Walker Uses Ill. Tax Increase to Bolster Wisconsin

Gov. Scott Walker tried to take full advantage of Illinois lawmakers passing dramatic tax increases Wednesday, saying Wisconsin would welcome any businesses from its neighboring state that care to relocate.

Absent from Walker's sales pitch was the fact that Wisconsin's top income tax rates remain higher than Illinois even under the increase.

Even so, the Republican Walker was reveling in drawing a comparison between Illinois, which has a Democratic governor, and his agenda to cut taxes.

"Years ago Wisconsin had a tourism advertising campaign targeted to Illinois with the motto, 'Escape to Wisconsin,'" Walker said in a statement. "Today we renew that call to Illinois businesses, 'Escape to Wisconsin.' You are welcome here."

Walker referenced Illinois' problem in a speech to business leaders on Tuesday, issued a statement hours after the tax increase vote on Wednesday and then called a news conference to talk about it as well.

Wisconsin lawmakers were picking up on it as well. Rep. Robin Vos, R-Caledonia, said he welcomed any chance to "kind of stick it to them" in Illinois. He said lawmakers there raising taxes played right into Walker's hands.

And while income tax rates are higher in Wisconsin, corporate income taxes in Illinois would be higher.

Wisconsin has a graduated income tax rate that goes from 4.6 percent to 7.5 percent. Illinois has a flat rate that would increase from 3 percent to 5 percent under the move passed by the Legislature to help plug a $15 billion budget hole. Lawmakers there also approved raising the state's corporate income tax rate, effectively moving it from 7 percent to 9.5 percent. Wisconsin's rate is 7.9 percent.

Walker hasn't yet proposed lowering the state's income or corporate tax rates. But he has called for eliminating taxes for companies that move to Wisconsin from Illinois or anyplace else. He also wants to cut taxes on small businesses already in the state. He argues that those moves, along with lawsuit and regulatory reforms, will make Wisconsin a more attractive place to do business.

Vos, co-chairman of the Legislature's budget committee, said he wants to change Walker's small business tax cut proposal into a $1,000 income tax credit to companies for every job created in the state. The Legislature could vote on the tax cut proposals as soon as next week.

The key is that Wisconsin is moving toward lowering taxes while Illinois is raising them, said James Buchen, a vice president at Wisconsin Manufacturers and Commerce, the state's largest business group.

"It just makes Wisconsin look more attractive relative to our neighbor to the south," Buchen said.

Walker has adopted the mantra that "Wisconsin is open for business" and has repeated it at nearly every turn ever since his election in November. He's pledged to add 250,000 jobs in Wisconsin by 2015.

Wisconsin faces a two-year $3 billion budget shortfall. Walker has said his budget, which will be released next month, will balance even with the business tax cuts he's already proposed.

While Walker's talking about taking jobs away from Illinois, Wisconsin's neighbor has already tried to woo Talgo Inc., a train maker that said it will move its manufacturing jobs out of Milwaukee next year because the state rejected federal funds for high-speed rail.

Talgo spokeswoman Nora Friend said Illinois's tax structure would be one of many factors in determining whether the company would relocate its manufacturing there.

"Illinois is still a very strong state because of its strong supply chain and strong will to expand its rail plan," she said Wednesday. "Our analysis includes a lot of factors. (The tax situation) would not weigh in as a positive but it's difficult to say whether it's the deciding factor. It would be one more factor that gets weighed in."

She said Illinois, Washington and Florida are among the top three candidates for Talgo's new site.