Here & Now

Here & Now for Nov. 3, 2017

Frederica Freyberg:

I’m Frederica Freyberg. Tonight on “Here and Now,” a first look at the U.S. House tax plan. After that, a closer look at the sulfide mining bill headed to the state Senate. Then a look ahead to the 2018 governor’s race. We will introduce you to Bob Harlow, Democrat running in the race. It’s “Here and Now” for November 3.

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Funding for “Here and Now” is provided, in part, by Friends of Wisconsin Public Television.

Frederica Freyberg:

The GOP tax bill released Thursday adjusts current tax codes at nearly every level. House Speaker Paul Ryan called it a win for the middle class.

Paul Ryan:

The Tax Cut and Jobs Act will deliver real relief for people in the middle. People who are also striving to get there. With this plan, the typical family of four will save $1,182 a year on their taxes. For many families, having an additional $1,182 more will make a real difference.

Frederica Freyberg:

Speaker Paul Ryan in Washington on Thursday. Will the tax plan provide tax relief for average families as the speaker says? The so-called Tax Cuts and Jobs Act reduces the corporate tax and reduces the number of tax brackets, among many other changes. But who wins, who loses or is it mixed? Our first guest is a taxation and household finance expert with the UW-Madison La Follette School of Public Affairs. Rourke O'Brien also served two years as a senior policy advisor at the U.S. Department of Treasury. He joins us from Chicago where he is on business. And thanks very much for being here.

Rourke O'Brien:

Thanks for having me.

Frederica Freyberg:

So what is your overall reaction to this so-called Tax Cuts and Jobs Act?

Rourke O'Brien:

So at least from the perspective of the average household, it does seem like the average household will experience a modest tax decrease, although the specifics really do matter. Your individual household might experience something different. For example, if you are used to deducting student loan interest, you can no longer do that under the proposed plan. If you’re a household that has significant medical expenses, that can no longer be deducted from your taxes. Importantly, if you’re a household that’s used to deducting your state income taxes from your federal taxes, which many households in Wisconsin do, you’re no longer able to do that under the plan. So really while on average, we can say that maybe a majority of households might see some decrease in their tax burden, it really does matter, the specifics of the plan. Especially when we look going forward. One of the interesting parts of the plan is how some aspects of it phase in and phase out over time. For example, the plan includes a new $300 family credit that is supposed to help offset the elimination of the personal exemption. But that credit phases out after five years. So at that point unless that’s extended, a number of families will actually see a tax increase based on the plan as written right now.

Frederica Freyberg:

Wow. So and this, the corporate rate goes to 20% from 35%. Will that grow jobs and boost the economy?

Rourke O'Brien:

So it’s certainly designed to make American businesses more competitive in this global market that we’re now all operating in. It’s going to be interesting to see kind of what some of the models and the projections that we get in terms of what this will actually do for the American household. So certainly by making business more competitive, that’s good. That should help increase growth. But at the same time, it’s an open debate whether or not those savings will be actually be passed on to the average worker in the form of higher wages or if it will just be captured by shareholders through dividends. I think that’s an important part of this story that remains to be told.

Frederica Freyberg:

What do you think?

Rourke O'Brien:

I think that the current projections from the White House and Congress I think are a bit too rosy in terms of the expectation that the vast majority of these savings are going to be passed onto the household. I do think it will make businesses more competitive by simplifying the tax code and streamlining the process. What’s important is that the current tax code while there is a 35% statutory rate, many of these companies have been paying an effective rate much, much lower than that. Even much lower than 20% given the myriad tax breaks and industry-specific tax incentives that we currently have. So going forward as this bill progresses through the process, it’ll be important to see whether those industry-specific breaks are left out or if they are included, you know, at the behest of lobbyists and others. If so, we might have to see an increase in the statutory rate to make the math work at the end of the day.

Frederica Freyberg:

The highest bracket of 39.6% remains for high-income earners. That seems to be a nod to not just cutting taxes for the wealthy in this plan.

Rourke O'Brien:

Right, although it is important to note that although they’ve retained the highest statutory rate, it now only applies at a much higher income level so it still does amount to a pretty sizable tax cut for a lot of very wealthy households. There are other elements of the plan such as the phase-out of the estate tax that will really be a boon to wealthy families. As estate tax right now only applies to estates valued at well over $5 million. As the plan is written now, that will double to $10 million and then over time, that will be phased out. From the perspective of wealthy households, this does seem like it will be a real boon to them.

Frederica Freyberg:

Now, this plan would reportedly grow the deficit by $1.5 trillion over ten years. How important is that?

Rourke O'Brien:

Well, this is I think where a lot of the politics are going to be interesting going forward. Yeah. So as predicted right now, the tax bill is going to cost $1.5 trillion which ultimately will have to be paid for down the road either in the form of spending cuts or higher taxes in the future. There is an argument out there that many are trying to make that this tax bill will spur economic growth to the extent that it will help to offset some of those losses. But here again, I think that many of the estimates put out by the White House and Republicans on Capitol Hill are a bit too rosy. Ultimately this will increase the national debt which at some point will have to be addressed in the future.

Frederica Freyberg:

Describe for us how people who support this and the drafters of this, how would it grow jobs and the economy, even in the face of this kind of deficit?

Rourke O'Brien:

Sure. Well, one of the interesting provisions on the corporate tax side is allowing businesses to fully expense investments that they make. So, for example, if a factory — if a company decides it wants to purchase a new machinery for their factory, under this bill, they’d be able to fully deduct those expenses right away. This is a real incentive for investment, which in turn, would hopefully generate jobs. Unfortunately as written, again to help make the math work, they phase out this full expensing after five years. So ultimately what it might just do is shift the timing of those investments and not actually generate much new investment.

Frederica Freyberg:

So making the math work, what do you think of having to go through those kinds of, you know, maneuvers to get this thing on the table?

Rourke O'Brien:

Yeah. It’s interesting. I mean, tax bills like this are incredibly complicated. And the way that the House has set up the way they want to negotiate this where they set up a budget rule that authorized them to write a tax bill that would increase the deficit by $1.5 trillion. That required them to do certain things, like, you know, phasing out that family credit and other kind of important aspects of the timing. We’re also not only looking at the total amount of the deficit increase, but also the window of that deficit increase. So here they’ve been constrained to $1.5 trillion increase in the deficit over a ten-year time horizon. As we move to the Senate, we look at the reconciliation rules, if it turns out this bill is also scored and found to increase the deficit in the out years, so after that ten-year window, it’s going to have a hard time making its way through the Senate reconciliation rules and so might require quite a bit of rewriting once we involve the Senate.

Frederica Freyberg:

All right. Well, we will all be watching. Professor O'Brien, thanks very much for your expertise.

Rourke O'Brien:

Thanks for having me.

Frederica Freyberg:

From Washington to the state capitol in Madison and a closer look at environmental news. Wisconsin’s effective 20-year moratorium on sulfide mining could be lifted by the legislature, which is on the road to passing a bill to do just that. The Assembly passed the measure this week and the Senate is expected to take it up next week. So would opening up and easing regulations on gold, silver and nickel mining result in an economic rush in the state? We asked the bill’s chief sponsor, Republican State Senator Tom Tiffany, who joins us now from Rhinelander. Senator, thanks for being here.

Tom Tiffany:

It's good to be here, Frederica. By the way, I want to give a shout out to my mom. She’s a regular listener of yours. Hi mom.

Frederica Freyberg:

Hi Mom Tiffany. Well, first question to you. What kind of companies want to invest in sulfide mining in Wisconsin?

Tom Tiffany:

So I think the initial interest would be exploratory companies. They’ve been very skeptical as we went through this process because Wisconsin has been closed for business for mining for the last 20 years. But I think if we’re able to pass this bill on Tuesday, take up the bill the Assembly just passed last night as you referred to, I think companies will look at coming to Wisconsin initially to do exploratory work.

Frederica Freyberg:

Could we see a gold rush, in your mind, in Wisconsin if this passes and is signed into law?

Tom Tiffany:

No. I think the law is so rigorous here in Wisconsin, I don’t think you’ll see a gold rush. But you’re going to see companies that are interested. Initially the exploratory companies. And if they’re able to find deposits — and I believe they will — that are economically viable, then you’re going to see the mining companies follow them. But we’re looking at at least a couple years down the road before we could see an active mine operate here in Wisconsin.

Frederica Freyberg:

Now, I don’t have to tell you that there have been concerns about the easing of environmental regulations that are part of this bill. Why ease those regulations?

Tom Tiffany:

Actually, I don’t view it as an easing. In fact, if people read the analysis by the Legislative Reference Bureau, they say this does not diminish our environmental standards at all. There are no changes in numeric environmental standards. We want to maintain — in fact, that was one of my goals along with Representative Hutton, my coauthor, is to maintain those high environmental standards here in Wisconsin but to get rid of the mining moratorium and also make sure that the financial assurance makes sense for the long term here in Wisconsin.

Frederica Freyberg:

One part of this bill says a mining company would have to show it is “capable” of running a mine that complies with environmental laws and doesn’t cause pollution. Now capable is different than proving it, as under current law. These are pretty far apart. But this effective moratorium is something that you want to get rid of it because is it virtually impossible to have that proof?

Tom Tiffany:

Yeah. That’s correct. And some people have really honed in on that term “capable.” but if they read the statute further as it’s written, it goes beyond capable. It says that the regulatory agency, in this case the DNR, they have to make sure that it will happen, not that it’s just capable. It has to be capable and it will happen in terms of the regulations that need to be in place to make sure that we have — that a mining company complies with our high environmental standards.

Frederica Freyberg:

Still, environmentalists describe sulfide mining as the “most toxic industry in the united states with a global track record of water pollution.” How do you respond to that?

Tom Tiffany:

Oh, mining is a very intrusive activity. There is no doubt about it. That’s why we have the most rigorous standards for any industry here in Wisconsin, including if this bill passes, we will have the toughest standards and the highest levels of financial assurance will be required to protect the public for the long term with this bill. We understand that mining is — that it needs to be highly regulated. This bill continues to do that.

Frederica Freyberg:

In your bill, groundwater standards are changed, providing that contamination enforcement doesn’t apply below a certain depth? Why not?

Tom Tiffany:

Well, when you get down to certain depths, like below 1,000 feet, that water’s not potable. So why insist that certain standards need to be met where that water isn’t even drinkable to begin with? It’s important just to make sure it doesn’t get into the groundwater that’s further up. We make sure that there’s high standards for what we refer to as the design management zone. Outside of there, in other words, outside of the mine site, any company that wants to operate here in Wisconsin, they got to meet our standards, they cannot pollute our groundwater.

Frederica Freyberg:

Describe for me what kinds of jobs you would expect this bill to bring into Wisconsin.

Tom Tiffany:

Look at examples in our neighboring states. Governor Dayton over in Minnesota — by the way, a Democrat — he just said we should open up the PolyMet mine up in northern Minnesota. That would be their first nonferrous mine, 1,000 direct and indirect jobs, $5 million impact annually. Over in Michigan, they just opened the Eagle mine a couple years ago. They have 450 people working there with good, tough, rigorous standards. But it can put a lot of people to work and bring prosperity to northern Wisconsin, where we’ve seen declining enrollment in our schools. We have a robust tourism industry. We have a good forest products industry. We would like to add that to the mix to have greater economic growth, especially here in northern Wisconsin.

Frederica Freyberg:

All right. Senator Tom Tiffany, we leave it there. Thanks very much.

Tom Tiffany:

It's good to be here, Frederica.

Frederica Freyberg:

Senate Democrat on the Sporting Heritage, Mining and Forestry Committee joins us now with his take on the bill. Senator Jon Erpenbach of Middleton joins us by phone. Senator, thanks for doing so.

Jon Erpenbach:

My pleasure.

Frederica Freyberg:

So you will vote no on this bill. Why?

Jon Erpenbach:

Well, I can’t imagine a scenario at all, Fred, where I'd vote yes on the legislation. We are taking something that will definitely protect our environment in northern Wisconsin where they want to do the mine, with the Prove it first law, essentially get rid of it. So we are moving from where the mining company has to prove or point to another example where there’s a safe sulfide mine in operation or has been closed down and isn’t leaking and all of that stuff, to essentially taking the word of the mining company that it will be okay. It really puts our environment at great risk.

Frederica Freyberg:

This proof that a mine won’t pollute surface water in ten years of operation or leave contaminants ten years after closing, that requirement of current law as you just expressed is essentially this 20-year moratorium. But is it even possible to come by such proof anywhere in the U.S. or Canada?

Jon Erpenbach:

Well, we should have to do that, don’t you think? At least we think so, those of us who are opposed to the legislation. If you want to dig into our soil and you want to remove toxic materials, and if you want to process it on the site, you should have to prove to us that there is a technology available now that will do it in a safe manner. If you can’t prove that, you shouldn’t be doing that. You know, our environment generates a tremendous amount of money for the state of Wisconsin as far as hunting, fishing, tourism and all of that. What we’re doing right now for the sake of a handful of jobs is the idea of just saying to the mining company, “Okay, if you think this will work, go ahead and do it.” Our environment, you know, isn’t this generation’s. We don’t own it. We pass it on to generations to come. And if they can’t prove that there is a very safe way to do it, they shouldn’t be doing it at all.

Frederica Freyberg:

Well, environmentally what do you envision if this kind of mining for gold and copper and zinc and silver is more easily allowed in the state?

Jon Erpenbach:

Well, again, it’s a situation where if there’s a safe way to do it, I don’t think anybody would really have a problem with it. Another aspect of this legislation that has a lot of us upset is the idea that local control or local input doesn’t matter anymore. I mean, there are a number, over 200 local officials, 50 environmental groups who are opposed to this, yet they don’t have a say in this whatsoever. So the legislation doesn’t take into account what local units of government want to do. The legislation doesn’t take into account what environmental groups want to do. The legislation is so pro-mining, it absolutely ignores what anybody in the area of the mine wants to do.

Frederica Freyberg:

All of that aside, and not ignored, but what about the potential jobs and markets that this could create in northern Wisconsin?

Jon Erpenbach:

That's a whole other issue on the job sides of things. For example, when they had the Flambeau mine back in the day up there, it only produced 25 local jobs. The concern about the mining jobs is that there will be a lot of miners who will be coming in from out of state to take the jobs because they have the experience, they’ve done this before. So that’s a big concern, not only to those of us in the Madison area who have to vote on this legislation, but I also know the concern in northern Wisconsin, the fact that there’s no guarantee that the jobs will come from folks up in northern Wisconsin, even if we tried to build that into the legislation. The author of the legislation wouldn’t allow us to do it. As far as the jobs are concerned, that’s a huge unanswered question. If there was a guarantee, which there isn’t, I think some people might feel a little bit better about it. But again, in the end there is no guarantee on jobs.

Frederica Freyberg:

Now, back to the environment piece. Under provisions of this bill, there will be DNR oversight as I read it, but it’s streamlined and in some cases changes language from requiring that the DNR must issue permits to the DNR is authorized to impose conditions on such things as high-capacity wells. How significant in your mind are these diminutions of environmental regulations?

Jon Erpenbach:

They're very, very significant. The DNR should be in a position without any sort of political influence whatsoever to do their job. That’s something Senate Democrats have been trying to protect the DNR from Republican legislators on this particular issue, the idea that the DNR goes to a high degree of involvement and has to sign off on a lot of things to in some circumstances within the legislation, they’ll let the mining company go ahead and do what they’re going to do and the DNR would sign off on it rather than the DNR do what it’s supposed to do. So in the end, I wish the DNR had much more authority over this process. They won’t. If anything, I think they stand to lose quite a bit of their authority and being in a position to say no when they feel it’s necessary to say no.

Frederica Freyberg:

All right. We leave it there. Senator Jon Erpenbach, thanks for making time.

Jon Erpenbach:

All right. Thanks, Fred.

Frederica Freyberg:

We'll be in Waukesha on Sunday, when Governor Scott Walker makes his re-election announcement. Meanwhile, the field of Democrats running in the primary race is growing. That field includes our next guest, who grew up near Barneveld. Bob Harlow once worked for Republican State Senator Dale Schultz and is now a software engineer. Thanks very much for being here.

Bob Harlow:

Thank you for having me.

Frederica Freyberg:

We wanted to start by asking you what do you think sets you apart from the other Democrats in the field?

Bob Harlow:

Certainly background and I think also vision in the way we’re going about this campaign. This campaign is about bringing Wisconsin together. We’ve seen almost a decade of a divisive governor trying to tear us apart as a state and it has really set us back. We need to come together as Wisconsinites because I know we share a lot more in common than divides us. We all have a vision for a prosperous Wisconsin. And as governor, I will lead our state forward toward that vision.

Frederica Freyberg:

On the issues, what do you think would be the most important thing to make our education system the best it could be?

Bob Harlow:

What we need to do is the technology coming out of our universities is already driving our national economy, but the problem is, you know, that that technology is being licensed to out-of-state companies. We need to find a way to make sure that we can transform that technology into world-class businesses in the state of Wisconsin. And those businesses will bring prosperity to our state. They will give a place for the world-class graduates coming out of our universities to work instead of going out of state. So I would like to see that integrated with our education system. And furthermore, I want to see every Wisconsinite have the opportunity to get the training to do a really good-paying job. There are great-paying jobs being created every day all across the United States, all over the world. I want to see those happen in Wisconsin. And as governor, I will fight to make sure that these good-paying jobs are being created in Wisconsin and that Wisconsinites have the opportunities to get the training and the education to be able to secure those jobs.

Frederica Freyberg:

On health care, would you be in favor of expanded Medicaid in the state of Wisconsin or as some have been talking about BadgerCare for all?

Bob Harlow:

Yes. Certainly every Wisconsinite should have the option to decide if they want to purchase BadgerCare or some other plan. I know BadgerCare will be much more bang for the buck. You’re going to get more care for the buck because in BadgerCare, they’re not spending on these big advertising bills. They don’t have an army of people trying to deny claims. So as governor, one of my priorities will be opening up BadgerCare enrollment for every Wisconsinite who wants to get it in the marketplace.

Frederica Freyberg:

Now, next week the Wisconsin Economic Development Corporation is expected to vote on this Foxconn deal. What is your position on that deal? Are you in favor of it or opposed to it?

Bob Harlow:

Opposed in the strongest terms. You know, there are good-paying jobs in the world and there are jobs that don’t pay so well. And an example of a really bad job, someplace you would not want to work, is for Foxconn. The jobs that Foxconn will make in Wisconsin will be $10.80 per hour jobs. Because if they create merely 1,500 of those, they will get over a million dollars of Wisconsin's money for every single one. And that’s what they’re going to do. So it’s going to be very bad jobs, where if Walker gets elected again, he’ll continue to bash and try to dismantle unions and people doing those jobs will have no protections to stand up to Foxconn, who will be able to skirt environmental regulations and public health concerns. And you will see workers who are working jobs that are setting them back economically and where they’re exposed to all kinds of really bad chemicals. So it’s a very bad deal for Wisconsin. As governor, I'm going to fight to bring good-paying jobs to our state, jobs that you can actually raise a family on and get ahead.

Frederica Freyberg:

As for an issue that was vexing during the state budget process, transportation funding. What would you do to have a kind of consistent source of funding for our roads and highways?

Bob Harlow:

We just need to pay for roads and highways. You see a failure of leadership from the Republicans, because they could not figure out — you know, basically they decided they need to give a lot of tax cuts to their rich friends. And so they were incompetent enough that they even figure out how to pay for our roads. It shows they are so beholden to their wealthy donors that they cannot even accomplish basic things for the people of Wisconsin, like maintaining good roads. As governor, I will not have that problem. I will lead our state and make sure that we are doing the things that our citizens need.

Frederica Freyberg:

All right. We need to leave it there. Bob Harlow, thanks very much.

Bob Harlow:

Well, thank you, Frederica.

Frederica Freyberg:

Now for another state capitol update and a look ahead to next week’s vote on the $3 billion Foxconn deal. Amid growing pressure including from Republican leaders of the state Senate and Assembly to make the process transparent, the Wisconsin Economic Development Corporation announced today it would allow its board members to see the contract with Foxconn before casting their vote on the deal. That vote is expected next Wednesday. According to WEDC, the contract will be made available to the public after it has been signed. And finally tonight, a look ahead to next week, when we will cover Governor Scott Walker’s re-election announcement, as well as the latest on the Wisconsin Economic Development Board vote on the state contract with Foxconn. I’m Frederica Freyberg. Have a great weekend.

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Funding for “Here and Now” is provided, in part, by Friends of Wisconsin Public Television.