Paul Soglin: Waxing America

Going After Tax Evaders is a New Tax Increase: WMC

Last night I had a opportunity to hear Jack Norman, Research Director of the Institute for Wisconsin's Future speak about Wal-Mart and its use of loopholes to legally avoid paying taxes.

I started to wonder. Imagine that Wisconsin took steps to change the state law so that Wal-Mart would have to pay the taxes.

Would Wisconsin Manufacturers and Commerce (WMC) consider remedial legislation to fix the problem an amendment of the existing tax laws or would they consider that a new tax and/or a tax hike?

If anyone can get near to this august body that prides itself on patriotism and loving the state of Wisconsin, please put the question to them.

Here, from Broken Partnership: How Wisconsin’s Corporate Sector Underpays State and Local Taxes by $1 Billion is what Wal-Mart does to avoid the taxes.

Wal-Mart has a separate corporation that owns the real estate. Wal-Mart makes sure that the rent is high enough so that the stores never make a profit. Of course, the real estate holding trust that owns the land and building make a lot of money - like several hundred million dollars.

...The Wal-Mart operation that owned the stores collects rent is set up as what is known as a real-estate investment trust (REIT).

The REIT's profits, paid out in dividends to Wal-Mart are tax-free.

That is because the REIT is located in a state that does not tax the profits from rents. Very nifty. Figure out a way of showing no profit in Wisconsin and move the income in the form of a rent to another state.

Wal-Mart and WMC do not hate all lawyers. They must love the ones who figured out these tax loopholes.

Look into your pockets. Not a lot there?

That's OK. Wal-Mart and WMC wish to thank you for paying additional taxes since someone has to make up for their clever tricks.

Remember, if you support fixing this problem you are a supporter of big government who just wants to raise taxes.

Remember the WMC motto: Standing Up for Business! If it is good for WMC, it is good for you!

Wisconsin Manufacturers & Commerce Tries Socialism

When it was in the best interest of Wisconsin Manufacturers and Commerce (WMC) to shift costs from their members to the general public, the Madison based lobbying cabal was never shy. One of the best examples of WMC hubris is found in their 2007-2008 Legislative Agenda, WMC, Standing Up for Business.

Tucked away on page ten is an agenda item that WMC says reflects "...our strong environmental ethic..."

Encourage the cleanup and redevelopment of contaminated sites by strengthening and improving tax and other financial incentives and liability protections.

In other words let government do it and take the money from the taxpayers.  Instead of having the responsible private property owners clean up the contamination, have everyone pay.

A little socialism right here in Wisconsin.

WMC is shameless. Contaminated brownfields are the responsibility of the owner. Property owners do not expect the rest of us to pay for the cost of grading, laying utility lines on their property, or preparing the site for construction.

American capitalism and free enterprise expect you, the homeowner, to pay your own bills the next time the furnace goes out or the roof needs repair. But WMC, filled with hubris, wants the rest of us to pay and provide financial incentives if some business finds its soil contaminated.

You have to wonder, if after the cleanup is complete and the land is productive, will WMC support the public getting a return on investment and a share in the profits?  I am not speaking of the normal property taxes - that is already expected of all private property owners. I am speaking of the return any investor or shareholder expects. Dividends. Pay outs. Big bucks.

They have absolutely no shame.

And there is more.

Hospital 'Tax' Supported from Left to Right, Except WMC

When I first came to Wisconsin as a student in 1962, I heard the constant chatter about how our state ranked last in receiving federal dollars relative to all of the money we sent to Washington.

Wisconsin lacked in defense industries, military bases, and space centers. To make matters worse we did not lead the nation in significant populations living in poverty or that were elderly. Consequently, we could not maximize dollars spent on poverty, entitlement, or block grant programs.

I am not a big fan of taxing any form of heath care. But the proposed gross receipts tax on Wisconsin hospitals of .8 percent makes sense. Unfortunately.

But that is not five percent, or one percent, but 4/5's of a percent.

As The Capital Times noted in its March 1, 2008 editorial, Hospital tax pays for itself

The tax would have brought in about $400 million from the hospitals, but the hospitals would have received that $400 million and more in matching federal money to help pay for Medicaid programs.

That is because the federal government will match much of the revenues. By not imposing the tax, we leave hundreds of millions of federal money on the table - in Washington D.C.

Madison's progressive newspaper is not the only one supporting the tax. The not quite so liberal, Appleton Post Crescent, says Hospital tax needed to ease budget crunch

It (the hospital tax) may even end up reducing costs for those with private insurance, too, since hospitals have said they make up for the poor Medicaid reimbursements by charging the insured more. With better reimbursement, they wouldn't have to.

The hospital tax is favored by hospitals and will bring in more money. The state can't afford to let the hundreds of millions of dollars slip away a second time.

Keep in mind that the projected Wisconsin budget deficit is $650 million. While these federal monies could not be used to fill the budget deficit, it demonstrates the magnitude of the matter.

Not surprisingly,  if two opponents changed their minds, resolution would be forthcoming. The first is the Republican leadership in the Wisconsin Assembly, the second is their puppetmasters, Wisconsin Manufacturers and Commerce (WMC).

Here are the health career providers who sit on the WMC board of directors who are trapped between the best interests of their companies and the powerful business lobby:

• Marshfield Clinic
• Aspirus Wausau Hospital
• Gundersen Lutheran
• Humana Inc.

Milwaukee County Worse Than Private Contractor in Records Row

While the furor continues over a private contractor releasing social security numbers while working for Wisconsin, it seem that Milwaukee County has managed to give great comfort to those who claim government performs worse than the private sector.

According to the Milwaukee Journal Sentinel, Records released in error , county officials provided confidential records that:

...detail payments for tests and other costs linked to mental competency, paternity and guardianship cases...

While the release of social security numbers can plague a citizen for some time, the damage can be rectified. There are mechanisms for the federal government, the credit rating agencies, the financial services community, and the wronged individual to undo the damage.

For the individual or family, inadvertently outed by the release of records of everything from psychiatric to medical examinations, there is no way of reversing the damage. As noted in the article:

Clerk of Circuit Court John Barrett said he was thunderstruck...

..."I was dumbfounded by the breadth of information they gave out that was confidential," he said. Doing so violated the trust placed in the county to protect vulnerable individuals, he said...

To date those clamoring for heads to roll in state government  are not focusing on Milwaukee County and its executive.

Wisconsin Business and Entertainment Climate: Belling Style

You have to wonder why Mark Belling hates Wisconsin and Milwaukee as much as he does. In his latest rant, subtitled, State’s business climate far from welcoming, the right wing radio entertainer asserts:

We are driving businesses out and telling new ones to stay away by raising taxes to obscene levels, regulating businesses to death, imposing impossible environmental restrictions and levying some of the nation’s highest health care costs. Until those things are fixed, the business climate is not going to improve.

With so-called friends like Belling, it is no wonder that there is more than a little confusion in the Milwaukee business community.

There is not one word in Belling's quiver about the most important challenge facing Milwaukee and the state, growing a vital workforce. The key to Wisconsin's future is eduction, job training and workforce development.

Other key elements that Belling gets wrong:

• Collections of taxes and fees in Wisconsin is average compared to the rest of the nation.


• Taxes on Wisconsin businesses are significantly lower.

• When businesses make location or expansion decisions the quality of the schools, the environment, safety, and the workforce all trump tax rates.

• Government and the private sector can work together within the M-7 environment. In fact, that collaboration will allow a frank and candid discussion of the changes that both government and the private sector need to make.

• Lowering the bar so that wage rates compete with China or even Alabama are not what Wisconsin business needs.

• The new economy is not solely based on "biotech and drug industries." The secret for Milwaukee is not to copy others but to work from its strengths, its industrial and financial base.

It is evident that there are elements in Wisconsin including Belling and the Wisconsin Manufacturers and Commerce who are less concerned about the quality of Wisconsin's business climate, and more concerned about using the business community to drive a right-wing ideological political program.

For a true understanding of how far Belling is off the planet, take a look at the  Milwaukee 7 website and scroll down to the Strategic Planning link and look at the thoughtful reports. I may not agree with all of their findings but certainly, this is more substance than "inane cheerleading."

Marketing and Business Recruitment, Wisconsin Style

A few observations:

• John Shiely and his brethren who fault those on the left who have negative knee jerk reactions to "anything business" are correct. There are a suspicious lot of lefties who start with the assumption that anything that is good for business is bad for everyone else. That must change.
• That said, Shiely has little that is positive to contribute to the discussion and the rest of his charges just make life more difficult for everyone trying to build a positive environment.
• For those of us on the left who do want to see a business and labor partnership in growing Wisconsin's economy, Shiely does not make the job any easier. Comparing Wisconsin wage rates to southern states does not cut it. We are not interested in lowering the bar, and there is plenty of proof that a well-paid workforce more than makes up for the additional labor costs in everything from productivity to having more successful kids in the public schools.
• Other than Tax Incremental Financing (TIF) there is really no rationale for using tax cuts and incentives to lure business. TIF has that vital "but for" test, and that standard should not be waived.
• Consistently, taxes are down the list in determining where a company locates. High on the list are the "quality factors": parks and recreation, safe neighborhoods, great schools, sound transportation systems (both public and private), a clean and healthy environment, cultural activities.
• Working on enhancing the presence of existing businesses is always a more productive goal than recruiting outsiders. If the outsiders find that the work done to develop the local business environment is sound, they will come.

When you have a runaway plant, a company determined to go to the site with the cheapest labor force, no matter what the consequences, it is difficult to compete since the values between the company and the community are so disparate. You have to change the values of the company, not the community standards.

For those new to this discussion, here is the background.

Since the explosive presentations at the Public Policy Forum Milwaukee Business Leaders Meet Their Worst Enemy - Themselves, we have the following, which is far from a complete list:

• Illinois thinks we are doing just fine: We Don't Need No Stinkin' Limousines: Ask the Flatlanders.
• Minnesota thinks we are doing just fine: Milwaukee has good company in having image problems.
• Some think Madison and Milwaukee's problems are the same: Blaska's Blog: Read Milwaukee, think Madison.
• And some just do not want to quit:  Somehow, we have to put an end to Milwaukee's zero-sum culture , or as Jim Rowen notes  Briggs & Stratton CEO Urges "Positive" Tone, Then Has A Counter-Productive Meltown Himself.
• And up until now we have not touched upon another dozen bloggers who entered the fray, including the penultimate battle  Our own worst enemy finding Steve Jagler, of the Small Business Times and a friend of Wisconsin Business, taking on a plethora of entertainers from right-wing talk radio.

Belling and Jagler's Small Business Times: Milwaukee Has A Choice

Once in a while you encounter a debate that is so one sided, so unfair, that you have to wonder when the referee will stop the fight.

In the corner on the left we have Steve Jagler, the executive editor of the Small Business Times. Last week Jagler wrote a blog post for OnMilwaukee.com,  Our Own Worst Enemy, "Five of the Milwaukee area's most prominent chief executive officers were featured in a panel discussion on "Global Wooing" Thursday by the Public Policy Forum. The five CEOs took turns ripping Milwaukee as a terrible place to do business."

In the opposite corner, we have Mark Belling, who proclaimed that,  "If this Steve Jagler wanted to do some good, he'd join the rest of us and try to improve the business environment in Wisconsin by fixing the problems, rather than saying we all ought to run around like the bluebird of happiness, acting like this is the most business-friendly region in America. It's not."

The problem is this. Jagler is not the bluebird of happiness. He is a thoughtful and contemplative writer who actually has a clue as to what needs to be done to improve Milwaukee. He is not perfect (none of us are), but up against Belling (who is convinced he is the Renaissance man) it is not a fair fight.

Jagler reports the news about Milwaukee business, how to develop the local economy, and how to build a strong workforce.

Belling berates just about everyone and everything, and while he has noticed that many Milwaukee black households are well below the poverty line, and the education of students in Milwaukee Public schools is wanting, no one call recall a single realistic recommendation from Belling that works.

Identifying the problem is one thing; finding a workable solution is another.

American Airlines - Customer Service Plunges To New Low

With all of the horrible options for customer service in industries ranging from communications and computers, from travel to financial services, American Airlines (AA) just won the award for worst service. Ever. And the competition is stiff.

I will spare you the chronological turmoil that began Monday, January 7, 2007 and continued over four calendar days as I attempted to retrieve a lost bag. The bag was misplaced Monday night between Chicago and New York's JFK.

By Wednesday I determined the following:

• The bag was probably not in Chicago.
• The appearance, labeling, and the contents of the luggage was clearly described to baggage agents over the phone.
• That there were over 500 misplaced bags at JFK, left over from the Christmas holidays.
• The many agents I spoke with reiterated that no one at AA at JFK was responding to the emails or phone calls they made on my behalf.

Wednesday, faced with the fact that JFK baggage was not answering the phone and that no one had searched for the bag for three days, I attempted to escalate the matter. Wednesday's calls focused on convincing superiors to go up the ladder to their management who could then contact supervisors at JFK and work down to baggage.

I was told, politely, that was not an option. I called again Thursday morning, call number 13, and still no luck. At noon I knew that these were desperate times and called for desperate measures.

The challenge was to make a credible and nasty threat without going to jail or being placed on the 'no fly' list.

Call number 14, noon on Thursday:   I said, "If the bag is not recovered by Friday night, I am going to fly to JFK at a cost of $411 (true), call all the network stations in NYC (true), speak with my three friends working at the networks (false, I know no one), and invite them to meet me at the AA baggage office and have them accompany me as I find the lost bag (true, if anyone of them were to show up).

Call number 15, 4:00 pm on Thursday: "We have good news for you Mr. Soglin, the bag was found and is on its way."

Airlines Plot Against Customers - Passengers Joyfully Share Airport Comforts

Passengers may grumble but they know that flight cancellations are the best outcome with conditions are not safe for air travel. Whether it is mechanical problems or inclement weather, it is best to stay on the ground.

That said, it is clear that the airlines are largely responsible for this year's major delays and cancellations. In the rush to show profits the airlines took two flagrant steps which compound the problems created by weather and a congested system.

The first was to lay off a significant number of pilots and other crew members. Now when there are problems, there are not a sufficient number of pilots to fly equipment that is in position.

Then there are the mechanical problems and the availability of equipment. As another storm socks Denver, United airlines is flying planes to other airports so they will "Be in position" for weekend travel. Ten years ago, United had enough equipment so the airplanes could hang in Denver with the passengers. Now United skips town, leaving the passengers stranded.

Northwest Airlines already admitted that it was inadequately staffed.

The FAA may be a government agency, but the number of planes, pilots, and crew are industry decisions. Another example of better service to you through government deregulation.

Menatime, Ma, Pa and the kids are sleeping on the floor in the baggage area, dining at the fastfood resturant near gate B24, and shoplifting $2.78 candybars since they ran out of cash long ago.

Airlines Outsourcing Maintenance, Call Centers and Your Safety

A few weeks ago I had another battle with a United States airline. I made two calls to check on an existing reservation and accomplished nothing in over ninety minutes except to discover I was speaking to people in the Philippines who knew less about airline travel and airline management than me.

Whether buying automobiles, checking on my health, or making travel plans, I find it useful to work with people who know more than me -not a very high standard.

Finally I cheated.  Years ago I was a frequent flyer so I had the special phone number they can use. In five minutes I spoke to someone in Chicago and resolved the matter.

That prompted me to see just what was the airline outsourcing situation. I read that the Teamsters Union notified passengers that United Airlines is outsourcing heavy maintenance on equipment that goes to China. In fact,In the Beijing repair station, only five of 2,179 mechanics are certified by the Federal Aviation Administration (FAA).

Forbes Magazine recently reported that AAR Corp is a great investment. They are providing maintenance and repair services to US airlines at a reduced cost.  The article makes no mention about the quality of the work. The article tells me that AAR stock is good for my portfolio but it does not mention if it is good for my health.

Probably the most distressing is U.S. News & World Report, which published on December 20, 2007 that, The Transportation Department IGs (Inspector Generals), for example, have revealed potential safety risks posed by the airlines' outsourcing of maintenance work.

The story does not provide any more detailed information on the nature of those safety risks.

The Wall Street Journal was not shy to report that the failure of Boeing to complete its delivery schedule of the new Dreamliner,the Boeing 787, is a failure on the part of suppliers. The headline: Layers of Outsourcing Slow 787 Production;'Hostage to Suppliers'

Boeing figured it could save $10 Billion by outsourcing the supplies.

Today, the Dreamliner is at least six months late, and the goal of delivering 109 planes by the end of 2009 is threatened...Boeing said in September that it had set aside nearly $2 billion in additional research-and-development money for increasing costs associated with the delays.

That does not include future problems, delivery penalties, and the waste in fuel as the more efficient 787 goes into service two to three years late.

Disclosure: I am compensated by more than one labor union opposed to outsourcing. And I have a bazillion friends who don't pay me a damn thing that are just as vehemently opposed to outsourcing.