As Wisconsin Governor Scott Walker pushes austerity as the only solution to reducing the state's deficit spending, it seems as though there are a few exceptions to his idea of "shared sacrifice." S.C. Johnson & Son, one of the state's wealthiest firms, is one of many companies that pays nothing in state income tax -- increasing the burden on citizen taxpayers, according to a new project by the Institute for Wisconsin's Future.
SC Johnson: August Poster-Child of Tax Avoidance
The Racine-based, family-owned corporation -- which makes products like Windex, Glade, Ziploc, Pledge, Raid and Drano -- has annual sales exceeding $8 billion. Four of the richest Johnson family members have a net worth of $2 billion.
The family also owns a host of local firms, including two public corporations: Diversey and Johnson Outdoors -- which don't pay state income tax, either. (Diversey, which provides cleaning supplies to institutions, is being sold to the Sealed Air corporation in a transaction worth $4.2 billion.) Johnson Outdoors, for example, which sells fishing and recreational equipment, had sales of over $382 million in 2010, with gross profit of over $153 million and net income after all expenses of $6.5 million. Just this month, Diversey told investors that the company uses "valuation allowances" to offset taxes, or in other words to not pay taxes.
There is no independent evidence of the annual revenue of the privately held parent corporation, SC Johnson, because it does not make its gross profits or earnings public, although its annual revenue is estimated to be approximately $8.9 billion.
But, according to the Wisconsin Department of Revenue, this Racine-based company paid no corporate income taxes in Wisconsin for much if not all of the past decade (none, actually, according to all years in which public data is available). SC Johnson's expertise in tax avoiding has earned it the title of "August poster-child of tax avoidance" by a project of the Institute for Wisconsin's Future, a 501(c)(3) non-profit research institute located outside of Milwaukee. Each month, the institute will feature a state corporation that does not pay taxes and cheats the state of much needed revenue.
Former Employee Blows Whistle on SC Johnson's Shady Practices
SC Johnson & Sons is currently embroiled in a lawsuit with a former tax manager who blew the whistle on the company for allegedly illegal tax practices. He accused the company of not correcting the IRS when it mistakenly gave the firm $5.1 million in foreign tax credits in 2000, receiving another $1.8 million in refunds based on the mistake. The former tax manager, Michael DeGuelle, alleges that during the 12 years he worked for the company he was ordered to illegally alter and destroy company records and file false tax returns.
If Governor Walker is really interested in tackling the state's debt, why not investigate the state's biggest corporate tax-dodgers? Perhaps because SC Johnson, along with Johnson Bank, gave significant campaign contributions to Walker's gubernatorial campaign in 2010—over $14,000 in all.
Last month the Institute for Wisconsin's Future also called out Associate Bank and M&I Bank for their state income tax avoidance practices. These two banks, notably, were also both big contributors to Walker's campaign. The governor's recently signed state budget also created new loopholes for multi-state corporations to avoid paying taxes. The state's nonpartisan Legislative Fiscal Bureau says some 400 firms in the state will see lower future taxes due to the new loopholes.
Corporate Tax-Dodgers Under Public Scrutiny
The new project by the Institute for Wisconsin's Future is similar to US Uncut, a grassroots direct action group that has been targeting corporate tax-dodgers at the federal level. The group, with chapters across the country, has staged protests at corporations like Bank of America, Verizon, BP, FedEx and Target. Click here to follow US Uncut.
To learn more and receive updates on the Institute for Wisconsin's Future "Who Does Not Pay Taxes?" project, sign up here.