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Wisconsin Welfare
[Sorry about the problem last week. The problem was not with the
listserve, but with two sites that received the message.]
Last week, Ralph Nader sent the following letter to Wisconsin's Governor
Thompson, recommending that the Governor cut corporate welfare rather
than put needy families and children at risk.
Governor Tommy Thompson
P.O. Box 7863
Madison, WI 53707
July 9, 1996
Dear Governor Thompson:
You appear to have unerring eye for asserted welfare abuses
involving the poor down to the last school lunch. But, your vision
seems to dim at the mere mention of waste and abuse inside welfare
for corporations.
This selective view of welfare problems allows you to continue
to recommend expanded state handouts and tax escapes for profitable
corporations, even as you boast of plans to cut the poverty welfare
rolls in Wisconsin.
In your May 22nd USA Today op-ed, you declared, "We must end
welfare, not only in Wisconsin but also in America," and further
claimed, "The end of welfare is not negotiable." You declared,
"The welfare check is history," in a May 19th New York Times
article. Yet, at a May 29th press conference in Washington, DC,
where our Corporate Welfare Project coordinator asked you when you
planned to start attacking Wisconsin's other AFDC program, Aid For
Dependent Corporations, you failed to answer her question.
You brag about your so-called landmark Wisconsin Works (W-2) program,
which cuts back Aid for Families with Dependent Children in Wisconsin and
places needy children and families who have no jobs at risk. Wisconsin
spends a little over $300 million per year for poverty welfare cash
assistance. In contrast, you and state staffers promote corporate
welfare, which provides well over a billion dollars a year in state tax
breaks, subsidized loans and grants to businesses. A recent ad placed by
the Wisconsin Public Service Corporation in Site Selection magazine touted
the state's "exceptional corporate tax advantages." Corporate welfare
privileges given to powerful economic interests overflow in Wisconsin,
forcing innocent small businesses and residential taxpayers to compensate
for big corporations' bonanzas, by either paying more taxes than
they should, or receiving reduced public services, or enduring
larger government debt.
AID FOR DEPENDENT CORPORATIONS THRIVES IN WISCONSIN
The Wisconsin corporate welfare trough is a cornucopia of
corporate freebies. It is filled with tax escapes, subsidized
loans and grants. Business people don't even have to pay for the
phone call to get the details; they need only dial 1-800-HELP-
BUSiness.
Since the 1960s, the Wisconsin Legislature has enacted a
number of welfare offerings in an effort to induce profit-seeking
corporations to locate or expand their operations within the state.
According to the Wisconsin Department of Development (DOD), these
privileges include tax exemptions, tax credits, special corporate
tax treatment and other special tax incentives. State and local
tax escapes for businesses in Wisconsin now total $1.1 billion each
year.
The DOD also offers a broad range of state financial
assistance to businesses. These include grants, loans and DOD
services designed to help businesses get started, expand and meet
corporate welfare challenges in other states. During 1995,
Wisconsin Development Fund awards totalled almost $9.5 million in
state funds. Sample recipients and their 1995 profits are listed
in Table 1. Why do these profitable companies need to tap state
funds?
Table 1
Sample Recipients of 1995 Wisconsin Development Fund Awards
Company Award 1995 Company Profits
General Electric Medical Systems $500,000 $6,573,000,000
(General Electric)
Hutchinson Technology Inc. $1,000,000 $21,078,000
Kohl's Department Stores, Inc $1,480,000 $80,973,000
Mercury Marine (Brunswick Corp.) $750,000 $127,200,000
Reynolds Wheels International $510,232 $389,000,000
(Reynolds Metals)
Supervalu, Inc. $502,000 $43,334,000
Source: Wisconsin Development Fund Semi-Annual Reports, Department of
Development.
Even sports teams have their hands in the state till. Last
summer, when the Brewers claimed that they hadn't been able to
raise private funds for a ballpark, you immediately held closed-
door meetings with the mayor of Milwaukee and the Brewers' owners.
The result was a proposal for more corporate welfare in the form of
a tax hike in Milwaukee and surrounding counties to raise $160
million toward stadium construction costs. The total deal, as of
February 1996, included $882 million in state, city and county
investment, even though more than 70 percent of state voters had
turned down efforts to fund the stadium through a state lottery.
The voters further expressed their opposition when they voted, for
the first time in history, to recall a state legislator Senator
George Petak. Succumbing to pressure from you, Senator Petak had
cast the deciding vote for a sales tax increase to help pay off
$250 million in bonds to build the new stadium, even though he had
promised constituents that he would oppose the tax.
Your support of business welfare is at odds with expert and
public opinion. According to Site Selection magazine, quality
labor, overall costs, business climate and infrastructure not
incentives are today's top site selection factors. A recent
report reviewed results of hundreds of studies that had examined
the effectiveness of state and local tax subsidies. Though the
studies used a variety of methods of data collection and analysis,
the results were fairly consistent. Two important findings were:
There is no evidence that state and local tax cuts,
when paid for by reducing public services, stimulate
economic activity or create jobs.
There is little evidence that the level of state and
local taxation figures prominently in business-location
decisions.
Rio Rancho, New Mexico is an unfortunate case in point. The
city provided a smorgasbord of subsidies and tax escapes to attract
employers, but after handing out big tax breaks to corporations,
could not afford adequate funding for its schools. According to a
Wall Street Journal exposi of corporate welfare, Rio Rancho's high
school students were bused to an overcrowded Albuquerque school and
local middle and elementary schools were packed to twice their
capacity. Rio Rancho's "bidding for business" strategy may come
back to haunt the city. According to Site Selection magazine, the most important
factor driving business location decisions is the availability and
quality of labor.
At the May Economic War Among the States conference in
Washington, many of the more than 70 state and municipal
legislators and officials, business executives and legal, labor and
economic experts in attendance called for a truce in the
proliferation of lucrative tax breaks, loans and grants that states
and cities are using to attract companies and professional sports
teams. Nearly all attendees agreed that the governors and mayors
are in the dark about the long-term effect of tax breaks for
businesses, that may create jobs at a substantial cost but also
make it harder to finance other public services.
While Wisconsin's corporate welfare programs grow, the social
spending caseload has been slashed by 39 percent. Among the cuts
are included income support for the neediest children. AFDC
payments to disabled parents receiving Supplemental Security Income
will be eliminated and replaced with a lower separate monthly
supplement per child, resulting in a cut in benefits of 60 percent,
or $10 million annually, for example. Must a child incorporate
itself to elicit your concern?
Your rhetoric attacking "welfare as we know it" is hollow as
long as you ignore tax escapes, subsidies and subsidized loans to
corporations. These welfare payments and tax breaks for allegedly
"free market" wealthy corporations must be examined and curtailed
before genuinely needed payments to needy families and especially
children are slashed. Failure to end these huge amounts of
corporate welfare and erosions of the tax base for the privileged
and wealthy makes a mockery of your professed conservative belief
in `sink or swim' free enterprise markets. You are, instead, a
leading corporate socialist.
Sincerely,
Ralph Nader
-----
Janice Shields
Center for Study of Responsive Law
P.O. Box 19367, Washington, DC 20036
202-387-8030 | Internet: jshields@essential.org