Month: April 2021

Consumer-Fueled Economy Pushes GDP to 6.4% First-Quarter Gain

Gross domestic product, the sum of all goods and services produced in the economy, jumped 6.4% for the first three months of the year on an annualized basis. Outside of the reopening-fueled third-quarter surge last year, it was the best period for GDP since the third quarter of 2003.

“This signals the economy is off and running and it will be a boom-like year,” said Mark Zandi chief economist at Moody’s Analytics. “Obviously, the American consumer is powering the train and businesses are investing strongly.”

Consumers, who account for 68.2% of the economy, accelerated spending by 10.7% in the quarter, compared with a 2.3% increase in the previous period. The expenditures were largely focused on goods, which increased 23.6%, but spending on services, which had been the missing link in the recovery, still grew by 4.6%.

On the goods side, spending exploded by 41.4% on durable goods like appliances and other long-lasting purchases.

While the numbers indicated that many used the free money to spend, they also tucked a good portion of it away, as the savings rate soared to 21%, from 13% in Q4.

“With the elevated saving rate, households are still flush with cash and, now that restrictions are being eased as the vaccination program proves a success, that will allow them to boost spending on the worst-affected services, without needing to pull back too much on goods spending,” wrote Paul Ashworth, chief U.S. economist at Capital Economics.

Some Wisconsinites Who Declined to Return to Unsafe Jobs Could Be Eligible for Federal UI Benefits

Tens of thousands of people in Wisconsin whose applications for COVID-19 pandemic unemployment benefits were denied could be eligible for up to 79 weeks of unemployment payments.

There are three main categories of newly eligible workers:

  • Those who declined to return to work at a site that wasn’t complying with COVID-19 safety standards, such as requiring face masks and physical distancing.
  • Those working for an educational institution who became unemployed or partially unemployed after COVID-19 scrambled workers’ schedules.
  • Those who were laid off or had their hours reduced as a result of COVID-19 measures, including restaurant workers.

Officials with the state Department of Workforce Development said they would be mailing notices to nearly 28,000 people who were denied benefits under the federal Pandemic Unemployment Assistance program to let them know they are eligible to reapply under the expanded guidelines. If they were denied before but found to be eligible now, they could be paid for the entire period of the pandemic thus far.

The Biden administration announced expanded eligibility for the federal program in February after President Joe Biden in an executive order said workers whose employers didn’t follow safety protocols could get the benefits. The Wednesday announcement by DWD follows from that executive order and guidance from Biden’s Department of Labor.

Wisconsinites who weren’t previously denied federal Pandemic Unemployment Assistance can also apply under the expanded eligibility. However, they’ll be limited in the number of weeks of back payments they can claim.

Governor Signs Bipartisan Bill to Allow Worker’s Compensation Benefits for PTSD for Public Safety Officers

Gov. Tony Evers signed into law Senate Bill (SB) 11, now Wisconsin Act 29, which will allow public safety officers—including law enforcement and firefighters—who have been diagnosed with post-traumatic stress disorder under certain conditions to receive worker’s compensation benefits.

“We know the toll post-traumatic stress can take on our first responders might otherwise go unseen, but today we’re going to help make sure it doesn’t go unheard,” said Gov. Evers. “We’re saying today that we want to dismantle that stigma around post-traumatic stress and mental health—we want our first responders to know that we see these effects, we’re going to call it like it is, and there’s no shame in talking about it or getting help.”

SB 11, now Wisconsin Act 29:

• Allows payment of worker’s compensation benefits if a public safety officer, such as a law enforcement officer or firefighter, is diagnosed with post-traumatic stress disorder by a licensed psychologist or psychiatrist, and the mental injury is not accompanied by a physical injury if if proven by a preponderance of the evidence and the mental injury is not a result of a good faith employment action by the employer; and

• Limits the liability for treatment of such injuries and claims to no more than 32 weeks after the injury is first reported, and restricts compensation for such injuries and diagnoses to three times within an individual’s lifetime regardless of a change in employment status.


President Biden to Order Raising Federal Contractor Minimum Wage to $15

President Biden on Tuesday is expected to sign an executive order raising the minimum wage for federal contractors to $15 by March 2022.

At that time, the order will result in a 37-percent raise for federal contractors making the current contracting minimum $10.95, and setting their salary at over double the regular statutory federal minimum wage, which has been stuck at $7.25 since 2009.

Biden’s order would also phase out the tipped minimum wage, which stands at $7.25 by 2024, and set minimum wages for workers with disabilities on par with the standard minimum wage for contractors.

Federal agencies will have to begin incorporating the new wages into their contract solicitations by January 30, 2022, for implementation no later than March 30.

The new wages will apply to existing and multi-year contractors when their contracts receive their annual renewals, meaning some workers won’t see the benefits until later in the year.

IRS Provides Safe Harbor for Small Businesses to Claim Deductions relating to First-Round PPP Loans

Last Thursday, the Treasury Department and the Internal Revenue Service issued Revenue Procedure 2021-20 PDF for certain businesses that received first-round Paycheck Protection Program (PPP) loans but did not deduct any of the original eligible expenses because they relied on guidance issued before the enactment of tax relief legislation in December of 2020.

Under prior guidance, businesses that received PPP loans to cover payroll costs, interest on covered mortgage obligations, covered rent obligation payments, and covered utility payments could not deduct corresponding expenses.

With the Dec. 27, 2020, enactment of the Consolidated Appropriations Act, 2021, businesses now may claim these deductions even though they received PPP loans to cover original eligible expenses. These businesses can use the safe harbor provided by this guidance to deduct those expenses on the return for the immediately subsequent year.

Governor Creates $420 Million Grant Program for Small Businesses, Vetoes GOP Legislation to Allocate New Federal Aid

Gov. Tony Evers is using $420 million of the billions in federal relief funding heading to Wisconsin to help small businesses that lost revenue because of the COVID-19 pandemic.

Evers on Thursday announced a new grant program funded by the federal American Rescue Plan Act that would provide $5,000 grants to Wisconsin businesses that have an annual gross revenue between $10,000 and $7 million — about 84,000 would qualify.

The Democratic governor also on Thursday vetoed Republican lawmakers’ plans for the federal funding, which would have spent the money in ways that federal authorities likely won’t allow.

Among the bills vetoed Thursday is one that would give property owners a payment equal to 10% of their last property tax bill. That would account for $1.1 billion of the federal funds the state is receiving. In addition, under their plans the state would have spent $500 million to pay off debt, $310 million to shore up the state’s unemployment fund, $308.5 million to repair roads and bridges, and $68.2 million to upgrade communications equipment and establish a mental health crisis center in northern Wisconsin.

Other bills vetoed Thursday appear to be in keeping with federal rules, according to the fiscal bureau. Under those provisions, the state would provide $500 million for broadband, $200 million for small businesses, $150 million for long-term care facilities, $75 million for tourism efforts, $61 million for lead pipe replacement and environmental efforts, and $50 million for rural economic development.

Senate Majority Leader Devin LeMahieu, R-Oostburg, and Assembly Speaker Robin Vos, R-Rochester, said Evers should work with the Legislature on how to spend the money.

“The governor just sent a clear message to the people of Wisconsin that they will have little to no say in how their federal tax dollars are spent,” LeMahieu said in a statement about the vetoes. “He has, once again, rejected the opportunity to work with legislators on even a basic spending plan. This is not good government.”

Governor Evers noted his grant program provides more than double what Republicans planned for small businesses.

“The Legislature’s proposal to spend just a small portion of our American Rescue Plan funds on small businesses simply won’t cut it for me,” Evers said in a statement.



Audit: Wisconsin Economic Agency’s Performance Improving

Wisconsin’s troubled economic development agency improved its performance over the past fiscal year but it still must sharpen its oversight of tax credit contracts, policies on closing contracts and the accuracy of online data, according to an audit released Wednesday.

The Legislative Audit Bureau’s biennial review found the quasi-public Wisconsin Economic Development Corporation largely complied with state law and its contracts when administering tax credits, loans and grants to businesses in fiscal year 2019-20. By December, the agency had awarded about $250 million to businesses to help them through the pandemic.

The amount of past-due loans decreased from $7.6 million to $6.6 million in 2019 and 2020. The audit attributed the decline to WEDC’s writing off loans and amending contracts to defer repayments.

The agency’s largest tax credit awards, meanwhile, mostly went to historic redevelopment projects in the last fiscal year.

The top 20 tax credit awards the agency gave out totaled $44.5 million, of which $32.4 million went to projects through the state’s Historic Preservation Tax Credit program. Nine of WEDC’s 10 largest tax credit awards in the past fiscal year supported historic redevelopment projects. The Madison startup Capio Biosciences received the fourth-largest tax credit award for a $3 million incentive it received as part of the state’s qualified new business venture program, which supports investments in early-stage businesses.

WEDC CEO Melissa Hughes wrote in a three-page response to the audit that her staff has been working on ways to administer and track enterprise-zone wages and plans to close tax credit awards in a more timely manner and is working to make online data “more robust and digestible.” She said she will present an action plan to the Legislature’s audit committee within the next few months.

New State Contract Offers Foxconn up to $80 million in Tax Incentives

The renegotiated contract between Foxconn Technology Group and the State of Wisconsin offers the company up to $80 million in tax credits if the company hits certain hiring and investment targets. Specifically, the new deal requires the company to hire 1,454 qualified workers at an average wage of $53,875 and invest $672 million in capital spending.

The deal dramatically cuts the potential incentives available to the company under a previous agreement negotiated by former Gov. Scott Walker. That deal offered up to $2.85 billion in tax incentives if the company created 13,000 jobs and invested $10 billion.

Hitting the job targets would earn the company $20.3 million in tax credits while the capital investment targets are worth another $40 million. Another $19.7 million, earned with previous capital investment, would be available if the company created more than the 1,454 jobs included in the contract.

Not only does the new deal set lower job and investment targets, it also offers less of a credit for each dollar the company pays in wages and investment. Under the original deal, Foxconn earned a 17% credit on wages and a 15% credit on capital investments. The new deal drops those figures to 7% and 10% respectively, the same rates available to other companies under Wisconsin’s enterprise zone tax credit program.

In exchange for the smaller incentives, Foxconn is now free to earn credits on any economic investment activities related to operating a technology and manufacturing ecosystem. The previous deal had required the company to build a Gen. 10.5 LCD screen fabrication facility in Mount Pleasant, a plan the company had abandoned by the spring of 2018.

The deal also adds Foxconn Industrial Internet as an eligible tax credit recipient. Fii is a publicly traded company that was spun off from Foxconn’s parent company in recent years. It has already been making investments on the Mount Pleasant site where Foxconn originally planned to build its LCD plant.

Finally, the new contract plays out over a dramatically shorter timeframe. The previous deal ended at the end of 2032 while the new one ends in 2025.

Property Taxes would See Slight Increase under Governor’s Proposed State Budget

Property taxes on the median-valued home in Wisconsin would increase by about $85 over a two-year span under Gov. Tony Evers’ proposed 2021-23 biennial budget, according to a new report from the nonpartisan Legislative Fiscal Bureau.

However, the bureau also reports that while the total net tax bill on a median-valued home is expected to increase in both years of the budget, the increase in taxes is slightly lower than what it would have been under current law over the two-year span.

The bureau estimates the tax bills on a median-value home — valued at $197,200 according to 2020 preliminary estimates — would be $3,337, a 0.7% increase, in 2022 and $3,400, a 1.9% increase, in 2023 under the governor’s budget. Under those estimates, the owner of a median-valued home would pay $22 more in 2022 and $63 more in 2023 on their tax bill. All told, the end result would be an estimated $12 reduction to the homeowner’s tax bill over the biennium when compared with current law.

The bureau reports that Evers’ proposed changes to school district levies would result in the largest impact on property taxes — representing a $33 reduction for a median-valued home over the biennium.

Figures provided by LFB are estimates for the entire state. Tax impacts on individual municipalities would vary considerably.

Foxconn, State of Wisconsin Reach New Deal on Scaled Back Project

Foxconn Technology Group has reached a new deal with reduced tax breaks for its scaled back project in southeast Wisconsin.

Gov. Tony Evers and the world’s largest electronics manufacturer announced the new deal on Monday. Details of the new agreement were not immediately released.

It was scheduled to be approved at a Tuesday meeting of the Wisconsin Economic Development Corp., the state’s top jobs agency that previously negotiated the initial deal with Foxconn.