The Impact of the Manufacturing and
Agriculture Credit in Wisconsin
Noah
Williams
Center for Research on the Wisconsin Economy
University of Wisconsin – Madison
Abstract
In 2011 Wisconsin adopted
the Manufacturing and Agriculture Credit (MAC), which provides
credits which largely offset the taxes faced by businesses in
those sectors in the state.
While manufacturing employment has grown since the MAC
took effect in 2013, how much of these gains were due to the
credit is under debate. To isolate the policy effect, I focus
on counties on either side of the Wisconsin border. After
accounting for time and group effects, I find that since 2013
manufacturing employment has grown on average 1.9 percentage
points (at an annual rate) faster in Wisconsin relative to
counties just across the border.
Quantitatively, I find that every 1 percentage point
cut in the effective manufacturing tax rate was associated
with a nearly 0.9 percentage point increase in the
manufacturing employment growth rate. I also find
significant spill-overs to the broader economy.
Non-manufacturing employment has grown on average 0.7
percentage points per year faster on the Wisconsin side of the
border since 2013, with each percentage point cut in the
manufacturing tax rate associated with a 0.4 percentage point
increase in non-manufacturing employment growth with a one
year lag. I
estimate that the cumulative impact of the MAC was that by
September 2016 manufacturing employment in Wisconsin border
counties was 6.6% higher and total employment 2.5% higher than
they would have been in the absence of the tax credit.
Applying these border-county estimates to the whole state
suggests that since its introduction the MAC accounted for a
total gain of over 20,000 manufacturing jobs (a 4.6% increase)
and over 42,000 total jobs (a 1.8% increase) in Wisconsin.
Media Coverage: Associated Press (national) Milwaukee Business News
Overview Op-Eds:
“What Tax Credits Did to Manufacturing Jobs in Wisconsin,” Forbes.com
"Manufacturing Tax Break Has Been Good for Jobs,” Wisconsin State Journal, April 28, 2017.
Related Interview:
"Wisconsin's
Manufacturing Job Market: Healthy or Not?,
Wisconsin Public Radio, June 20, 2017.
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