News of the Day

Illinois Tax Increase Welcome in Wisconsin

Many Illinois lawmakers say that following the state’s 32 percent income tax increase, neighboring states will try and recruit Illinois businesses and taxpayers. But one Illinois lawmaker on the Wisconsin border says recruiting won’t even be necessary.

State Rep. Joe Sosnowski, R-Rockford, said communities in southern Wisconsin don’t need billboards or ad campaigns to lure Illinois taxpayers and businesses over the border.

“Wisconsin doesn’t really have to [recruit], we do a good enough of shooting ourselves in the foot,” Sosnowski said.

Higher taxes, such as last week’s 32 percent state income tax increase, are driving people out of Illinois.

And he’s right. Illinois’ population has declined each of the past three years, and it lost more people than any other state in the U.S. between July 2015 and July 2016, according to the U.S. Census. At the same time, Chicago lost more people last year than any other major U.S. city.

Southern Wisconsin State Rep. Todd Novak said lower taxes and more job opportunities are driving Illinoisans to Wisconsin.

“I am seeing an influx of people who are looking to move into Wisconsin,” Novak said. “Out here we have one of the lowest unemployment rates in Wisconsin. So you can easily find a job, and a pretty good-paying job.”

The unemployment rate in Winnebago County, Illinois, Sosnowski’s district, is 6.4 percent. Lafayette County, Wisconsin, Novak’s district, has a 2.2 percent jobless rate.

Novak says there are 100,000 jobs open in Wisconsin. He says Illinois’ economic refugees are welcome to apply.

Homeowners Don’t Have to Let Assessors In to Challenge Tax

Wisconsin homeowners don’t have to let assessors inside as a condition for challenging their property taxes, the state Supreme Court ruled Friday.

The court said in a 5-2 decision that such visits amount to unreasonable searches and that assessors need to get warrants if they can’t obtain the homeowners’ consent.

The ruling involves Vincent Milewski and Morganne MacDonald, who own a home in the Town of Dover in Racine County. According to court documents, they tried to challenge their 2013 property tax assessment in front of a town review board.

The board refused to hear the challenge because Milewski and MacDonald wouldn’t let an assessor inside their home. Under state law, people who refuse an assessor’s request to view their property can’t contest the assessment to local review boards.

Milewski and MacDonald sued. A judge dismissed the lawsuit and a state appellate court upheld his decision. The state Supreme Court reversed that ruling.

Writing for the majority, Justice Dan Kelly said Milewski and MacDonald were faced with a difficult decision: relinquish their constitutional right to be free of unreasonable searches so they could challenge the assessment or exercise their rights and forfeit their ability to contest the assessment.

Kelly said an assessors’ visit without consent is a search as defined in the U.S. Constitution’s Fourth Amendment, which protects people from unreasonable searches and seizures. The town failed to show how assessing taxes is such a special need that the Fourth Amendment doesn’t apply, which means assessors must obtain search warrants to enter without consent, he wrote. Assessors can use other means to gather information about the property, he said. Milewski and MacDonald can challenge the assessment without an interior inspection, he concluded.

He said the law isn’t unconstitutional on its face. But it can’t be read to require a property viewing that violates the Fourth Amendment in order to allow a challenge, he wrote.

The town’s attorney, Jason Gehring, didn’t immediately respond to a voicemail seeking comment.

The court’s conservative-leaning majority handed down the decision. Shirley Abrahamson and Ann Walsh Bradley, the only two liberal-leaning justices, dissented. Abrahamson wrote in a joint dissent with Bradley that such choices are common in the law and are seen as constitutionally valid.

The Wisconsin Institute for Law and Liberty, a conservative law firm that represents Milewski and MacDonald, issued a statement calling the decision “a victory for private property rights.”

The Wisconsin Realtors Association, the state Department of Justice and the Institute of Justice, a law firm specializing in constitutional protections, all filed friend-of-the-court briefs urging the Supreme Court to strike down the law.

Governor Recommends Cutting Road Borrowing as Stalemate Continues

Seeking to break an impasse on the state budget, Gov. Scott Walker has proposed reducing borrowing for transportation projects while sticking to his pledge not to raise gas taxes or vehicle fees. The plan gained no immediate traction and his fellow Republicans who control the Legislature signaled they remain far apart on highway funding — the biggest reason for the budget stalemate.

Walker sent his letter Wednesday to Assembly Speaker Robin Vos (R-Rochester) and Senate Majority Leader Scott Fitzgerald (R-Juneau) and made it public Thursday.

“We can pass a budget that provides meaningful increases to local governments to improve roads and bridges — as well as add significant investments in safety and maintenance and highway rehabilitation —  all without raising the gas tax or vehicle fee,” Walker wrote.

The governor’s original transportation plan would delay work on some projects, including the north leg of the Zoo Interchange in Milwaukee County and I-94 south of Milwaukee. But he said his new plan would not result in further delays because of projected savings and tax collections that were better than expected.

Assembly Republicans want to find new money for roads by raising gasoline taxes or other fees. Walker and Senate Republicans are opposed to that.

Underlining the disconnect between the two sides, Fitzgerald emerged Thursday from a meeting with fellow GOP senators to say his caucus won’t support raising new money for roads

“No gas tax, no increase in fees,” he said when asked to sum up the position of Senate Republicans.  “In our caucus … there certainly is the idea we’re not going to support any new revenue because we believe there’s enough revenue in the system and believe that (the Department of Transportation) needs to be significantly reformed,” he said. “We think there’s some money that’s in DOT that’s currently being wasted.”

Senate Republicans want to borrow $750 million for roads over the next two years, a modest decrease from their previous positions of seeking $850 million in highway loans.

Senate Republicans want to prevent further delays on the Zoo Interchange and I-94 south of Milwaukee, Fitzgerald said. They also want to begin work on the east-west portion of I-94 between the Marquette and Zoo interchanges — an idea Walker rejected this spring.

Rep. John Nygren (R-Marinette), the co-chairman of the Legislature’s budget committee, praised Walker’s letter as a good first step but offered little reason to think it would solve the stalemate on its own.

“It’s good that the governor’s engaged and looking for a solution,” Nygren said.

Meanwhile, the DOT is seeking $341 million through a special federal highway program — more than 10 times as much as it has received through that program in recent years.

When states don’t use all their federal aid, other states can compete for what’s left over. Wisconsin has received $34 million annually on average through that program in the last five years, according to the Legislature’s nonpartisan budget office.

During that time, the state applied for between $30 million and $137 million annually. But the most the state has ever gotten since 2012 is $40 million, according to the Legislative Fiscal Bureau.

Nygren said that Assembly Republicans would be willing to provide more state matching dollars to capture such additional federal aid for highway projects. But he was skeptical that Wisconsin would see a huge jump in federal money for roads.

“Passing a budget based on (federal money) being there — I’m not sure we’re there,” he said.


Wisconsin’s Cap on Medical Malpractice Awards Unconstitutional, Courts Rules

Ruling that Wisconsin’s $750,000 cap on medical malpractice claims is unconstitutional, an appellate court said Wednesday that a Milwaukee woman who lost all four limbs should collect the $16.5 million for pain and suffering awarded to her and her husband.

“We conclude that the statutory cap on non-economic damages is unconstitutional on its face,” Judge Joan Kessler wrote in the 19-page unanimous opinion by the three-judge First District Court of Appeals panel.

Kessler added that “Wisconsin’s cap on non-economic medical malpractice damages always reduces non-economic damages only for the class of the most severely injured victims who have been awarded damages exceeding the cap, yet always allows full damages to the less severely injured malpractice victims.”

Wisconsin law caps non-economic damages in medical malpractice cases at $750,000 but does not put a ceiling on the amount that could be awarded for economic damages, such as medical costs, which in Mayo’s case was awarded at $8.8 million. That award and $750,000 has already been paid by the $1.3 billion state-managed medical malpractice insurance fund.

The case is expected to be appealed to the state Supreme Court.

Wisconsin has had various ceilings on medical malpractice damages since 1986. A $350,000 cap enacted in 1995 was struck down by the state Supreme Court in 2005 as being arbitrary and violating the equal protection provision of the state constitution. It was replaced a year later by the $750,000 ceiling.

Republican Lawmakers Want to Change the Way Wisconsin Taxes its Residents

With its largest Republican majority in decades — momentum is growing behind what could amount to more significant changes to the way Wisconsin taxes its residents, including an effort to move the state toward a flat income tax and a proposal to eliminate the personal property tax.

Todd Berry, a longtime tax policy analyst and president of the Wisconsin Taxpayers Alliance, is “not inclined to predict” any major changes to the way the state raises revenue. A proposal to repeal the personal property tax would require an adjustment in priorities. Moving to a flat tax requires more support than currently exists. Even a significant change in transportation funding — the largest source of discord among lawmakers and the governor during the budget process this year — is unlikely, he said.

What is significant in the current climate, Berry said, is that so much of the push for major tax reform is coming from lawmakers, particularly from a group of trained accountants known as the “CPA Caucus.”

The four-member group is composed of three certified public accountants — Sen. Chris Kapenga, R-Delafield, Sen. Howard Marklein, R-Spring Green, and Rep. Dale Kooyenga, R-Brookfield. Rep. John Macco, R-Ledgeview, is a financial adviser. Marklein and Kooyenga both sit on the Legislature’s Joint Finance Committee, which reviews, refines and rewrites the state budget after it is introduced by the governor.

The accountant-lawmakers have led the charge on tax policy changes large and small: eliminating 18 tax credits in three years, reducing the number of income tax brackets, reducing the number of people required to pay the alternative minimum tax and reducing the so-called “marriage penalty.”

Kooyenga, a U.S. Army Reservist and potential U.S. Senate candidate with a penchant for quoting the Broadway musical “Hamilton,” said his goal is to pull back on efforts made by politicians to “move levers” and control behavior through tax policy.

“I’m a firm believer that there should be less power in Madison and less power in D.C. And one of the ways that even Republicans have tried to assert their power is by creating mechanisms in the tax code to try to get people to do what they want to do,” Kooyenga said. “And I think that people should decide what they want to do and try to minimize the government trying to penalize or reward certain actions.”

The personal property tax, implemented in the early days of Wisconsin, when most of its governmental revenue came from property taxes, began as a tax on items like livestock, furniture, jewelry and vehicles. Its property tax counterpart — real property — covers land and buildings.

The list of exemptions to the personal property tax has grown to include, among other items, clothing, personal items, stocks and bonds, vehicles, farm and manufacturing machinery and business computers. The tax now applies, in general, to furniture, equipment, machinery and watercraft owned by businesses.

According to an analysis by the Wisconsin Taxpayers Alliance, personal property has accounted for between 2.2 and 2.6 percent of the state’s property tax base since 2005. Compared to the 40 other states with some form of a personal property tax, Wisconsin taxes less than most, but more than most of its neighbors.

While the personal property tax brings in a relatively small sum compared to other taxes, the state Department of Revenue estimates eliminating it would result in a loss of about $261 million per year in funding for schools and local governments. That’s based on a proposal introduced in April by Sen. Duey Stroebel, R-Saukville, and Rep. Bob Kulp, R-Stratford.

Depending on the proposal, the money would either be gone or accounted for with an increase to real property taxes — paid by homeowners and business owners, rather than only business owners, as it is currently.

Kooyenga said in an interview that his plan would reclassify some personal property items as real property, putting the fiscal impact below $240 million. It would also eliminate and reduce some tax credits.

“We would be replacing (the revenue),” Kooyenga said.

Heavy Truck Fee Concept Emerges in Budget Talks

Senate Majority Leader Scott Fitzgerald said the possibility of collecting a new fee on heavy trucks emerged Wednesday in his budget talks with Gov. Scott Walker and Assembly Speaker Robin Vos.

Fitzgerald, R-Juneau, said he’s not sure if Republican senators support the concept, adding they need to learn more about it. That marks a shift from just a day earlier, when Fitzgerald dismissed the proposal, offered by GOP state Rep. Amy Loudenbeck, R-Clinton, as a “nonstarter.”

The concept is the latest to be entertained by state leaders as they attempt to craft the state’s next budget. July 1 is when the budget is supposed to be passed and take effect, a deadline Walker and lawmakers now appear certain to miss.

At least four other states collect heavy truck fees, and such a proposal could generate hundreds of millions in new revenue for roads. But it also would meet strong opposition from some of the state’s most powerful business groups, including Wisconsin Manufacturers & Commerce. A lobbyist for the group, Scott Manley, slammed the proposal Wednesday as “punitive and unfair.”

“For a state that grows and produces as much as we do, it really provides a significant disincentive to produce more,” Manley said of the concept.

Still, Wednesday’s developments hinted at possible progress in budget talks. Contrast that with a day earlier, when Assembly-Senate negotiations broke down and Vos and Fitzgerald vented their frustrations to reporters, each calling the other’s budget positions “laughable.”

“It feels like things are kind of moving a little bit compared to what we saw yesterday,” Fitzgerald told reporters Wednesday.

Vos, R-Rochester, also was more optimistic Wednesday that a deal could be reached, saying the two Republican caucuses are “closer than we have been.”

Transportation is the biggest sticking point in budget talks, with Vos and Assembly Republicans maintaining the state needs a long-term revenue infusion to pay for road projects. Other issues still unresolved include how to boost funding for K-12 schools and how to cut taxes.

Walker has said he opposes increasing gas taxes or vehicle fees, the two main state funding sources for transportation, and would veto a gas tax hike if lawmakers pass one. Fitzgerald and Senate Republicans have said they won’t back either of those options because Walker won’t.

Opposing views on fee

Manley said the truck fee concept discussed by Walker and GOP legislative leaders would be collected on a per-mile basis for heavy trucks traveling on Wisconsin roads. It could generate more than $130 million a year for state roads and bridges, he said. Those figures were not confirmed independently by Walker’s office or legislative leaders.

Bill McCoshen, a lobbyist for the state’s DRIVE Coalition, a group representing business, tourism and agriculture interests that advocates for more funding for roads, said he was heartened by the truck fee discussion.

“Every credible study says our roads and bridges are some of the worst in the country, and the only way we’re going to address those is to generate new revenue,” McCoshen said.

If lawmakers don’t find more money for roads, it could mean delays to large highway projects under construction or scheduled for future construction.

Instead of new revenues, Walker has proposed $500 million in borrowing, and Fitzgerald, $850 million in borrowing, to fund road projects. But Vos and Assembly Republicans object to that approach, saying it’s unwise to put more on the state’s credit card. On Tuesday, Vos said the Assembly Republicans’ position was to refuse to discuss additional borrowing without also discussing ways to boost revenue.

But some Senate Republicans aren’t sold on the need for new revenue. Fitzgerald said Wednesday that many GOP senators think cost-saving measures must be weighed at the Wisconsin Department of Transportation.

“There’s still a lot of people that think DOT is an agency that needs significant reform,” Fitzgerald said.

Legislative leaders also have discussed highway tolling as a potential revenue source. But even if lawmakers approved it and secured a federal nod to start tolling Wisconsin’s U.S. Interstates, tolls likely wouldn’t be collected for at least four years — meaning they wouldn’t have an impact for the next state budget, covering the two-year period from July 2017 through June 2019.


Wisconsin Sees Reduction in Worker’s Compensation Rate for Second Consecutive Year

The Wisconsin Commissioner of Insurance has approved an overall 8.46% rate decrease for Worker’s Compensation (WC) premiums for business this year following a 3.19% decline last year. Some specific industries, like manufacturing, will see even greater decreases of 9.28%. This overall decrease represents a savings of nearly $170 million for employers.

“This is the second consecutive year Worker’s Compensation rates have declined in Wisconsin, reaffirming our commitment that Wisconsin is open for business,” said Governor Walker. “The magnitude of savings is a result of employers working with their employees to emphasize the importance of safety in the workplace.”

Worker’s compensation rates are adjusted yearly by a committee of actuaries from the Wisconsin Compensation Rating Bureau (WCRB). The committee studies the prior losses (claims) of hundreds of categories and professions throughout the state’s employment pool and submits a rate recommendation to the Office of the Commissioner of Insurance (OCI) who has final approval over the rates.

“Wisconsin businesses are dedicated to ensuring a safe working environment and this decrease in workers compensation rates reflects that,” said Commissioner of Insurance Ted Nickel. “These savings will allow Wisconsin businesses to continue to strengthen their ability to operate affordably and efficiently.”


Commercial Docket Pilot Starts July 1

On July 1, the Wisconsin court system will launch a three-year pilot project for the handling of large-claim business and commercial cases filed in Waukesha County Circuit Court and in the circuit courts of the Eighth Judicial Administrative District in northeastern Wisconsin.

There is also potential availability of a commercial docket for cases venued outside of those jurisdictions, when the parties agree to the change in venue, and a judge participating in a commercial docket agrees to the transfer. The commercial docket is intended to ensure that large business and complicated commercial cases are resolved timely and effectively.

“This is a significant step forward for the Wisconsin court system. It is our hope that the commercial docket will result in efficient resolutions of complex business-related controversies, and in the process, improve the efficiency of the justice system for everyone,” said Wisconsin Supreme Court Chief Justice Patience Drake Roggensack.

The Court approved the pilot project in an order issued April 11. If successful, and after a thorough review of the pilot program, the Court may consider a statewide commercial docket.

Roggensack convened the Business Court Advisory Committee in the fall of 2016 to draft a proposed rule petition to be considered in the event that the Court approved a commercial docket. The committee created the framework and forms necessary to implement the project, and the committee remains available to assist the Court with any adjustments that may be necessary moving ahead, Roggensack said.

The commercial docket will handle disputes involving, among other things: the governance of business organizations, including financial institutions; unfair competition or prohibited business activities; sales and mergers; securities sales and regulations; intellectual property rights; franchising; and cases involving claims or disputes under portions of the Uniform Commercial Code, when the amount in controversy exceeds $100,000 exclusive of interest, costs, and attorney fees.

Detailed criteria for cases to be assigned to the commercial docket, as well as cases that may be taken on a discretionary basis, are listed in the appendix attached to the Court’s order. Commercial court docket cases will be integrated with the existing circuit court eFiling system, making it easy for lawyers involved in the cases to submit and track filings.

Foxconn Expects to Expand

The chairman of Taiwanese electronics giant Foxconn said Thursday it may spend more than $10 billion to set up manufacturing in the United States, and will announce investment plans by early August for at least three states.

Terry Gou gave no new information about where Foxconn will locate a U.S. display panel factory he said in January would cost up to $7 billion to build. That announcement triggered a flurry of lobbying by state leaders hoping to attract the investment, which he said might generate as many as 50,000 jobs.

Foxconn is the biggest contract manufacturer of smartphones and other devices for Apple, Sony, Blackberry and other brands. Its success has made Gou Taiwan’s richest businessman. The company raised its profile with its purchase in March 2016 of struggling Japanese electronics brand Sharp for $3.5 billion.

The company plans to develop operations in the U.S. that combine hardware manufacturing and software development in technologies including artificial intelligence and automation, Gou said at a meeting with shareholders. Asked later at a news conference how much Foxconn might invest during the five-year plan, he said it might exceed $10 billion.

Gou mentioned Ohio, Pennsylvania, Michigan, Illinois, Wisconsin, Indiana and Texas as manufacturing states with which Foxconn hopes to work but gave no indication whether any of them might be in the investment agreement. Gou said in January that Pennsylvania was the leading candidate for the panel factory, which would work with Sharp.

Details for each state were not settled, but overall, “we will provide at least tens of thousands of job opportunities,” said Gou at the news conference.

Expansion into the United States would reduce Foxconn’s reliance on China, where it has the bulk of its operations and employs about 1 million people.



Senate GOP Unveils Draft of Health Bill

Senate Republicans on Thursday released a health-care bill that would curtail federal Medicaid funding, repeal taxes on the wealthy and eliminate funding for Planned Parenthood as part of an effort to fulfill a years-long promise to undo Barack Obama’s signature health-care law.

The bill is an attempt to strike a compromise between existing law and a bill passed by the House in May as Republicans struggle to advance their vision for the country’s health-care system even though they now control both chambers of Congress and the White House.

The Senate proposal largely mirrors the House measure with significant differences, according to a discussion draft circulating Wednesday among aides and lobbyists. While the House legislation would peg federal insurance subsidies to age, the Senate bill would link them to income, as the Affordable Care Act does.

The Senate measure would cut off expanded Medicaid funding for states more gradually than the House bill but would enact deeper long-term cuts to the health-care program for low-income Americans. It also would eliminate House language aimed at prohibiting federally subsidized health plans from covering abortions, a provision that may run afoul of complex Senate budget rules.

Like the House bill, the Senate measure is expected to make big changes to Medicaid, the program that insures about 74 million elderly and lower-income Americans and was expanded in most states under the ACA. In effect, the revisions would reduce federal spending on the program.

The Senate measure would transform Medicaid from an open-ended entitlement to one in which federal funding would be distributed to states on a per capita basis. The Senate measure would also seek to phase out the program’s expansion – although at a more gradual rate than the House version.

Yet the Senate bill is expected to go further than the House version in its approach to cutting Medicaid funding in the future. In 2025, the measure would tie federal spending on the program to an even slower growth index than the one used in the House bill. That move could prompt states to reduce the size of their Medicaid programs.

In a move that will please the health-care industry, the draft also proposes repealing all the ACA taxes except for its ‘‘Cadillac tax’’ on high-cost health plans in language similar to the House version. Senators had previously toyed with the idea of keeping some of the ACA’s taxes.

It would also eliminate Medicaid reimbursements for Planned Parenthood for one year. Federal law already prevents taxpayer funding to pay for abortions except to save the life of the woman or in the case of rape or incest. But some Republicans want to ban all federal funding for Planned Parenthood, which also provides health services such as birth control, because their clinics provide abortion services.

Like the House measure, the Senate bill would eliminate two central requirements of the current health-care law: that individuals provide proof of insurance when filing their annual tax returns and that companies with 50 or more employees provide health coverage for their workers.

In a move that is critical to insurers, the Senate measure would continue to fund for two years cost-sharing subsidies that help 7 million Americans with ACA plans. House Republicans have challenged the legality of the $7 billion in subsidies – which help cover consumers’ deductibles and copays – in court, and insurers have warned that they will have to increase premiums dramatically next year unless the federal government commits to continuing the payments.