceeds not taxed as capital gains. In any case, the benefits of the 20% business income deduction for sole proprietorships and pass-throughs are not as clear cut as the permanent corporate tax rate reduction.
Now is a Good Time to be Expanding Your Business Much of the tax changes are pro-growth measures targeting manufacturers and producers. The law specifically rewards companies that engage in expansion by permitting a 100% write-off of capital expenditures in the year of purchase. The 100% of capital expenditures write-off applies to tangible property with a recovery period of 20 years or less, software (if not acquired in a business purchase transaction), and non-residential leasehold improvements.
By deducting 100% of the cost of capital expenditures in the year incurred from 2018 through 2022, the U.S. government is encouraging businesses to invest now. You may want to get your orders in soon as suppliers and construction firms may struggle to handle the anticipated influx of new spending encouraged by the tax changes.
Now is A Good Time to be a Business Buyer As a buyer, there are several incentives for you to act quickly with your acquisition efforts. 1) 100% of all capital expenditures can be written off in the year they are incurred through 2022. The write-off steps down by 20% per year thereafter. For many buyers, the effect of this rule is that no income taxes will be paid for several years after the purchase. Whether your business is a corporation or pass-through, you benefit from reduced taxes and can use the increased cash flow to pay more for the acquired business, make additional capital expenditures or return money to your shareholders. 2) Interest deductibility is more favorable until January 1, 2022 because a buyer can deduct interest expense up to 30% of operating income plus depreciation and amortization (EBITDA). In 2022 and beyond, the deduction is reduced to 30% of operating income after deducting depreciation and amortization (EBIT). Given the enhanced depreciation rules, interest deductibility will be significantly reduced for many businesses after 2021. Interest deductions not available due to the 30% limitation may be carried forward to future years when they may not be deductible. 3) Lower tax rates enable buyers to have more annual cash flow from the companies they buy.
Now is A Good Time to be a Business Seller 1) Buyers will have more after tax cash flow in 2018 and beyond than in previous years. This is especially true for the next four years as the 30% interest deduction limitation is not effective until 2022. This means that purchase prices offered by buyers will increase noticeably, especially in the next few years. 2) Business confidence is high, credit conditions are favorable and private equity and mezzanine debt funds have a lot of “dry powder” they need to deploy. With more buyers taking advantage of the new tax rules, it is a seller’s market more than ever. 3) As a seller, you will most likely be able to keep more sale proceeds than you would if you sold in 2017. 4) Businesses are currently being sold at multiples that are high by historic measures. One of the reasons for this is that interest rates are at historic lows. When rates increase, and they will, valuation multiples will soften and fall from current levels. For sellers, there is a window of opportunity now: low interest rates + lower taxes = higher prices.
Consider Being a C Corporation if you Plan to Own the Business for 10 Years or More We see a renaissance for the C corporation form of business ownership. In most cases, there is still “double” taxation applicable to business’ income taxed at the corporate level and then passed to shareholders. On its surface, this seems more onerous than the single level tax applicable to pass-through companies. This “double tax” result may be superior to the single level tax result applicable to pass-through in many situations. This is especially true for those owners that plan to keep their companies for a long time. Here are some things to consider: 1) There is more certainty with the lower C corporation tax rate given that it’s a permanent cut from 35% to 21% versus the temporary reduction in personal rates (until 2026) and the 20% qualified business income deduction available to passthrough entities. It is often asserted that the 20% business income deduction results in a 29.6% rate to pass-through entities. This is a result of reducing the highest individual rate by 20% (37% x 20% = 7.4%; 37% - 7.4% = 29.6%). While the math is correct, the assumption that all pass-through business will get a flat 20% deduction from their taxable income is wrong in many situations. First, the 20% deduction does not apply to interest or investment income. More important is that a sale of a business in an asset sale will not benefit from the 20% deduction for any capital gain, nor will it benefit when income from the sale of other assets exceeds the wage/property limitations that apply to the 20% deduction.
2) With a C corporation, cash accumulates at a faster rate (79% of pre-tax cash flow) than for a pass-through business where a maximum of 70.4% of pre-tax cash flow remains after taxes are paid. These accumulation differences can be significant, particularly if the 20% deduction is limited for pass-throughs. 3) C corporations allow state taxes to be deducted when calculating federal taxes. With pass-throughs this is no longer the case. This means C corporation’s effectively pay less state tax than pass-throughs. 4) For C corporation Qualified Small Businesses per IRS code 1202 (generally businesses with less than $50 million of assets at the time of stock issuance) 100% of capital gains from stock held more than five years by an individual are excluded from federal taxes up to a limit of $10 million or ten times the original investment.
In conclusion, the Act represents a significant improvement to the business tax outlook for C corporations and pass-through entities alike. It is an impact that will stimulate business activity in 2018 and beyond. The next three years may also be the best time to buy or sell a business. *** Jeffrey A. Bartlett is the Managing Director of Finance for vonBriesenOneSource. For more information contact Jeff at (262) 923-8676 or email@example.com. vonBriesenOneSource is a group of von Briesen lawyers and non-lawyer professionals working in partnership to provide advice and representation to private businesses and assist in the creation of wealth. vonBriesenOneSource provides single-source transaction services, leveraging finance, negotiation and legal skills to serve clients in mergers, acquisitions, restructurings, tax planning, and ESOPs.
President's Circle Leadership Group Friday, February 2nd, 2017 | Time: 6:00 pm - 9:30 pm Location: Dale Carnegie Offices, 6737 W. Washington, Suite 3105, West Allis As the CEO, President, or Owner you are asked to produce more results with fewer resources, meet and exceed competition, innovate and motivate. This creates very difficult teams and leadership challenges. Leaders must encourage teamwork, bottom-up idea generation, alignment, loyalty and above all commitment.
President’s Circle IBAW / DALE CARNEGIE PRESIDENTS CIRCLE A LEADERSHIP PROGRAM FOR CEOs, PRESIDENTS, AND BUSINESS OWNERS
As the CEO, President, or Owner you are asked to produce more results with fewer resources, meet and exceed competition, innovate and motivate. This creates very difficult teams and leadership challenges. Leaders must encourage teamwork, bottom-up idea generation, alignment, loyalty and above all commitment. Rather than direct and dictate, leaders must inspire and motivate!
The Presidents Circle: The IBAW and Dale Carnegie Training have developed an exclusive Leadership program for IBAW members only. The Presidents Circle combines peer group engagement and highly targeted executive Dale Carnegie Training among peers to help you achieve significant results. These results will be achieved by providing insights, peer challenges, and developing leadership skills which are aligned with your organization and which will help drive agendas. By combining corporate mission, vision and values with our unique methodology employees will begin supporting a world they helped create.Ultimately, the only sustainable competitive advantage is the innovation, motivation, and creativity of the employees of an organization. Establishing a strong leadership culture provides the environment where innovation and creativity can flourish.
Program Specifics: • • • •
Meetings with other IBAW CEOs/Presidents/Business Owners 10 monthly meetings Dale Carnegie Executive Leadership Training workshop each session. Round Table Issues Discussed and Resolved
• • •
Guided Yearly planning Accountability among peers. Business Results
The President’s Circle will help you achieve results by: • • •
Providing training among peers Creating and sustaining change initiatives Ensure continuous improvement and bottom-line impact
• • • • •
Align the organization behind a common vision Develop a habit of fact-based decision making at every level. Strengthen and implement strategic planning Create a value based culture to ensure loyalty Build energy and trust up and down the organization to insure customer loyalty.
Program Leader: Steve Bobowski
“Knowledge isn’t power until it is applied.” -Dale Carnegie
Commitments: • Attend meetings • No cost for meetings, a benefit of IBAW membership •
Referrals or 3 enrollments
This program is now forming and is limited in the number which can attend. For more information, contact Program Leader Steve Bobowski by clicking here.
Are Unique Value Propositions Overrated? Scott Seroka, Certified Brand Consultant
For far too long, marketers in the manufacturing industry have been hung up on identifying their “unique” value propositions, believing that if they don’t own one, they wouldn’t be equipped to confront the competition head on and win new customers. Hold that thought. The urgency and anxiety over defining one’s Unique Value Proposition (UVP) has been on the decline as many manufacturers are discovering that the process of unearthing one that is truly unique is not always achievable. And even when it is, nearly all UVPs are susceptible to one or more of the following issues or risks: 1
If the UVP fails to align with what customers value the most, it won’t be relevant.
Some UVPs, no matter how compelling are at risk of losing their luster as soon as a competitor launches a superior product or service.
The pressure to own a UVP forces some manufacturers to create or define one that orbits around customer service or superior product quality; neither of which is unique due to its vagueness and nearly identical claims made by competitors.
Take the case of a manufacturer boasting the UVP that its new gear drive has the lowest cost of ownership compared to its rivals. Although a seemingly strong UVP, its relevance and significance in the eyes of customers are based on a number of variables: 1
The value of the UVP is directly proportionate to how much money the customer will supposedly save when using the product. If the cost of ownership is four percent less on average than rivaling products, the value proposition is a yawner. If the cost of ownership is twenty percent less, prospective customers will likely give the manufacturer’s product serious consideration.
If the cost of ownership of the gear drive does in fact happen to be substantially less than rival products, it must also closely match the performance of competitive products in terms of traits such as uptime, efficiency, reliability, warranty, value, etc. If it falls too short in any of these other key areas, the UVP may be rendered meaningless.
Most importantly, the unique value proposition will only be relevant if the manufacturer has a strong reputation, stands behind its products and is quick to service.
So, are UVPs overrated? Absolutely not. Owning one or more plays an integral role in attracting new customers and retaining existing ones. A UVP provides a compelling answer the question, “Why should I buy from you?” However, if you struggle to identify or define a value proposition that is truly unique, you have several options to help build a compelling brand that attracts customers in the spirit of winning business away from competitors. 1
Group together your top three or four value propositions (which other competitors may also claim) and focus on how you can enhance each to the point where they far exceed customer expectations. This will require some creative thinking, brainstorming and even speaking with some of your customers to fuel ideas.
Think of positive and memorable experiences you’ve had with companies in your personal or business life, and how you may apply similar experiences to customers in your business. (e.g. Ritz Carlton, Zappos, Amazon, etc.)
Build a culture where people love to come to work every day inspired to perform at their best. Delivering exceptional service and manufacturing great products require it. If you’re interested in building a continuous improvement and top-performance culture at your company, contact us.
Know what your customers want and give it to them. If you’re not sure, a simple survey will provide you with great ideas. Also, think in terms of improving delivery times, flexible shipment options and payment terms, being fanatically responsive and attentive, offering additional ancillary services, etc.
Focus on developing and nurturing your personal brand, and those of everyone at your company who touches customers. Oftentimes, sales are made simply because people at a company have a reputation of being trustworthy, dependable, generous, authentic and genuine.
If you devote yourself to focusing on these areas for the next 6-12 months, you’ll be surprised at how much stronger of a competitor you can become, and how many more customer relationships you will win. Owning a "unique" value proposition is only one component of the equation. If you don’t have one today, don’t sweat it, and start to focus on everything else that matters. 6
Join us for a complimentary employment law briefing. APPLETON – TUESDAY, APRIL 3, 2018
Keeping up with changing laws is a full-time job, and you’ve already got one.
MADISON – THURSDAY, APRIL 5, 2018
EMPLOYERS AND LAWYERS, WORKING TOGETHER
CopperLeaf Boutique Hotel & Spa 8:00 a.m. – 11:00 a.m. 300 West College Avenue Appleton, WI 54911 (920) 749-0303 The Edgewater Hotel 1:30 p.m. – 4:30 p.m. 1001 Wisconsin Place Madison, WI 53703 (608) 535-8200
RACINE – TUESDAY, APRIL 10, 2018 Delta Hotels Racine 8:00 a.m. – 11:00 a.m. 7111 Washington Avenue Highway 20 Racine, WI 53406 (262) 886-6100
Ogletree Deakins is one of the largest labor and employment law firms representing management in all types of employmentrelated legal matters. The firm has more than 850 lawyers located in 52 offices across the United States and in Europe, Canada, and Mexico.
BROOKFIELD – WEDNESDAY, APRIL 11, 2018 Embassy Suites by Hilton 8:00 a.m. – 11:00 a.m. 1200 South Moorland Road Brookfield, WI 53005 (262) 782-2900
Please email MILEvents@ogletree.com to register.
1243 North 10th Street Suite 200 Milwaukee, WI 53205 (414) 239-6400
Small Business Policy Index 2018: Nineteen States Making the Right Tax Policy Moves for Entrepreneurs Ray Keating, Chief Economist, SBE Council, Washington D.C.
The federal government’s policy decisions during and after the recession that began in late 2007 and ran to mid-2009 turned out to be a model of what not to do. Policymaking under the Obama administration and Congress featured massive increases in government regulation, spending and intrusiveness, along with two major tax increases. Why was anyone surprised that the Great Recession was followed by one of the worst periods of economic recovery and expansion on record? It’s only over the past year, that we’ve seen policies generally shift in a positive direction, namely, via regulatory restraint and some relief, and a tax measure providing some real relief for businesses. At the state and local level, however, there have been some states that have made positive moves on the policy front, enhancing their state’s competitiveness and boosting the environment for entrepreneurship and investment. The just-published “Small Business Policy Index 2018: Ranking the States on Policy Measures and Costs Impacting Entrepreneurship and Small Business Growth” ranks the 50 states according to 55 different policy measures – 27 are taxes or tax related, 20 relate to rules and regulations, 5 focus on government spending and debt issues, and the 3 remaining gauge the effectiveness of important government undertakings. The best states on this year’s Index are: 1) Nevada, 2) Texas, 3) South Dakota, 4) Wyoming, 5) Florida, 6) Arizona, 7) Washington, 8) Indiana, 9) Ohio, and 10) Utah. Kudos to policymakers in those states for creating a favorable policy environment for small business relative to the other states. (View the interactive results and summary of Index findings here.)
States Making the Right Tax Policy Moves for Entrepreneurs and Small Business But let’s also take a look at the states that have moved in a positive direction on a few key policy measures – the top state personal income, individual capital gains, corporate income and corporate capital gains tax rates – since the end of the recession (comparing data from the 2009 edition of the Index with the current 2018 edition). Each state’s overall ranking on the Index is provided in parentheses. Arizona (#6) reduced its individual capital gains tax from 4.54 percent to 3.405 percent. In addition, the state’s corporate income and capital gains tax rates was cut from 6.968 percent to 4.9 percent. Arkansas (#37) implemented some small reductions in its personal income tax (from 7 percent to 6.9 percent) and individual capital gains tax (from 4.9 percent to 4.14 percent). Delaware (#34) implemented a small reduction in its personal income and individual capital gains tax rates, from 6.95 percent to 6.6 percent. Idaho (#26) implemented tiny reductions in its personal income and individual capital gains tax rates (from 7.8 percent to 7.4 percent), and in its corporate income and capital gains tax rates (from 7.6 percent to 7.4 percent). Indiana (#8) reduced its personal income and individual capital gains tax rates form 3.4 percent to 3.23 percent, and its corporate income and capital gains tax rates from 8.5 percent to 6 percent. Kansas (#24) reduced its personal income and individual capital gains tax rates from 6.45 percent to 5.2 percent, and its corporate income and capital gains rates slightly from 7.05 percent to 7 percent. (However, Kansas recently raised its individual income and capital gains taxes – repealing part of the previous tax cuts.) Louisiana’s (#27) personal income tax rate was reduced slightly (from 3.9 percent to 3.78 percent), as was its individual capital gains tax (from 5.1 percent to 4.8 percent).
Maine (#41) reduced its individual income and capital gains tax rates from 8.5 percent to 7.15 percent. Maryland (#39) cut its individual income and capital gains tax rates from 6.25 percent to 5.75 percent. Massachusetts (#38) reduced its individual income and capital gains tax rates slightly from 5.3 percent to 5.1 percent, and its corporate income and capital gains tax rates was reduced from 9.5 percent to 8 percent. New Hampshire (#30) reduced its corporate income and capital gains rates slightly from 8.5 percent to 8.2 percent. New Mexico (#23) cut its corporate income and capital gains tax rates from 7.6 percent to 5.9 percent. New York (#47) implemented a tiny reduction in its individual income and capital gains tax rates (from 8.97 percent to 8.82 percent). North Carolina (#17) stands out, as it reduced its individual income and capital gains tax rates from 7.983 percent to 5.499 percent, and its corporate income and capital gains tax rates from 7.107 percent to 3 percent. North Dakota (#22) also ranks as a stand out, as it reduced its personal income tax rate from 4.86 percent to 2.9 percent; its individual capital gains tax rate from 4.86 percent to 1.74 percent; and its corporate income and capital gains tax rates from 6.5 percent to 4.3 percent. Ohio (#9) also is worth noting, as it reduced its personal income and individual capital gains tax rates from 5.925 percent to 4.997 percent, while eliminating its corporate income and capital taxes (the 1.9 rate in 2009 had fallen from previous years during a phase out). Oklahoma (#21) reduced its individual income and capital gains tax rates from 6.5 percent to 6 percent. Rhode Island (#40) reduced its individual income and capital gains tax rates from 6.5 percent to 5.99 percent; and its corporate income and capital gains tax rates from 9 percent to 7 percent. Vermont (#45) slightly cut its personal income tax rate from 9.4 percent to 8.95 percent, and its individual capital gains tax rate from 9.4 percent to 5.37 percent. As we look ahead, hopefully we’ll see increased tax and regulatory relief in these states and at the federal level, as well as such positive measures spreading to the other 31 states. As is made clear by SBE Council’s “Small Business Policy Index 2018: Ranking the States on Policy Measures and Costs Impacting Entrepreneurship and Small Business Growth,” tax and regulatory relief make real differences in terms of boosting entrepreneurship, small business, investment, and economic performance. View the Interactive Map and summary of Index results here. _________ Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.
Wisconsin Rank: #28
SBPI 2018 Score: 86.553
Wisconsin ranks 28th in terms of its policy climate for entrepreneurship and small business growth among the 50 states. Key Positives: Among key positives, Wisconsin has fairly low consumption-based taxes; no death tax; no added minimum wage burden; and is a right-towork state.
Key Negatives: Wisconsin has fairly high personal income, corporate income, corporate capital gains, property and unemployment taxes; imposes costly energy regulations; and has high workers’ compensation costs.
Republican Lawmaker Proposing $200 Million Tax Cut, Bringing Back Walker Plan Matt Kittle, The MacIver Institute
Republicans are working on a $200 million tax cut plan – the same income-tax relief package scrapped from Gov. Scott Walker’s budget proposal last year. “The way to think about the whole thing is there were changes at the federal level, and we have a buffet in front of us on what do we want to adopt at the state level,” Kooyenga said. The plan, proposed by state Rep. Dale Kooyenga (R-Brookfield) would be mostly paid for by a “buffet approach” to conforming with the federal tax reform law approved late last year. “The way to think about the whole thing is there were changes at the federal level, and we have a buffet in front of us on what do we want to adopt at the state level,” Kooyenga told MacIver News Service Friday. Walker’s plan included cutting Wisconsin’s two lowest income tax rates slightly – by a tenth of a percentage point – to 3.9 percent and 5.74 percent. A median income family of four earning about $86,000 annually would save about $139 over the biennium. The Legislature jettisoned Walker’s proposal, which would have saved taxpayers a combined $203 million over two years. Kooyenga’s plan basically picks up Walker’s. Kooyenga and Sen. Howard Marklein (R-Spring Green), both CPAs, have been working on a tax conformity package that would line up Wisconsin’s tax code with the many changes made in the federal tax reform law. Doing so will create less confusion for filers and the government, the lawmakers say. But arriving at the tax cut will take a little picking and choosing on the conformity buffet. The plan calls for adopting all of the federal tax changes, with the exception of four. While popular, the state cannot afford adding the federal deduction for pass-through business income, Kooyenga said. Not conforming with the federal change will pump in $242.5 million more in revenue this year and $161.8 million next year than would have been the case had the state conformed to the federal change, according to a Legislative Fiscal Bureau memo. Kooyenga’s plan also would not include adoption of the federal bonus deduction change, which would mean $241.1 million more for the state coffers this year and $110 million in 2019. Correspondingly, the tax revenue gain for the state is a tax loss for businesses, which would experience a tax cut if the state conforms to the federal change. On the flip side, filers would save $78 million in the first year, $69 million in the next, by Wisconsin not conforming to the federal change limiting interest deductions to 30 percent of adjusted taxable income. It’s a highly unpopular measure in the federal tax reform package, Kooyenga said. Kooyenga gets to a net $90 million or so in revenue each year after factoring in revenue gained and lost in conforming – and not conforming in certain instances – to the federal tax changes. It’s admittedly complicated, but at the end of the day the state is estimated to take a combined $180 million more in tax revenue, which Republicans would then send back to taxpayers in the form of tax cuts.
“If you were a Democrat, you would take that money and spend it on a bunch of stupid stuff…We say, why not take that $90 million and adopt the governor’s tax cut idea that we ditched,” Kooyenga said. “If you were a Democrat, you would take that money and spend it on a bunch of stupid stuff,” the lawmaker said. “We say, why not take that $90 million and adopt the governor’s tax cut idea that we ditched.” The state would chip in an additional $10 million per year to get to the $200 million tax cut number over the biennium. And the reduction would remain in place – at the will of the Legislature. Kooyenga said the tax package, as it stands now, would be combined with Walker’s proposed child tax credit – rebate checks that would be sent out later this year – and a proposed sales tax holiday in August. Walker proposes a $100-per-child tax credit for parents with children under 18 who live at home. A spokeswoman from the governor’s office said the administration is reviewing the plan. “We thank these legislators for developing the proposal,” said Walker spokeswoman Amy Hasenberg. Above all, Kooyenga said, state tax conformity with the federal changes is critical. If the state doesn’t act, Wisconsin filers will have to deal with twice the tax requirements, creating confusion and additional preparation costs. Some of the existing tax breaks may seem absurd to the average taxpayer. For instance, one of the federal changes ends the practice of taxpayers being able to write off things like the cost of Milwaukee Bucks tickets. Beyond the question of tax breaks for watching NBA games, is paperwork problems created if the state doesn’t adopt the federal change. Of course, the same complexity issues arguably will arise in the pass-through and Bonus Depreciation changes, if not adopted by the state. The federal tax reform law allows taxpayers to use investments in Edvest College Savings plans for K-12 education, in parental choice programs, or with other education-related expenses. Wisconsin taxpayers would miss out on that benefit if the state doesn’t conform to the federal change. “This is really necessary maintenance,” Kooyenga said Listen here to Kooyenga’s interview Friday with MacIver News Service on the Dan O’Donnell Show on NewsTalk 1130 WISN.
: S E L A S
2nd Monday of the Month SALES ROUNDTABLE 7:30 am - 9:00 am Free & open to IBAW members only Register at IBAW.com
Sales can be a tough road of ups, downs, potholes and a few bumps. But it can also be fast paced, exhilarating and rewarding. If you’re in sales, you know there are things only other sales people understand; the thrill of scoring the big account, the uncertainty of “let me think about that.”, the frustration of phone calls or emails that don’t get returned. IBAW’s Sales Roundtable is a support and knowledge resource for sales professionals, business owners, marketing and branding experts who are charged with driving sales. Join us to discuss the strategy, tactics, inspiration, and motivation to increase sales. It’s a FREE benefit of your membership! Who should attend: • Sales professionals of any level. • Business owners • Sales Managers • Marketing & P.R. Professionals
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4th Annual Sporting Clay Shoot! Join the IBAW for an afternoon of fun and fellowship at our 4rd Annual Sporting Clay Shoot at the Waukesha Gun Club. Come by yourself or bring your business associates. Gather up a team of 4 and there's special sponsorship opportunities available. Contact Steve Kohlmann for details. Your fee includes: - Shooting time & shells - Big lunch buffet - 2 drink tickets per person - Special networking afterparty - Door Prize Drawing Ticket Registration is now open! For more information or to register, click here.
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IBAW is on an upward trend of growth and we are actively recruiting businesses just like yours to join! When you join IBAW your entire company is a member - anyone from your team can attend our fine educational and networking events. Help yourself, your business AND your Team Members. Come on in...weâ€™re open for business!
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2018 Membership Committee
Jake Hansen Jacsten Holdings
Charles Fry Robert W. Baird
Mike Poludniak Merrill Lynch
Tom Parks Annex Wealth Mgt.
Legislative Fix Moving Ahead for Wisconsin’s New Manufacturing & Agricultural Credit Jim Brandenburg, CPA, MST - Sikich LLP
In IBAW meetings and publications in recent years we have introduced you to Wisconsin’s new tax incentive - the Wisconsin Manufacturing and Agriculture Credit (referred to as the “MAC”). The MAC came about in 2011 to provide an incentive for Wisconsin manufacturers and agricultural companies to remain and grow here, and also perhaps to have out-of-state companies move here. It was scheduled to begin in 2013, and when fully phased-in by 2016 it would essentially exempt any Wisconsin manufacturing and agricultural income from Wisconsin income tax. The MAC was championed by Representative Dale Kooyenga and Senator Glenn Grothman in the legislature.
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The MAC, however, had some problems for individual taxpayers when it was drafted and this glitch was recently identified. Here is the issue in a nutshell: the MAC would reduce a taxpayer’s Wisconsin individual income tax, but then would trigger a Wisconsin minimum tax for nearly the same amount. Thus, there may be little, if any, net savings for the MAC in 2013 (a “MAC Attack?”). The legislature is trying to remedy this situation now so that taxpayers can realize the proper tax savings with the MAC on their 2013 Wisconsin individual tax returns.
The IBAW magazine is in need of content, we rely on our members and sponsors to supply us informative articles. The digital magazine is sent out to over 650 contacts statewide and the magazine is parked on the web where, on average, it gets over 1100 views.
Legislative Update: It seems that all key legislative leaders are now on board to correct this issue. It was approved by the legislature’s Joint Finance Committee last week. The Senate and Assembly will be in session in March and voting on final passage for several bills, one of which is this tax bill with the MAC correction. It looks like the legislative timetable will have the bill passed near the middle of the March, before going to the Governor. Thus, a best guess now is that the bill would be enacted into law somewhere in the latter half of March, 2014. MAC Attack Options: For any of our individual taxpayers taking advantage of the MAC, this may present some filings logistics. Here are the possibilities:
1. Best case scenario - in some cases the taxpayer’s share of the MAC for 2013 will be used and not result in a Wisconsin Minimum Tax. A taxpayer in this situation could go ahead and claim the MAC and file their 2013 Wisconsin individual return. There would be no need to wait for the legislation to pass.
Consider writing an article on a timely business related topic to your particular field of business. This is an outstanding opportunity for you and your company to gain exposure and increase your brand awareness to a statewide audience. There is no cost to submitting an article.
2. Next, a taxpayer has generated a MAC for 2013, but it will trigger a Wisconsin Minimum Tax. The taxpayer in this case could wait until the law is changed (and then wait a little for the WDR to update its computer processing systems) and then file their Wisconsin tax return and claim the MAC, and not incur the Wisconsin Minimum Tax. This could present a tight timeline for the April 15 deadline, and you may need to file for an extension.
3. Similar case as #2, but this taxpayer could file their Wisconsin individual return with the MAC, but also incur and pay a Wisconsin Minimum Tax for 2013. Then, once the corrective law is enacted go back and file an amended 2013 Wisconsin tax return to obtain the proper tax benefit of the MAC. You would not need extend, but you would need to amend. We’ll keep you posted as this legislation moves forward. If you have any questions, please contact Jim Brandenburg or Brian Kelley at Sikich, LLP in Brookfield (262)754-9400.
Contact Steve Kohlmann for details.
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Welcome New IBAW Members!
Meeting Recaps 2014 Wisconsin Manufacturing Knowledge Summit
On June 20, 2014 the IBAW partnered with the Tool, Die & Machining Association of Wisconsin (TDMAW) to offer Wisconsin manufacturers and their suppliers a unique look at trends within the industry and to also report on some of the challenges the industry faces in the next 5 years.
Power Test, Inc. is an industry leader in the design, manufacture and implementation of dynamometers and control systems.
Special thanks to the event sponsor, First Business Bank for their efforts in helping organize this event.
For more than 37 years, Power Test has provided specialized test equipment to manufacturers, rebuilding facilities and distributors globally. Our products can be found in use at these facilities in nearly 100 countries on six continents.
Our headquarters and manufacturing operations are located in Sussex, WI with sales representatives worldwide. Our unparalleled customer service is well known throughout the industry. Power Test employs a dedicated staff of talented machinists, fabricators, electronic technicians, assemblers, designers, engineers, software developers, and administrative and customer service personnel. Our exceptional product life and excellent customer service is well known throughout the industry and has made us one of the industryleading dynamometer manufacturers. Our dedication to the customer and to the advances in powertrain component testing keep us there.
Power Test N60 W22700 Silver Spring Drive Sussex, WI 53089 Phone: 262-252-4301
4 Advanced Waste Services Advanced Waste Services is an environmental services company that provides wastewater recycling and other waste and risk elimination services to manufacturers in all industries. Each day, AWS helps hundreds of businesses, both large and small, meet their community and environmental obligations. Annually, we collect, treat and recycle more than 50 million gallons of contaminated wastewater into clean, reusable water and other valuable resources like fuel, steam and electricity. AWS is constantly helping our clients manage, reinvent and improve their sustainability successes. For example, we recently partnered with Forest County Advanced Waste Services Potawatomi Community to help Wisconsin food and beverage manufacturers convert 1126 South 76th Street food waste into clean, green renewable energy. Suite N408B West Allis, WI 53214 Founded in 1993, AWS employs 55 people in the Milwaukee area and a total of 150 people companywide in 5 states. 414-847-7100
Photo Key 1: A full house in the main ballroom of the Wisconsin Club as IBAW & TDMAW members prepare to hear about the state of manufacturing and the challenges the industry faces in the workforce.
2: David Vetta of First Business Bank delivers opening remarks and highlights the importance of a strong relationship between banking and manufacturing working together for success. 3: New IBAW President, John Weber of Hypneumat addresses the change in IBAW Bylaws and calls for voting in new board officers. 4: Kent Lorenz of Acieta gives the main presentation on “Manufacturing Matters” pointing out the trends on manufacturing now and what to expect in the future. 5: Outgoing IBAW President, Steve Van Lieshout receives his award for his efforts as 2013 - 2014.
6 Photos courtesy of Tim Townsend.
6: IBAW Executive Director, Steve Kohlmann (Left) presents David Drumel with an award for his service on the IBAW board.
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Published on Feb 27, 2018