Marketplace of Ideas Blog

The Wisconsin Technology Council issued this news release Thursday afternoon:

The repeal of Wisconsin’s capital gains tax exclusion will hurt state efforts to increase the number of investors, companies and jobs in tech-based industries, two leaders of the Wisconsin Technology Council said Thursday.

Tech Council Board Chairman Mark Bugher and President Tom Still said the Senate’s decision to eliminate Wisconsin’s 60 percent tax exclusion on investments held more than a year will discourage investment in all sectors, but particularly in tech-based industries that have been creating a significant share of Wisconsin’s new companies and jobs.

If the budget decision stands and is not vetoed by Gov. Jim Doyle, it would cost investors $485 million over two years. Doyle had proposed reducing the current state exclusion from 60 percent to 40 percent, which matches the federal tax break. Doyle’s plan would have cost investors $170 million over the next two years; the Senate plan would cost them an additional $315 million.

“It makes little sense to remove incentives to invest in Wisconsin’s economy, particularly at a time when the state needs more start-up activity,” said Bugher, who is director of University Research Park and a former state Administration and Revenue secretary.

“Members of the Tech Council, through our board’s white paper reports to the governor and the Legislature, have consistently urged an expansion of Wisconsin’s capital gains tax exclusion as a way of keeping investors’ dollars in the state and attracting co-investment dollars from elsewhere. This vote moves Wisconsin in the opposite direction,” Still said.

Bugher noted that eliminating the capital gains exclusion stands at odds with other economic development efforts by the governor and the Legislature, including the recent expansion of investor tax credits for investors in certain high-tech companies.

Eliminating the tax break will also hurt existing small-business owners, for whom the capital gains exclusion is crucial when it comes time to sell their businesses as they near retirement.

“This is not a tax on the wealthy, as some might imagine, but a tax on current small business owners and those who want to build small businesses,” Still said.

The Tech Council is the independent, non-profit science and technology adviser to the governor and the Legislature. It has membership chapters in Milwaukee, Madison, Northeast Wisconsin, Central Wisconsin, the Lake Superior region and Western Wisconsin.

The last time a Democratic president signed substantial tax relief, it involved capital gains taxes. Doyle proposed to cut Wisconsin’s capital gains exemption from 60 percent to 40 percent (which increases your taxable state income by 50 percent on your capital gains), and the state Assembly went along with that, but the Senate now wants to eliminate the exemption entirely, which, as noted yesterday, is not investor-friendly.