Manufacturing and Agriculture tax credit creates jobs

Posted on Mar 15, 2017 :: Insight From
Jason Culotta
Posted by , Insight on Manufacturing Staff Writer

After being signed into law in 2011, manufacturers and farmers across Wisconsin were finally able to claim the full value of the Manufacturering and Agriculture tax credit. While critics are quick to belittle the impact of the MAC, it has been a major reason the manufacturing industry is soaring back in our state.

Since the MAC was first signed into law in 2011, Wisconsin has experienced the fifth-highest net increase in manufacturing jobs among the states, using data from the U.S. Bureau of Labor Statistics. 

Citing those same federal statistics, Wisconsin lost 81,800 manufacturing jobs in the four years leading up to the MAC’s adoption compared to 34,200 jobs gained in the four years following. On average, manufacturing jobs pay more than $68,000 per year, which is 45 percent higher than the state’s average income. Without the credit, thousands of middle-class jobs could be at risk.

MAC has been so important because it makes Wisconsin competitive again. Without it, Wisconsin’s high corporate and individual income tax rates make companies less likely to invest and stay here. The Badger State’s competition includes states like New York, where its Democratic governor has eliminated corporate income taxes on manufacturers altogether. Additionally, our Midwest neighbor of Indiana recently lowered its individual income tax rate to just over 3 percent.

Without the MAC, Wisconsin cannot compete. Those eligible to claim the MAC include C corporations that pay corporate income tax as well as LLCs and S corporations (pass-through entities) that pay personal income tax. The credit may be claimed on 7.5 percent of the state’s flat 7.9 percent corporate income rate or the 7.65 percent top personal income tax bracket, leaving an effective rate of 0.4 percent or 0.15 percent, respectively, for manufacturers or farmers who produce in Wisconsin.

This strategy has made our state more attractive to companies looking to move here and to Wisconsin-based businesses seeking to expand here. For example, Karl Schmidt of Belmark Inc. in De Pere has said that the MAC is one of the major reasons the company decided to invest more here at home.

Before the MAC, Belmark had a plan to expand outside of Wisconsin. But its strategy changed when the MAC leveled the playing field with competing states. Since 2011, Belmark has invested more than $100 million in Wisconsin for new buildings and equipment. Plus, employment has jumped from 495 to more than 700. This investment and creation of new family-supporting jobs would not exist in Wisconsin without the MAC.

Belmark is not the only example. The Fox Valley has seen substantial investment by manufacturers since the MAC took effect, including expansions by Neenah Paper in Appleton, Sargento in Hilbert and Bemis in Oshkosh. The new manufacturing jobs these investments create allow workers to generate income, property and sales taxes for all levels of government.

Instead of calling for its repeal, policymakers across Wisconsin should be celebrating its success. And it isn’t just large companies that are taking advantage of the MAC. Nearly 90 percent of those claiming the credit actually make less than $1 million annually. That’s a lot of small Wisconsin businesses and investors who are reinvesting into their companies and communities.

Remember, you have to invest in production in Wisconsin and employ Wisconsin workers to earn the credit. That means food processors, plastics manufacturers, steel fabricators and other companies like machine shops across the state must produce their products right here in the state to benefit. Simply put, the MAC allows manufacturing jobs to stay here and continue to serve as the economic anchor for so many Wisconsin communities.

Jason Culotta is the director of tax and transportation policy for Wisconsin Manufacturers and Commerce.