Fund Public Education through Corporate Taxation


The Madison Metropolitan School District (MMSD) is facing a $30 million shortfall for the 2010-11 budget.  To add to the bad news, an assessment prepared by Durrant Engineering indicates that the district faces approximately $86 million in “pressing maintenance needs.”1  According to the budget summary,

Since 1993, the Madison School District has created efficiencies and made reductions in programs and services totaling approximately $60 million.  Over that 17 year period, these reductions and efficiencies were necessary for the school district to work with annual expenditure increases that outpaced allowable revenue increases under state law.

The document goes on to note, “Madison Schools is receiving a 15% reduction ($7.8 million) in school aids from the state for 2010-11.  This is after a similar 15% reduction ($9.2 million) in school aids to Madison Schools for the 2009-10 year.”  On Monday, March 23rd the Madison School Board voted unanimously to claim $4 million in tax authority granted by voters in a 2008 referendum, plus another $7.7 million allowed under revenue caps.  That reduces the budget gap only to $18.1 million: $1.2 million in cuts are still to be made, and a budget hole of $16.9 million remains.2  When local school boards are faced with such deficiencies, they can make up the difference by further increasing property taxes, cutting costs, or a combination of the two.

Meanwhile, in the midst of the continued recession, the city is discussing a public investment of $16 million in Tax Increment Financing (TIF) subsidies to fund the remodeling of the Edgewater hotel.  With our schools’ infrastructure crumbling and threats to close schools mounting every budget cycle, Mayor Dave Cieslewicz thinks that putting public funds toward a bloated Lake Mendota waterfront project should be Madison’s priority.  Moreover, even as funding for public education shrinks year after year, the city granted an additional $227,000 above and beyond the original request of $58.5 million for the Madison Police Department’s 2010 budget.  Former candidate for Madison mayor Burt Zipperer stated at the public hearing: “Spending caps on schools — what isn’t covered under spending caps?  Security.  Because they realize if you are not going to meet kids’ needs, you better have security, and lots of it.”  Which, according to the 2010 police budget, translates into additional positions in what they refer to as the “innovative, new Crime Prevention and Gang Unit” and approximately 15 new police vehicles for the MPD fleet.

There is another elephant in the room that is being ignored when considering how to make up for the state’s budget shortfalls.  That elephant is the fat cat corporations that continually get away annually without paying corporate income taxes to the state of Wisconsin.  In fact, if Wisconsin corporations were paying taxes at the United States average, this would annually generate approximately $1 billion in additional revenue for state and local governments.  According to research by Dollars & Sense magazine back in 2007, “among corporations with more than $100 million in revenue, more than 60% paid no state income tax.”3  These companies include Wisconsin-based Kohl’s, Harley-Davidson, and Johnson Controls.  Other offending companies include corporate giants like Kraft Foods, McDonalds, Microsoft, and PepsiCo.  The startling statistic reported in “Wisconsin’s Revenue Gap” by Institute for Wisconsin’s Future in 2007 is that “during the decade from 1996 to 2006 . . . total personal income taxes rose 47%, sales taxes rose 52% and homeowner property taxes grew 62%.  But corporate income taxes grew only 23%.”4

Wisconsin residents should look to the example set by voters in the state of Oregon.  In January, Oregonians voted and passed Measure 66 and 67.  Measure 66 raises taxes for a household earning more than $250,000 ($125,000 for individuals) and eliminates income taxes on the first $2,400 of unemployment benefits received in 2009.  Measure 67 increases the business minimum tax and corporate profits tax and raises the $10 corporate minimum tax to $150, a law that had been unchanged since 1931.  Both of these measures effectively raise an estimated $727 million to provide funds for public services.5  The passage of these measures demonstrates that the working class are fed up with suffering from budget cuts and are eager to send a message to the rich that they should pay their fair share of taxes.

The Institute for Wisconsin’s Future put out a catalog of tax reform options for the state in 2008.  There are three progressive measures that could provide the biggest relief for working-class taxpayers in the midst of a recession that is showing no signs of going away.  The first measure would be to increase the top marginal tax rate from the current 6.75% up to 7.75% on Wisconsin’s higher income earners — taking a page from Oregon’s playbook.  The second measure would be to tax 100% of capital gains, as does the federal government.  Wisconsin now excludes 60% of capital gains on assets held more than one year.  The third measure would be to eliminate the itemized deductions credit, which mostly benefits higher-income taxpayers because they tend to have higher deductible expenses.  In 2006, 9% of filers had income of $100,000 and more and 97% of them benefitted by receiving 54% of their taxes reduced by this credit.6

With 17 years of continued budget cuts and balancing acts, compounded by the reality of $86 million in “pressing maintenance” necessary for the crumbling schools of the Madison Metropolitan School District, it is clear that we need to revolutionize the way we fund our public schools.

1  Susan Troller “Chalkboard: Madison School Repairs to Cost $86 million; Is Referendum Next?” (Cap Times, 5 April 2010).

2  MMSD Budget & District Profile – 2010-11 Executive Summary

3  “Psst!  Corporations Don’t Pay Taxes!” (28 February 2007).

4  Wisconsin Legislative Reference Bureau, State of Wisconsin Blue Book, qtd. in “Wisconsin’s Revenue Gap — An analysis of Corporate Tax Avoidance,” Institute for Wisconsin’s Future (December 2007).

5  “Oregon Tax Hike Vote, Ballot Measures 66 and 67 (2010),” Ballotpedia.

6  “The Catalog of Tax Reform Options for Wisconsin,” Institute for Wisconsin’s Future and Wisconsin Council on Children and Families (November 2008).

Andy Ambler is an activist and community organizer in Madison, WI.   He is a member of the International Socialist Organization and Single Payer Action Network of Madison.

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