FOX 11 Investigates: Many corporations pay no state income tax
This story was updated at 6:20 p.m. to clarify the number of workers being laid off at Oshkosh Corporation.
Nobody likes to pay income taxes to the state. But it's the law and we all do it. Right? Well not exactly.
Oshkosh Corporation is one of Northeast Wisconsin's most successful businesses. The truck manufacturer reported net sales of $7.5 billion in 2011. And net income of more than $273 million. But that same year with all that money coming in, Oshkosh Corporation paid net state income taxes of zero.
"Yeah, that's a neat trick," said Kevin Quinn, economics professor at St. Norbert College. "That has been one of the more criticized elements of the tax code: the ability of firms to be able to do that."
Quinn is well-versed in the ins and outs of taxes. He says how much a company pays comes down to two things - sophisticated accounting and political deals.
"It may make economic sense, I'm not saying it does or doesn't," said Quinn. "It may make economic sense for this to happen, but it certainly doesn't pass the fairness test."
Oshkosh Corporation, though, isn't the only high-profile Northeast Wisconsin company able to essentially pay no state income tax.
See which corporations are receiving tax credits:
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FOX 11 Investigates filed an open-records request with the Department of Revenue, inquiring about two dozen of the largest businesses in the area. Big name, money making companies like Kohler Company in Kohler, KI in Bellevue, Schneider National in Ashwaubenon, Mercury Marine in Fond du Lac, and Green Bay Packaging in Green Bay.
Records show all paid nothing to the state in net income taxes for the years 2011 and 2012 - the last two years available from the Department of Revenue.
The state agency does not specify why a company would pay nothing.
But reasons could include the company is a non-profit, exempt from paying income tax, as is the case with Thrivent Financial for Lutherans in Appleton and ThedaCare in Neenah.
Corporations that lost money or carried over losses from previous years could also end up with a net income tax of zero, as was the case with Associated Banc-Corp in Green Bay.
Some corporations are set up as partnerships, with the partners paying the income tax, like Schreiber Foods in Green Bay.
And some like Oshkosh Corporation have been able to get some help in the form of tax breaks from the state.
"Governments regularly cut deals. And businesses that maybe will locate hundreds or thousands of jobs are in a pretty good situation," said Quinn.
In the case of Oshkosh Corporation, records show it received a tax credit from the Wisconsin Economic Development Corporation during its 2011 fiscal year. That was worth more than $20 million to the company. The requirement of the tax credit? Oshkosh Corporation had to retain 3,566 jobs - which it did.
Oshkosh Corporation offered a further explanation to FOX 11 Investigates, stating tax credits are also achieved by spending millions on capital improvements and utilizing Wisconsin vendors. The statement points out, "Oshkosh Corporation ('Oshkosh') endeavors to pay all taxes it is legally obligated to pay." In Oshkosh's case taxable income has also been offset by what the company calls "losses" in previous years.
"When you give corporations tax breaks someone's going to have to pick up the tab for them. It's either going to be the taxpayers by having higher taxes or by having less services," said Scot Ross, executive director of the Democratic-leaning government watchdog group One Wisconsin Now.
Ross's group conducted its own look at who pays income tax in Wisconsin.
"Two-thirds of Wisconsin corporations pay no state income tax and this is at a time people feel they're paying more and more income tax than they ever had," said Ross.
Information obtained from the state's Department of Revenue confirms in 2011 65 percent of corporations paid nothing in state income tax.
Reed Hall heads up the Wisconsin Economic Development Corporation, which works to grow Wisconsin business and create jobs, by providing select companies with tax credit incentives.
WEDC awarded $330 million in tax credits to Wisconsin companies in 2013.
"We didn't give out, we loaned people who have promised us job creation and we've given them tax credits they're eligible for," said Hall. "They make the investment, hire the people and claim the tax credit on their income tax return for the state of Wisconsin through the Department of Revenue."
"Is it turning out to be a wise investment for the state?" FOX 11 Investigates reporter Mark Leland asked Hall.
"So far absolutely," said Hall. "We're choosing companies that will grow in Wisconsin when we're making awards."
WEDC boasts that due to the $330 million awarded last year, private companies receiving the money spent another $1.2 billion toward capital investments. Hall says last year's awards are also responsible for the creation or retention of more than 37,000 jobs.
Kohler Company in Kohler confirms receiving a variety of tax credits from Wisconsin in 2011 and 2012 to help "offset corporate income tax." But the company points out that doesn't mean it pays no tax to Wisconsin. Kohler issued a statement to FOX 11 Investigates saying in part, "Kohler did pay significant sales and use tax, payroll tax, unemployment tax, and property taxes in Wisconsin."
It's fair to say all of the companies paid those taxes. But is the selective distribution of tax credits fair.
"It doesn't look fair, especially when we believe, okay, everyone's supposed to be paying their fair share, whether they're corporations or individuals or whatever," said Quinn.
"Our job, our jurisdiction is creation of jobs, helping businesses move forward in the state of Wisconsin so they have the opportunity to pay more taxes," said Hall.
But that brings us back to Oshkosh Corporation. Tens of millions of dollars in tax credits offered up in the past to retain jobs and help the business grow, is no guarantee of long-term success. Oshkosh Corporation is now facing job cuts due to a soft market for its products.
Oshkosh Corporation announced last month it will lay off 760 workers this summer.