Gov. Scott Walker has called off plans to sign the 2011-’13 budget bill at a private Green Bay-area company run by an executive with eight felony convictions, a spokesman announced today.
The announcement came less than an hour after the Journal Sentinel contacted the governor’s office to ask about the executive’s criminal history.
Walker aide Cullen Werwie said this afternoon that the event will now be held at 2 p.m. Sunday at Fox Valley Metal-Tech Inc. in Green Bay.
Werwie acknowledged that Walker’s advance team had erred by not conducting a thorough background check on Gregory A. DeCaster, chief executive officer of Badger Sheet Metal Works in Ashwaubenon, the original location for the ceremony.
DeCaster was convicted of eight felony counts of income tax evasion in the mid-1990s and was sentenced to three months behind bars. He was also fined $10,000, ordered to pay another $3,700 to cover prosecutors’ expenses and given two years of supervised release.
“It was something we wish we would have known on the front end,” Werwie said.
Progressives have found precious little to like in the 2011-2013 budget Gov. Scott Walker will sign into law Sunday at a ceremony in Green Bay.
But perhaps the most regressive item is a new tax loophole — disguised as an economic development tool — that is projected to cost the state hundreds of millions in lost revenue over the next decade.
Walker’s budget creates two new provisions to provide income tax shelter for capital gains — or profits made from an investment like stocks, bonds, real estate or precious metals.
Right now, Wisconsin exempts 30 percent of capital gains on assets held at least one year and allows 100 percent exclusion for gains on the sale of business assets to a family member or sale of small business stock.
But the new budget makes all capital gains free from state income tax as long as the money is reinvested in a qualified Wisconsin business for at least five years. A separate provision allows taxpayers to defer any tax on capital gains if they reinvest the profits within 180 days to a Wisconsin business. Tax on the deferred gain would be paid when the new investment is sold.
At first blush, it sounds like a good way to encourage investment in state-based companies. Grow your own, so to speak.
In reality, however, it’s a tax accountant’s dream and a nice loophole for upper income residents, says Andrew Reschovsky, professor of public affairs and applied economics at UW-Madison.
“The benefits of this provision will almost certainly be concentrated among the wealthy,” he says.
That’s because the wealthy also book the big capital gains. According to this Legislative Fiscal Bureau report, taxpayers with incomes over $150,000 represented only 10 percent of 2009 state tax filers but claimed 52 percent of the capital gains exclusions.
For the vast majority of taxpayers, the only real capital gain in their lifetime comes from the sale of a house — and that gain is already exempt from state and federal taxes up to $250,000.
But an investor in Mequon, for example, with $100,000 in taxable gains from the sale of a bond or gold could avoid paying state tax by buying stock in any company that registers with the new Wisconsin Economic Development Corporation.
Reschovsky also details the conclusions of his study of the impact on educational funding in the state here:
“The governor’s budget proposal would result in larger per-pupil reductions in general aid in districts with the highest levels of student poverty,” Reschovsky adds. “The average general aid reduction would be $279 in districts with fewer than 10 percent of pupils from poor families, and $524 in districts with more than 60 percent from poor families.” Wisconsin has 95 school districts where more than half of the students are eligible for the federal government’s program that provides free and reduced price lunches for pupils from economically disadvantaged families. He finds that the majority of these districts would have to reduce property taxes by more than $200 per student.
For me, Governor Walker’s original choice of signing venue seems entirely appropriate.