>> A closer look now at tax credits.
The manufacturing and agriculture tax credit was
passed in 2011 to help two of our cornerstone industries, but
the credit will cost the state 1 1/2 billion dollars over its
first seven years and it won't get any cheaper going forward.
As the legislature considers how to pay for schools and roads,
part of the debate asks if this tax credit helps create jobs or
if it's just a big giveaway.
Zac Schultz reports.
>> Belmark has been producing food packaging materials in De
Pere, Wisconsin for 40 years.
>> It's very safe to say you go in the grocery store, you look
left and right and you will see our products.
>> About a decade, Belmark President Karl Schmidt decided
future growth would come outside Wisconsin and they built a
facility in Phoenix, Arizona.
But in 2011, Republicans in the legislature slipped a tax credit
into the budget that forced Belmark to rethink their
business plan.
>> The tax credit itself changed that strategy and we said you
know, this is now an economical place to work.
We can build some scale here.
>> It's called the manufacturing and agriculture credit
or MAC for short.
>> The thought was let's take
the two largest industries in the state.
Manufacturing and agriculture and let's encourage them
with this credit.
>> Jason Culotta is the senior director of government relations
for Wisconsin Manufacturers and Commerce, the influential
conservative business lobby.
The tax credit didn't actually go into effect until 2013.
It started small and grew larger each year.
>> The thought was, if we phase it in
we can control how much it is.
>> The MAC reduces the state income tax for all manufacturing
and agricultural producers in the state.
But 91% of the money has been claimed by manufacturers.
Wisconsin's top income tax bracket is 7.65% for individuals
and 7.9% for corporate filers.
In the first year, the mac cut taxes by around 2% but now that
it's fully phased in, it reduces taxes on income by 7 1/2%.
So the MAC essentially wipes out the state tax burden
for about 10,000 filers.
>> It is hard to imagine there being a less effective use
of an awful lot of money.
>> Democrat Gordon Hintz has been criticizing the MAC
for six years.
>> Year after year we'd ask for new numbers and each year those
numbers got bigger and bigger and bigger.
>> The MAC has cost Wisconsin $468 million
in the first four years.
The state now estimates it will cost nearly a billion more
in the next three.
The nonpartisan legislative fiscal bureau estimates
for tax year 2017, the MAC will cost $228 million.
77% of that money will go to just 1,200 filers who earn more
than a million dollars a years from manufacturing or
agriculture production.
But what really grabs critics' attention is the top 11 filers.
They earn more than $30 million a year and will each save more
than $2 million on their state income taxes.
>> The goal of this cut when it was first passed, when it was
phased, was to eliminate the tax liability effectively of I think
some of the wealthiest people in the state of Wisconsin.
>> Are there people who make a lot of money
who are receiving the credit? Sure.
But they're investing in the state.
They're producing here.
They're employing a lot of people here.
>> Jason Culotta of WMC argues the money from the MAC
isn't just a blank check from the state.
>> So it's their decision ultimately what they decide to
do with it.
Many of them invest right back into the company.
The money doesn't go into my pocket.
It goes into buying that next piece of equipment.
>> Greg Clement founded Argon Industries in 2002
with four people and three machines.
>> The next two years I'm going to have to invest
almost $2 million in new equipment.
>> He now has 100 employees fabricating sheet metal
components for major companies.
Clements says if he doesn't continually upgrade his quality,
he'll lose business.
>> This machine is from 2003.
So this is where the reinvestment and the money that
comes from receiving those tax credit comes into play because
the technology now coming out is fully automated loading,
unloading.
>> He says in recent years the MAC helped him install a new
powder coat line which has helped grow his business.
>> That was 1.5 million dollars.
We added 17 employees.
>> Just because a manufacturing business expands doesn't mean
they're going to be hiring.
>> Tamarine Cornelius says hiring may be the exception,
not the rule.
She's an analyst for the Wisconsin Budget Project, part
of the non-profit Wisconsin Council on Children and
Families.
One of her concerns about the MAC
is the lack of accountability.
>> There is no requirement that jobs be created.
So a business could be laying off workers or sending jobs
overseas or closing factories and still get the tax cut.
>> She points to Oscar Mayer which is shutting down its
factory in Madison.
They will get the credit for every last hot dog produced
before the lights are turned off for good.
>> If we want businesses to create jobs in return for
getting this big tax cut, then we need to require them to do so.
>> The four years after that credit was enacted,
we saw a regain of 34,000 jobs
and there have been some more gains since then.
>> Culotta says the MAC has led to job growth
but opponents don't see it.
>> For the previous year Wisconsin lost about 4,000
manufacturing jobs.
>> Hintz says much of that growth was a rebound from the
great recession and took place before the credit even started.
>> We actually had more manufacturing job growth in the
two years before the credit was even phased in.
>> Culotta points to the increasing cost of the tax
credit as evidence of success.
Over the first five years it will end up costing $376 million
more than originally projected.
>> We think so much of that has been investment that's been
drawn from out of state or from in-state companies which would
have spent in another state and now it's being spent here.
>> Belmark is a good example of that.
Their Phoenix, Arizona facility was supposed to be the first of
many in other states.
Since the tax credit was passed, they've added on in De Pere.
>> We've had six additions, most recently opened up a 30,000
square foot office addition.
240 jobs we added here that would not have been here that
would have been in another state.
>> And there is more to come.
Schmidt says for their latest facility they did a nine-state
search and settled on Shawano, Wisconsin.
>> We're going to spend $25 million there to start.
There will be another $25 million investment over the next
five years and employ up to 120 people.
>> We're expanding the business
for our next five years of our growth.
>> Dave Zielke helped found Imperial Blades in 2008.
They are the only manufacturer of oscillating saw blades
in the United States.
>> It's a big selling point for us.
American-made products are really sought after.
>> Imperial Blades has 55 employees.
>> We're looking to hire on 10 to 15 people in the next year.
>> But they've outgrown their Sun Prairie location
so they're adding on.
>> If we didn't have the tax credit, that could be enough
where this would get delayed.
>> Imperial Blades could produce the same product anywhere in the
United States and Zielke gets offers to relocate to other
states all the time.
>> Georgia, Texas, every other week I get an email or phone
call from somebody.
>> But the MAC helps keep him loyal to Wisconsin.
>> We're growing profitable business but we put so much
money back into this just to stay ahead of our competitors
that, I mean, any little bit helps.
It really does help us.
>> I'm glad that we have a couple of examples where they
seem to be happy and they've added jobs.
But overall for the state I don't think anybody can defend
this as anything but a total loser.
>> Gordon Hintz says there are more than 9,000 manufacturing
facilities in Wisconsin and with the MAC, essentially none of
them pay state income taxes and not all of them are adding jobs.
>> I did a tour recently of a manufacturer.
I asked them about the credit.
And they said yeah, when we were doing our taxes last year
the first thing we said is we can't afford this.
And when they were talking about we, they were talking about the
state because they realized their tax liability had been
eliminated and they're a relatively small manufacturer.
If that's happening around the state, they realized just how
expensive it was.
>> Hintz says manufacturers who oppose it are afraid to publicly
criticize the MAC but he says the true impact of the MAC is
felt every two years at budget time when there isn't enough
money for schools or the university system or
transportation.
>> And so you have to look at this in what has been lost in
terms of priorities that the state could have been funding
while it was giving this money away with no accountability?
>> I hate to get into a competition because we're adding
to the pie, we're not taking from the pie by having this
credit.
>> Supporters of the MAC say you can't ignore the impact of
manufacturing jobs in Wisconsin.
>> If more people have jobs, more people are paying into the
tax system.
That's what you need.
And then you will gain that money for the roads and for the
schools.
>> And we work with seven different vendors in Wisconsin
for making our saw blades.
>> I like to look at the multiplier effect.
>> Karl Schmidt can point to a number of machines that he
bought from other Wisconsin manufacturers who can also claim
the MAC.
>> We're going to buy the best in the world,
but it's nice that you see it's coming from Wisconsin.
>> And all the people he has employed to build his new plants.
>> We've had two great builders here, Miron and Boldt.
All the block comes from County Concrete.
The electricians are here.
>> But in the end, this may come down to a debate about
Wisconsin's priorities and Wisconsin's identity.
>> I want to support our manufacturers but just throwing
a lot of money at the top with no assurances, with no
accountability is not fair to the rest of the taxpayers of the
state.
It's not very effective.
>> What is Wisconsin's core?
It's agricultural and manufacturing.
That's what we built Wisconsin on.
>> That was Zac Schultz reporting.
A study released just last week says the manufacturing and ag
credit helped create more than 20,000 jobs in Wisconsin.
UW-Madison Economics Professor Noah Williams looked at 21 of
Wisconsin's 22 border counties.
He compared their manufacturing job growth since the credit
started to counties just across the border in Illinois, Iowa,
Minnesota and Michigan.
He then applied that growth rate to the rest of the state to
reach 20,000 jobs.
However, Democrats like Gordon Hintz point out Professor
Williams was an advisor to Governor Scott Walker and
Senator Marco Rubio in their recent presidential campaigns.
Hintz says the researcher cherry picked his data pointing out the
one border county that was excluded, Trempealeau County
lost manufacturing jobs last year and that would have altered
the numbers.