Today, we bring you the latest development: The following memo was just received by every member of the Wisconsin State Legislature.
TO: Members of the Legislature
FROM: Jason Culotta, Director of Tax and Transportation Policy, WMC
DATE: February 1, 2013
RE: Opposition to a Mining Gross Receipts Tax
Some have proposed that the Legislature impose a gross tonnage tax on the proposed iron mine in northern Wisconsin to replace the net proceeds tax that has traditionally been assessed on metallic mining. WMC strongly opposes efforts to impose a gross tonnage tax for iron mining.
The net proceeds tax, like Wisconsin’s franchise and corporate income taxes, are imposed on net income and profits; the greater the profits, the greater the tax liability. Even a gross receipts tax is based on a firm’s revenues. Unlike a gross receipts tax or net income tax, a gross tonnage tax has no relationship to net income, revenues, or profitability. Gross tonnage taxes are among the least economically neutral of all taxes, meaning that they influence business choices regarding location, suppliers, organization, and operations.
Prior to the adoption of the Single Sales Factor apportionment formula, businesses were punished for having more payroll and property in Wisconsin. Replacing the existing net proceeds tax with a gross tonnage tax similarly punishes a mine operator for engaging in economic activity, with a steeper penalty for additional activity.
To the extent the gross tonnage tax causes costs to exceed revenues, state tax policy would force the closure or curtailment of production, causing jobs, investment, and the generation of tax revenues to cease.
The existing net proceeds tax functions like an income tax. The tax is assessed on profits, not punitively adding to the cost of extracting ore as a gross tonnage tax would. There is a direct relationship between the amount of ore that is mined and the number of employees hired, product sold, and extraction equipment purchased. If the Legislature discourages mining companies from mining iron ore by imposing a gross tonnage tax, it will discourage mining companies from hiring employees, selling ore, and purchasing mining equipment, including equipment built in Wisconsin.
WMC has consistently opposed gross receipts taxes, such as Governor Doyle’s efforts in 2009 to apply a gross receipts tax on oil companies and former Senate Majority Leader Chvala’s efforts in 2001 to impose a gross receipts tax on telephone companies. A gross tonnage tax on mining would stifle economic growth and investment in the same manner as these poorly conceived proposals.
The Legislature should not enact a tax that will be a deterrent to investment and job creation in northern Wisconsin. Enacting a new tax on a business seeking to locate in Wisconsin and make an enormous investment in our economy does not send the signal that Wisconsin is open for business.