Politics & Government

COMMENTARY: Why Corporations Like SC Johnson Need To Make Peace With Wisconsin Taxpayers

Sure we'd love to hate these corporate giants, but we need to look at our tax policies, too.

SC Johnson is not a corporate monster because the company does not pay income taxes.

However, their response serves as a larger framework about our current income tax policy, how that policy taxes the worker, and how job creation seems to be a handy tool to hammer home the justification for the exemption.

SC Johnson officials acknowledge that they did not pay income taxes from 2000 to 2008 and the reason, they say, is because they received an R&D tax credit – a tax credit that the state and federal government said they could use. However, David Cay Johnston’s story cites a PricewaterhouseCoopers document to show how this may not be the reason.

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While there are questions Patch has about how they got to the zero on their income tax returns, the question is whether or not they used (not qualified for) the tax credit and if they had a net operating loss, which would not have allowed for the credit to be used. We’ve told officials with SC Johnson that we would be happy to write a follow-up story addressing those two issues if they gave us primary documents to verify that Johnston’s story is inaccurate.

But, this discussion isn’t only about SC Johnson. However, their response reflects the complexity of our federal, and state tax policy, which was once rooted in the idea that everyone should pay their fair share in income tax, and now places that burden on workers.

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As private citizens, we pay income tax, property tax, and sales tax and we get tax credits – so do corporations. But SC Johnson’s response is compelling. Here’s what they said:

SC Johnson (SCJ) has not owed Wisconsin state income taxes for the last several years due to a 1984 Wisconsin R&D tax credit, which encourages companies to move R&D jobs to the state.  As Wisconsin income taxes are based just on the sale of SC Johnson products in Wisconsin, the company’s maximum tax obligation would be less than $500,000 absent any tax credits or deductions.  By locating its R&D facility, employing more than 500 people, in Wisconsin, SC Johnson’s R&D tax credit well exceeds what would be owed. If the legislature decides there is benefit in changing the R&D tax credit versus attracting and retaining jobs in the state, SC Johnson would of course pay whatever tax it owes.

This statement reflects how the tax credit is seen as a trade-off for job creation. Furthermore, SC Johnson officials pit the R&D tax credit against the idea of attracting and retaining jobs. So, the underlying sentiment is that the R&D tax credit creates jobs even though there is not currently an easy method for measuring whether or not this is true, said a former state auditor speaking on condition of anonymity.

The reasoning is that if the tax credit goes, the jobs go and this is the reason why we have an a la carte corporate income tax structure where corporations are holding job creation hostage and not paying income taxes. Ultimately, tax credits and job creation have become a political hot potato and no elected official would want to pull the plug on any credit that companies could claim resulted in job loss. Also, it’s common practice for communities and states to leverage one tax-friendly state against another. Wisconsin has been known to offer tax credits to keep jobs here as well.

Johnson officials are quick to point out that they employ 2,500 people in Wisconsin, spend $265 million with Wisconsin suppliers and partners, “who in turn provide jobs and pay taxes and paid more than $3 million on state sales and use taxes, as well as nearly $3 million in state property taxes.”

We know that SC Johnson does good things. They have employed thousands of people, and yes, they have created jobs when market conditions were favorable to do that, but they probably would have done so anyway given the supply/demand formula of a free market. We know they pay property taxes, sales taxes, and a multitude of other taxes. We know they hand out backpacks full of school supplies, grant money to homeless shelters, summer youth programs and a multitude of other organizations. And these are great endeavors, but you have to wonder if SC Johnson and other corporations were paying income taxes, and the tax code was simplified, would there be a need for their philanthropy at all?

So, no matter if they used the R&D tax credit to offset their tax liability or if they used the tax loophole, those are inherent elements that are part of the tax policy our government has created. But corporations that pay nothing in income tax for years and then hold those jobs hostage is a valid concern; one that is a worthwhile discussion for policy makers and corporate decision makers to consider, especially when a huge disparity exists between the rich and the poor, and we have a shrinking middle class.

Because at the end of the day, we’d all like to buy products SC Johnson, Harley-Davidson or any company makes. We’d also like to be able to afford them and not be taxed to death, and we’d all like to have a job.


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