Wisconsin touts new economic development programs

MADISON, Wis. - Wisconsin came up empty in the competition to land a new General Motors Corp. car plant, but tax breaks that were a part of the state's pitch may end up helping other businesses stay or expand.

"Coming in second or third on this GM plant may turn out to be a long-run blessing," said Tom Still, president of the Wisconsin Technology Council, which advises the governor and Legislature on economic development and other issues.

GM closed its production plant in Janesville in April, cutting about 1,200 jobs. The state lobbied the auto giant to reopen the plant to make a new line of small cars, but GM chose a Michigan plant instead.

Janesville residents who hoped the plant would reopen might find it hard to believe that losing might really be a win. But the incentives designed for the automaker may end up luring other, more attractive businesses to Wisconsin, Still said.

New tax breaks, some of which were included in the state's $195 million pitch to GM, were passed by the Legislature this year despite a $6.6 billion budget shortfall.

Republicans have criticized the Democratic-controlled Legislature as bad for business because it balanced the state budget in part with $3 billion in higher taxes and fees. But Democratic Gov. Jim Doyle's administration says it has overhauled the state's economic development incentives to make Wisconsin a leader in keeping and retaining jobs.

The new tax breaks, which emphasize investment and research and development, give Wisconsin "one of the most powerful economic development tools in the country," said Zach Brandon, executive secretary of the state Commerce Department.

There was news Thursday of a success story. Small Minneapolis biotech startup VitalMedix Inc. announced it was moving to Wisconsin thanks to the state's network of angel investors — those individuals who provide startup money for businesses in return for partial ownership.

"They just seem to understand the deal better," the company's president, Jeffrey Williams, said of Wisconsin's economic development officials and investors.

Brandon said the news was an example of how successful Wisconsin's programs are.

But praise for the new economic development tools is getting lost among a sea of criticism from Wisconsin's business community over higher taxes included in the state budget, in particular a doubling of taxes on capital gains.

"On balance, our thought is that there's a lot more bad things for economic development or things that will negatively impact economic development," said Jeff Schoepke, director of tax and corporate policy for Wisconsin Manufacturers and Commerce. The group has about 4,000 members representing large and small Wisconsin businesses.

WMC has criticized the budget even though it includes many of the group's suggestions for economic development. Those included consolidating economic development programs, offering new incentives to encourage existing companies to expand, and making up to $10 million in capital gains invested in Wisconsin companies tax exempt.

The state's efforts at economic development are getting more attention as the recession continues.

Statewide unemployment was 8.7 percent in May. In communities like Janesville and Beloit, which were hard hit by GM's closure of its factory, unemployment is in double digits.

Other major employers also have cut jobs and closed factories.

Earlier this month, Briggs & Stratton announced it would eliminate 430 jobs and close a Jefferson plant that makes pressure washers and portable generators by mid-2010. Harley-Davidson Inc. announced in January it would cut about 650 jobs in Wisconsin.

The recession led to a record-high $6.6 billion budget shortfall and criticism from Republicans that Doyle and Democratic legislative leaders weren't doing enough to spur more growth.

Republicans even formed their own task force that held hearings across the state to gather feedback from businesses upset with the Democratic budget. The business community has been particularly critical of the Legislature for lowering the tax exemption for capital gains from 60 percent to 30 percent. Schoepke, with WMC, said it will "have a pretty serious negative impact on Wisconsin's economy."

But the Commerce Department's Brandon said the budget shields businesses with the $10 million capital gains exemption, which he called "unheard of."

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