Doyle Guts a HOG
By Charles J. Sykes
Who will be Jim Doyle’s Kimberly Clark?
During the 1980s, Kimberly Clark’s CEO Darwin Smith moved Kimberly-Clark’s worldwide headquarters to Texas because of Wisconsin’s hostile business climate. Smith’s complaints and the company’s dramatic departure focused attention on then-Governor Tony Earl’s decision to raise taxes during a recession and precipitated Earl’s defeat in 1986.
Flash forward two and half decades: Doyle is pushing massive tax increases during a recession, but despite complaints from the business community, it has yet to come up rallying point, a face, or a company that symbolizes the current crisis.
Maybe it will be Harley Davidson.
The iconic Wisconsin manufacturer announced last week that because of declining earnings, it was planning to cut as many as 400 manufacturing jobs. Lagging sales of motorcycles accounted for most of the earnings decline, of course, but Harley also announced that it was taking a charge of $22.5 million “due to a change in Wisconsin tax law that occurred mid-quarter.”
Company officials later said in a conference call that Harley’s effective income tax rate in the first quarter of 2009 was 47.6% compared to 36% in the same quarter last year. This increase, they said, was due to “an unanticipated change in Wisconsin tax law,” presumably the Doyle-backed tax hike for “combined reporting” rammed through in just three days earlier this year.
Do some quick math here: $22.5 million is the equivalent of 400 jobs paying an average of $56,250 in salary and benefits. Of course, there is no guarantee that the jobs would have been saved even without the tax hikes, but the juxtaposition was jarring nonetheless.
As it was struggling to stay afloat, one of the state’s most important manufacturers was hit with a tax hike that stripped $22.5 from its bottom line -- $22.5 that went to state government rather than to building motorcycles or paying workers.
Think of those 400 Harley jobs as the first down payment for the jobs that will be killed by the business taxes yet to come. Thus far, Wisconsin has lost more than 140,000 manufacturing jobs since 2000, and the trend is accelerating under Jim Doyle.
Just this month, Thomas Industries announced that it was moving nearly 300 jobs from its plant in Sheboygan to its plant in Monroe, Louisiana. The move came after vigorous lobbying from Louisiana’s Republican Governor Bobby Jindal and a half-hearted counter-effort from Doyle.
State Senator Joe Leibham, who represents the Sheboygan area, has been vocal in accusing the governor of dropping the ball, noting that “during the ten-week negotiation process, [Doyle] only made one phone call” to Thomas’s parent company, Gardner Denver.
Leibham says that he asked Doyle for help saving the Thomas jobs in early February, but that “the Governor chose not to contact anyone at Thomas until February 20, eighteen days later.”
“My second request of the Governor was that he, or a high-ranking member of his administration, personally visit with Thomas’ Sheboygan management team to present our state/local incentive package. After failing to receive a commitment from the Governor’s Office, we scheduled our meeting with Thomas on February 25, just two days before their deadline. Unfortunately, Governor Doyle was unable to attend because he was in Spain reviewing their train system. The highest ranking administrative official at this important meeting with Thomas was a bureaucrat from the Department of Commerce.”
But despite that stinging criticism, it is doubtful that Doyle’s personal involvement could have changed the outcome.
The problem is not Governor Doyle’s indifference to business; it is the governor’s open hostility. Let us count the ways the governor is telling business that they aren’t welcome here:
*On top of already enacted business taxes, his proposed high income tax bracket of 7.75%, which would apply to many small businesses. Total tax hike: $311.7 million for individuals and small businesses.
*His proposal to slash the capital gains exclusion Total tax hike: $180 million for individuals and corporations.
*His proposals for quarterly withholding by non-resident pass through entities ($38.5 million), deleting an income tax deduction for domestic production incomes ($71.7million), throwback sales ($95.2 million) and on and on, until you get a total of $764 million in potential tax increases on employers in the midst of a job killing recession.
Maybe Governor Doyle didn’t pick up the phone to talk to executives from Thomas for the same reason he didn’t pick up the phone to talk to the bosses at Harley: his policies speak far louder than anything he could have said.
-April 23, 2009