Let’s stop rewarding irresponsible corporate behavior with tax breaks.
Your Wisconsin Income Equity Act
By
Rep. Mark Pocan
Last month, the Wisconsin Legislature passed the Single Sales Factor tax break, yet another corporate tax giveaway. This legislation, once it is fully implemented in 2007, will allow the top 2 percent of Wisconsin’s corporations to receive an annual $45 million tax break. I, along with my progressive colleagues in the Assembly and Senate, attempted to amend the legislation numerous times, but the Republican majority denied us at every attempt.
In response to this and other corporate giveaways Senator Fred Risser and I introduced the Wisconsin Income Equity Act, legislation designed to limit the tax deduction for CEO salaries to not more than 25 times the wage a company’s lowest paid full-time employee. Current law allows corporations to deduct up to $1 million from their income taxes for compensation paid to each executive officer.
It is because of tax breaks like the Single Sales Factor, and property tax exemptions for business computers and ATM machines that we as individual taxpayers end up getting stuck with the bill in Wisconsin. In 2001 alone, Wisconsin lost $174 million in revenue due to aggressive corporate tax sheltering according to the nonpartisan Multistate Tax Commission, an organization of state governments. Corporations, like everybody else, need to pay their fair share in taxes. Add this abuse to the abuse of excessive CEO pay, and we need to wonder why the richest in society escape paying their fair share in taxes.
Take for instance the CEO-to-worker pay gap. In 1980, the gap was 42-to-1. It skyrocketed to 531-to-1 by 2000, a growth of 1,996 percent. The CEO-to-worker pay gap is now at a point where U.S. CEO’s make about three times as much as their counterparts abroad. Production workers would have averaged annual wages of $101,156 in 2001 instead of $25,467 if worker pay had grown as fast as CEO pay from 1990-2001. And if the minimum wage had grown at this rate, it would have been $21.41 an hour in 2001 instead of $5.15.
Seeing this inequality prompted Sen. Risser and me to introduce legislation that would try to change this wage picture, and at the same time force corporations to act like good citizens in a way that would also generate at least $11.1 million per year in additional revenue for the state.
The Wisconsin Income Equity Act changes the $1 million executive compensation deduction cap by limiting the deduction to 25 times a company’s lowest paid full-time employee. So, if the lowest paid employee makes $20,000, the corporation would be able to deduct $500,000 of executive income. Increases in corporate deductions are now tied to increases in the wage scale.
Simply put, the Wisconsin Income Equity Act seeks to reduce the income gap by encouraging corporate responsibility. This bill would end our state’s practice of subsidizing excessive executive pay.
This bill is not an attack on those at the top of the income ladder. Our goal is to bring the people at the bottom up, not to pull down those at the top. This bill does not limit executive pay, nor does it tell companies how much to pay their employees. It will, however, send a strong message to companies that want to receive tax deductions for executive pay: Re-examine the fairness of your workers’ pay. People who work full time should be able to live without government assistance.
This bill also aims to send a message about the values of Wisconsin government. Those who work on the factory floor are as important to the company as those who work in the corporate suite.
In addition, our bill addresses the state’s practice of subsidizing excessive pay. Why should corporate executives be offered a tax break that the average citizen is not afforded? The fact that Wisconsin has the second highest personal property taxes in the nation, yet the second lowest corporate tax burden, is wrong. We need to correct this by fixing this inequity in the tax code.
But this bill is just the start. We also need to reduce property taxes for those who need the relief the most, the average taxpayer in Wisconsin. We need to work on living wage efforts statewide. And we need to fix the tax code to get rid of the corporate loopholes that cost all of us.
Please join us in making our tax structure fairer in Wisconsin. We do this by beginning with one small step, the Wisconsin Income Equity Act. Please support our efforts for real tax reform in our state.
July 24, 2003
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Mark Pocan is the representative for the 78th Assembly District in Madison and a FightingBob.com contributing editor.
