State Rep. Spencer Black, D-Madison, proposed legislation Monday that would eliminate taxation of over-the-counter medicine and close a so-called corporate income tax loophole, leveling the tax burden more equally among citizens and large corporations.
Under current law, prescription drugs are exempt from state sales tax, but over-the-counter medicine is still subject to taxation. Black said this is very dangerous for Wisconsin citizens, especially senior citizens and working families.
'Wisconsin is one of the few states that taxes medicine. I don't believe we should tax the necessities of life, like rent or food or medicine,' Black said. 'This is becoming an even bigger issue, as more medicines become non-prescription.'
The second part of the proposal addressed what Black called a long-standing policy loophole, also known as the 'Las Vegas Loophole.' This currently allows for large corporations to legally move their profits to states that do not have corporate income tax, costing the state an estimated $260 million per year, Black said.
Black said tax burdens are also shifting to Wisconsin students.
'Students have been asked to make up for those tax breaks by paying higher tuition. Closing the corporate loophole will bring in far more money than it will cost to exempt non-prescription medicine,' Black said.
UW-Madison professor of applied economics Andrew Reschovsky said he thought Black's proposal was a step in the right direction.
'It's possible to shift profit subsidiaries in other states, and the Las Vegas [Loophole] is just one example of a range of things that corporations can do to reduce their corporate tax liability,' Reschovsky said.
He said this proposal would treat all corporations equally, regardless of their size and ability to employ tax accountants adept at finding ways around the existing tax system.
'If we're going to tax corporations, then I think we ought to have a corporate income tax that prevents corporations from determining how much tax they pay,' Reschovsky said.
Anne Lupardus, spokesperson for Gov. Jim Doyle, said the governor will assess the proposal once it is closer to legislative action.
'The governor will review the legislation as it moves through the legislative process,' Lupardus said.
While Black is doubtful of his bills' chance of passing, he said it was important to make an attempt to level the tax system.
'It's hard to make the tax system fair'many people that control the legislature support the unfair tax system,' Black said. 'But I think it's an important fight to wage and one that the public will support.'
