Friday, February 23, 2007

What Really Worries Wisconsin Businesses

Edward Zore -- the CEO of Milwaukee's largest private employer, Northwestern Mutual Life -- recently took the stage in front of other business leaders and told them that if his company was looking for a place to relocate from another city, Milwaukee would not be high on the list.

Once those lines were uttered, much of the audience was surely thinking: Taxes.

But, as the Journal Sentinel explains, "Unexpectedly for many, Zore repeatedly downplayed Wisconsin's tax burden as one of the impediments." "Taxes for us," Zore told the group, "are not bad."

So what are the impediments? While Zore didn't get into too many details, the relative low number of Milwaukee area residents with college degrees was a point he did stress.

Adding to the answer is a recent survey of 68 biomedical firms in the seven-county Milwaukee area. Top issues on the list were skilled and educated workers, access to university research, health care costs, and access to investment capital. Conspicuously absent from the list is taxes.

This news actually fits well with a similar survey completed by the state's corporate lobby group, Wisconsin Manufacturers and Commerce, last spring. This survey was given to 600 manufacturing CEOs in the state, and when asked about "the top business concern facing your company," the executives responded with the following order:
  1. Health care costs (35 percent)
  2. Competition (16 percent)
  3. Labor shortage (12 percent)
  4. Energy (10 percent)
  5. Regulation (9 percent)
  6. Economic slowdown (9 percent)
  7. Taxes (6 percent)
  8. Other (2 percent)
  9. Lawsuit abuse (1 percent)
While there is little doubt that there are some businesses in the state that would place taxes high on the list of concerns, it's clear from these surveys and comments by executives like Edward Zore that taxes are low on the list of concerns for many.

Surveys of the general Wisconsin public often show taxes higher on the list of concerns, but, depending on who's doing the asking, it's not necessarily the highest. According to the right-wing Wisconsin Policy Research Institute, taxes are at the top of the list with 26 percent followed by health care with 16 percent and education with 14 percent. On the other hand, according to the left-wing One Wisconsin Now, health care tops the list at 45 percent, taxes and the economy/jobs are tied for second at 34 percent, and education is third with 31 percent.

What makes all of this important to note is that, if you listen to the state GOP rhetoric, you'd think there was no more pressing or important issue for any business, individual, or family in the state than taxes -- by a long shot. This rhetoric, in turn, drives public policy attention toward that issue and, subsequently, away from others like education and health care that are actually of more concern to most state businesses and at least as much concern to the rest of the public.

To be sure, during the last legislative session over 14,000 hours were spent lobbying on the so-called Taxpayer Protection Amendment. That's over 6,000 hours more than the second heaviest lobbied bill of the session and 9,000 more than the third.

And one night toward the end of the session, our state Assembly spent the entire night -- literally -- trying to find a version of the amendment that was suitable enough for moderate Republicans to support, only to have that version and the original soundly rejected in the GOP-controlled state Senate.

Around the same time as the TP amendment all-nighter, state Sen. Russ Decker (D-Schofield) and Rep. Terry Musser (R-Black River Falls) announced a comprehensive health care reform package designed specifically with employers and employees in mind.

But while the fledgling TP amendment continued to grab front page headlines and take up time at the Legislative Fiscal Bureau -- which was even able to dedicate an entire section on its website to all of the analyses it did of the amendment -- the Decker/Musser bill touched off articles in only two newspapers in the state, the Capital Times and the Wausau Daily Herald.

None of this is to say that public revenue, in any form, shouldn't garner policy or press attention, but rather the amount of attention it has generated in the past is not on par with the level of concern that exists in the state, at least in relation to other issues that are at least as important.

And much of the attention is being driven by incessant GOP rhetoric that should be, ideally, toned down or, if necessary, neutralized by an equally incessant level of Dem noise on the issues that actually top the list of business concerns and those that share the top of public concerns.

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Blogger Dad29 said...

Interesting, and credible.

So how about "the EFFICACY of taxing in Wisconsin, vis-a-vis educational results"?

February 23, 2007  
Blogger Seth Zlotocha said...

So how about "the EFFICACY of taxing in Wisconsin, vis-a-vis educational results"?

Not sure what you mean there. Are you suggesting education revenue should be tied to how well students perform?

February 23, 2007  
Blogger Russ said...

You are missing THE problem. Wisconsin public sector worker wages and benefits are growing much faster than private sector wages and benefits. This fact obviously causes taxes to increase faster than the private sector workers ability to pay. Transfering wealth from the private sector to the public sector is a recipe for disaster.
The consequences are setting in, rich people are leaving the state, taking their noney, and no longer paying Wisconsin's outrageous property taxes.
So here we are, for years we've overtaxed those people that pay lots of taxes and now many are not willing to take it any more.
On the other hand poor people are coming to Wisconsin to take advantage of our generous social benefits.
The tax payers are leaving and the tax absorbers are coming, and you imply Wisconsin is looking good. Don't insult my intelligence.

February 23, 2007  
Blogger krshorewood said...

Myths do die hard and the prime ones were laid out above.

Granted, unlike other states we are not growing a particularly lush crop of wealthy citizens, but they are NOT leaving in droves. Why would they? We have essentially a flat income tax and among the lowest corporate taxes in the country. One of the reasons by the way why we have higher property taxes.

As far as the benefits for state employees, it is what's known in the HR trade as attraction and retention, especially when it comes to education.

As for the comment about poor people coming to Wisconsin, that is so 1960's and even then that assessment was never true. Poor people came here for the jobs. And thanks to Tommy T's bar room think tank welfare policies there are no gushing welfare benefits.

Tell you what will help. Wisconsin business should stop putting teachers under siege. The same people who tell you that you cannot through money at education in Milwaukee have not problem stocking their own suburban school systems.

Belling, Sykes, WMC, lay off the teacher attacks. We all know the real agenda is union busting.

By the way. I am not a teacher.

February 24, 2007  
Blogger goofticket said...

If he wants to take Northwestern out of Wisconsin, will he do the right thing and give us back all those tax credits we gave him over the last hundred and some odd years?

Or will it bee, oh poor us, we are a stuggling extortion, I mean insurance company.

February 24, 2007  
Blogger Dad29 said...

Efficacy means "bang-for-the-buck" in loose terms.

No matter the public service rendered (except, I suppose, national defense;) can it be done better AND cheaper?

It's called "continuous improvement" in private industry. You won't find that phrase enshrined anyplace in Gummint.

February 24, 2007  
Anonymous Anonymous said...


"continuous improvement" is in fact a phrase that SEWRPC and the DOT use ALL the time. In fact, I wonder how we will justify our "bang for the buck" when we spend 6+ billion to expand the freeway so that you and I can get to the south side 5-7 miuntes faster. That is not my definition of "Efficacy". The reality we are hearing now is that there are MANY other issues (beyond taxes) to tackle that would help spur and support the business climate in Milwaukee.

February 24, 2007  
Blogger Russ said...

Hey KRShorewood
So you justify Rolls Royce public worker benefits as necessary to atract the best people. Common sense tells most of us that we can't continue to take a greater percentage of private sector workers income forever. At some point they will revolt. Anyway your guy Doyle is certainly doing his best to accelerate the transfer of wealth to government. Hey why don't you ask Doyle to legislate prosperity for all Wisconsin citizens rather than just public workers.

February 25, 2007  
Blogger Seth Zlotocha said...

Oh, Russ. I write a post about how taxes are not at the top of the list of concerns for businesses in Wisconsin, and -- apparently lacking anything meaningful to add on the topic -- you manage to drag into the discussion your tired old "public workers and liberals are ruining the country" schtick. You really should consider starting your own blog rather than trying to change the subject on mine.

But since you brought it up, why don't we first separate the issue of wages and benefits. To examine your claim that public sector wages are outpacing private sector wages, let's take a look at the Bureau of Labor Statistics. On the page for Wisconsin wages, broken up by profession, let's play a little game where I try to find professions where private sector wages are higher and you try to find professions where public sector wages are higher. I'll start off by naming five professions where private sector wages are higher than public sector wages. Then you locate five professions where public sector employees have higher wages than private sector employees. Once you've done that, I'll go again, and so on until we see who runs out of professions first. Sound good?

Ok, here are my first five: executives, public relations managers, training and development managers, actuaries, and economists. Your turn.

On the issue of benefits, I think it's pretty clear that the public sector is higher. But to stop there doesn't tell the whole story. After all, there was a time when private sector benefits were more on par with public sector benefits, particularly in the area of health care and retirement. But rather than the public sector pulling ahead in recent decades, it's really been the private sector falling behind. Yet that too doesn't even tell the whole story since not all private sector employees have seen their benefits decrease in recent years. In fact, top executives at corporations that have drastically undercut employee benefits have seen their own benefits at least stay the same if not get stronger. As the Wall Street Journal found last April: "At a time when companies are scaling back health benefits for other retirees, former top executives at many corporations are receiving partial or full lifetime medical coverage on top of pensions valued at millions of dollars, a Wall Street Journal analysis of dozens of recent securities filings indicates."

The public sector has resisted this private sector trend. Although my salary as an administrative specialist at UWM is justifiably lower than Chancellor Santiago's salary as the top executive at the university, his health care coverage and the terms of his retirement are no better than mine. If only that were true in the private sector, maybe the benefit cuts for private sector employees wouldn't have been quite so bad in recent decades.

But, putting all of that aside, if you want to talk about reigning in health care costs, I'm more than happy to do it. But simply shifting costs onto employees isn't the way to go about truly solving the problem; as many companies in the private sector are discovering, cost-shifting does not necessarily make health care any more affordable.

If reform is going to take place, it needs to be fundamental reform, similar to what's being proposed in the Wisconsin Health Plan or the Wisconsin Health Care Partnership Plan. I'd support either of those proposals, even if it meant losing a big chunk of my "Rolls Royce public worker benefits."

February 25, 2007  
Blogger Dad29 said...

I think that the DOT's case for rebuilding I-94 rested on the age and deterioration of the original road--not necessarily a 5 minute change in commute-time.

Additionally, there are safety updates.

But you bring up a good point. If "continuous improvement" is the watchword, then how in HELL can Bluemound Road turn into a roller-coaster (just east of Brookfield Road, westbound lanes) in less than 5 years?

February 26, 2007  
Blogger Russ said...

I'm not quite sure what it takes to get you to understand economic reality. Globalization has been exerting downward pressure on private sector compensation for some years now. That's the way it is. Now you can justify public sector overcompensation by blaming private sector executives but that's going to wash much longer. All Americans, including yourself, are going to have to share in the pain global competition is inflicting on all first world countries. You can fight, it but you are going to lose.

February 26, 2007  
Blogger Seth Zlotocha said...


You have yet to provide any evidence for your point that public sector compensation -- that is, the combination of wages and benefits -- is outpacing private sector compensation in Wisconsin.

The fact is, Russ, Wisconsinites are paying less in total state and local taxes relative to personal income today than they were throughout the 1980s when globalization was just starting to effect the US labor force (see here, page 62). So please explain to me exactly how public sector benefits in Wisconsin is "THE problem."

February 26, 2007  
Blogger Russ said...

Yeh right taxation is down. In the three year period 2000 to 2003 median household income in the City of Milwaukee fell 10%. During the same three year period property taxes rose 10%. You want to explain one more time how taxes are down for Joe Six Pack.
You may think its perfectly acceptable to price people with limited incomes out of their homes to pay your fringe benefits but there a few of us that are tired of your greed.
The outrageous cost of your taxpayer paid WEAC health care plans for example is flat out extortion.

February 27, 2007  
Blogger Seth Zlotocha said...

So now we've gone from a statewide issue to just focusing on the City of Milwaukee? Does that mean you're backing off from your rhetoric that public workers throughout the state are "THE problem"?

While the total property tax levy in the City of Milwaukee increased by 10 percent between 2000 and 2003, an average of about 3.3 percent per year, the increase was entirely due to increased property value. In fact, the property tax rate for the City of Milwaukee dropped during that time from 3.011 percent to 2.66 percent, while total property value in the city increased from $17.3 billion to $21.7 billion (probably driven in large part by downtown revitalization, including a lot of luxury residential space in the Third Ward). See here on page 42 for the 2000 figures and here on page 41 for the 2003 figures.

I couldn't find anything on the median household income in the City of Milwaukee between 2000 and 2003; so, if you know where to find those figures, please share.

Also, if you have any evidence that property taxes or any other taxes are the primary reason that people are being forced out of their homes in Milwaukee, I'd love to see it.

And my previous point about total state and local taxes decreasing in recent years relative to state personal income still holds. That statement was based on Legislative Fiscal Bureau figures; simply because it doesn't fit in your worldview doesn't mean it's not true.

And you still haven't provided evidence that public sector compensation has outpaced private sector compensation in recent years. What's the hold up?

And just a note, I'm not a member of WEAC. I work for the UW System. And, as I said before, I'd gladly exchange my health coverage for a reform plan that centralizes the health care system in the state and provides universal coverage to all (or nearly all) residents on a level playing field, even if that means I'd pay more (which I would under either the WHP or the WHCPP). I guess that's because I'm so greedy.

February 27, 2007  
Blogger Russ said...

The MJS did a lengthy article titled:
"Household incomes in city down 10% since 2000'.
It was published in the September 4, 2004 editin of the Milwaukee Journal Sentinel.

It is common knowledge that global competition is dragging down private sector compensation. If your interested you can easily find the income data on the Dept. of Labor and the Census Bureau web sites. The fact that public sector workers are unwilling to share the pain is a sad situation.

February 27, 2007  
Blogger Seth Zlotocha said...


I cited income statistics above from the Bureau of Labor Statistics showing five professions where private sector employees earn more than public sector employees. I asked you to find five professions where public sector employees earn more than private sector employees and you didn't do it. I actually don't think it's possible to do, which was my roundabout way of saying that, in terms of income, the private sector is still more lucrative -- by a long shot, in some professions -- than the public sector. That completely undercuts your line that "public sector workers are unwilling to share the pain." I gave you the place to find evidence to make that argument and you couldn't do it, plain and simple.

And, in case that's not convincing enough, here are the numbers for total compensation of employees in Wisconsin by industry between 2001 and 2005 from the Bureau of Economic Analysis (to see the report, select "Wisconsin" for Major & Minor Areas, highlight all years that appear in the third box and click "Display").

The increase in state and local employment compensation was 18.7 percent during that time, while the increase in private sector industries was 17.6 percent. Hardly a big difference. And that's putting the public sector up against every single private sector industry averaged together, which includes those that are notorious for low worker compensation, such as the food service industry (which only had a 3.7 percent employee compensation increase between 2001 and 2005), and those that were hit uniquely hard by the recession, such as the airline industry (which had a decrease in compensation until it began to rebound in 2005 to finish the time span with a 2.2 percent increase). When put up against professional industries that have positions that parallel most public sector work and, thereby, compete with it for workers, the numbers for private sector compensation go up notably faster than the public sector. The finance and insurance industry, for instance, saw employee compensation go up 27.7 percent in Wisconsin between 2001 and 2005. The health care industry in Wisconsin saw its employee compensation increase by 28.9 percent and the enterprise management industry in Wisconsin had employee compensation increases of 37 percent during that same time. You get the idea.

These are the facts on compensation for Wisconsin, Russ, whether or not they fit with "common knowledge."

February 27, 2007  

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