Paul Jay: CEO and Senior Editor, The Real News Network Posted: February 24, 2011 03:58 PM
Here’s an alternative “something has to give” plan for Wisconsin
Something has to give, say people backing Wisconsin’s governor, Scott Walker. And that something just has to be the wages and collective bargaining rights of public sector workers.
Early in this epic battle, Wisconsin’s Journal Sentinel’s editorial board wrote, on February 12, “Walker is right to do this. He must insist that state workers pay a bigger share of their benefits. And he’s right to take steps to compel them to do so… Walker must fill a gaping budget hole of $137 million for the fiscal year that ends June 30 and a much larger imbalance in the next two-year budget. Something has to give.”
The hole by 2013 is expected to be around $3.6 billion, so a few more things are going to have to give if Governor Walker’s going to crack that nut. But, hey, everyone’s going to make a sacrifice, right? So says the Wisconsin Club for Growth. They’re the outfit that says, “our leaders must stand up to the tax and spend mentality in Madison and work tirelessly to cut taxes and unleash the power of the free-market.” The Club for Growth should be called the “Club for Greed” — that’s what Mike Huckabee told The New Yorker magazine in 2007.
Here’s a television ad they ran to support Governor Walker:
“All across Wisconsin, people are making sacrifices to keep their jobs: frozen wages, pay cuts, and paying more for health care. But state workers haven’t had to sacrifice. They pay next to nothing for their pensions and a fraction of their health care. It’s not fair! Call your state legislator and tell them to vote for Governor Walker’s Budget Repair Bill. It’s time state employees paid their fair share, just like the rest of us”.
While public sector workers failed to heed the call of the Club for Growth, some people who benefited most from the “unleashed power of the free-market” are making their sacrifice.
Wisconsin retail magnate John Menard, from Eau Claire, Wisconsin, dropped to number 51 from number 44 last year on the Forbes list of the 400 richest Americans. Now, his net worth did climb from $5 billion in 2009 to $5.2 billion in 2010, but imagine how he felt the day he opened Forbes and found his rating had gone down.
Herbert V. Kohler Jr., the plumbing giant from Kohler, Wisconsin, made an even bigger sacrifice. His net worth went from $3 billion in ’09 to only $2 billion in 2010. His Forbes ranking fell from 97th to 182nd.
This should make Mr. Kohler’s workers feel better about accepting their latest contract that includes a two-tier pay structure. Current workers, who make an average of $22.50 an hour at Kohler plumbing will have their wages frozen for five years. New workers will make $14.50 an hour. Wisconsin’s Harley-Davidson and Mercury Marine won similar contracts. In all three cases, workers were made to understand their choice was to accept the concessions, or the companies would move out of Wisconsin.
No wonder, according to the Wisconsin Club for Growth, these workers should demand that public sector workers share their fate. It’s clear the government can’t threaten to leave the state to win similar concessions, so this legislation must be needed to make it all fair.
Unlike greedy public sector workers, joining their fellow Wisconsinites in taking the fair share of the pain were:
— Donald Schneider of Schneider National Inc., a Green Bay trucking company. He held his wealth at $2.5 billion, but dropped from number 123 on Forbes’ list to number 144.
— Afton, Wisconsin’s Diane Hendricks, of ABC Supply Co. Inc., saw her ranking fall from 158th to 170th. Yet she found some solace in the fact her net worth grew by $100 million to $2.1 billion.
— Members of the Johnson family of Racine, Wisconsin, bucked the trend, apparently, and refused to share the burden. They were four family members at 182nd on the list and $2 billion each. That was $50 million more and one ranking better than they did in ’09.
— Same goes for James Cargill of Birchwood, Wisconsin. His net worth grew from $1.6 billion to $1.9 billion and a ranking that went from 220 last year to 205 in 2010.
So, we’re told there’s a dire emergency to find $137 million by June and $3.6 billion by 2013. Something has to give. But why is it the public sector workers? I have a couple of alternative suggestions.
Thirty million’s all the governor’s apparently going get out of the concessions he’s demanded from public sector workers on their pension and health care payments, and for some reason that’s beyond me, the unions have agreed to it.
But here’s a much easier way to raise the dough. Just go back to 2008 levels of state-legislated estate taxes. According to the Wisconsin Department of Revenue, “no state estate tax has been collected for deaths occurring on or after January 1, 2008.”
Wisconsin picked up $158.8 million in 2008, so if that tax were collected for 2009 and 2010, there’d be enough to fill the short-term hole and perhaps give those workers at Kohler, Mercury Marine, and Harley Davidson a bit of a tax break.
Now let’s get out the heavy equipment and fill that $3.6 billion hole.
In 2001, estates paid 55 percent federal tax after the first $675,000, which was exempt. It had been that way for around 85 years. After the Bush presidency, in 2009 the rate was down to 45 percent after $3.5 million was exempt. For the next two years, in a deal negotiated by President Obama and the Republicans, the rate will be 35 percent after an exempt $5 million.
So, here’s my “something has to give” plan. How about Wisconsin passes a law that takes the estate tax level back to 2001? In other words, the state adds 20 percent to the current 35 percent federal tax. And let’s say the first million’s tax free. The state would have to establish its own rules on what was taxable; the federal guidelines just create too many ways to avoid the tax.
By my math, the collective net worth of the esteemed group on the Forbes 400 from Wisconsin mentioned above comes to around $21.7 billion. That would make Wisconsin’s share of their estates at the time of passing around $4 billion if you follow my plan. We just paid down the debt.
Now, while the Wisconsin Group for Growth calls for sacrifice, I’m sure even they wouldn’t expect these billionaires to voluntarily die by 2013. But if the state knows the money’s coming in, it shouldn’t be too hard to work out the finances.
For the libertarians in the audience, consider this. If you believe that capitalism works when it’s truly the survival of the fittest, doesn’t such concentrated wealth handed down from generation to generation defeat that objective?
The obvious other objection to my plan is that these billionaires will take flight to parts unknown to avoid the tax, somewhat the way they threatened to pull their companies out of Wisconsin if workers didn’t agree to the two-tier pay structure.
But there’s ways of dealing with all of this. As far as the estate tax goes, a real federal estate tax with a proper share going to the states would solve part of the problem. Failing that, the state could go after fixed assets like houses and office buildings. I’m sure if the legal brains working in the public service set their minds to it, they can come up with all kinds of effective measures. While they’re at it, how about a law that says if you move your company out of the state during a labor dispute, the state will no longer buy any of your products?
State governments, if they were really interested in the debt and not breaking unions, could use public pressure. Maybe even the Wisconsin Club for Growth will take out some more ads calling on