Government Calculations Versus Actual Calculations

I have an answer for Paul…

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?

I confess that I don’t know what WMC would say.  They seem to have their heads intermittently inserted in their posteriors lately, but I can answer for me. 

YES.  It’s a tax increase. 

Let me give you an example.  Currently, Wisconsin allows people to deduct over $4,000 for tuition paid for each child.  If I have four kids in college, I can deduct over $16,000!  Is it a “loophole?” Yes.  It’s a way of not paying taxes that is perfectly legal - just like what businesses are doing.  They are in perfect compliance with the law.  The only thing that makes it a “loophole” is that some people think that the tax law should be different to make them pay more taxes.  If Wisconsin were to cancel the tuition deduction, would I consider it a tax increase?  You’re darn right I would. 

Unlike Paul and other people immersed in government, regular people have a very simple method to measure tax increases.  If I have to pay a larger percentage of my income in taxes this year than last year, then my taxes have been increased.  Paul can try to dress it up in semantics and double-speak all he wants.  A tax increase is a tax increase. 

1. There is a huge flaw in your logic Owen.  It is one thing when public policy is made to proactively create a tax credit or deduction.  It is entirely another when the intention of the tax law is avoided.

   Nobody intended for Wal-Mart or anyone else to be able to set up a separate entity out of state that would make sure the rent for their stores was set so high as to prevent their stores from making a profit in Wisconsin.  I don’t blame Wal-Mart for seeking to take advantage of this loophole, but I do expect my elected officials to close it once it is identified.

   Wal-Mart doesn’t get to operate in Wisconsin without the infrastructure provided to it by state and local governments.  They are using unforseen flaws in state law to avoid payments the state intended for them to make to pay their share when the tax code was created.

   Posted by on March 15, 2008 at 0453 hrs




2. I see…

   So if the legislators craft a law in a way that has unintended consequences, the citizens should divine their intent and comply with the intent instead of what’s actually written into law? 

   Interesting view of the law you have there.

   Posted by Owen on March 15, 2008 at 0723 hrs




3. How do you arrive at that interpretation of what I wrote?  I repeat, I don’t blame Wal-Mart for recognizing the opportunity within the law and using it to enhance their profit margin.  I do however expect lawmakers to correct the mistake once it was recognized.

   Posted by on March 15, 2008 at 1058 hrs




4. And when they correct the unintended consequence, it will be a tax increase.  To argue otherwise is duplicitous.  That is my argument.

   Posted by Owen on March 15, 2008 at 1128 hrs




5. That’s fine, but your comparison in the original post is apples to oranges, that was the point I was making.

   I don’t care if you call it a tax increase, technically it is.  But you should be willing to explain fully how we got to this point.  I think more people will expect Wal- Mart and others to pay their fair share once they hear the details, whether you call it a tax increase or not.

   Posted by on March 15, 2008 at 1607 hrs