Democrat Running for Wis. Gov. Used Business Tax Loophole

Image: Democrat Running for Wis. Gov. Used Business Tax Loophole

Thursday, 15 May 2014 09:21 AM

By Elliot Jager

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Wisconsin Democratic gubernatorial candidate Mary Burke's family-run bicycle business did not pay standard state income taxes for three decades, The Washington Free Beacon  reported.

Under "Subchapter S" of Wisconsin's tax regulations, business income can be reported and taxed on the individual income tax returns filed by the owners of a company.

Trek Bicycle, now the biggest manufacturer in the country, was co-founded by Richard Burke, the candidate's father. Trek owners used Subchapter S to pay income tax on their individual returns avoiding the higher corporate tax rate.

The majority of Wisconsin businesses take advantage of the Subchapter S loophole, Trek spokesman Eric Bjorling pointed out. He said, "Trek has always complied with state and federal income tax laws."

Fox 6 News reported that a majority of the top 25 Wisconsin businesses do not pay standard state income taxes.

Critics say this makes Trek and the other companies bad corporate citizens, Fox reported. Bjorling pointed out that Richard Burke left his entire estate to a charitable foundation, according to Fox.

The candidate has cited her experience with Trek in campaign appearances, often detailing her efforts to improve "the company's bottom line." Burke has said that she does not believe corporate taxes are a "significant detriment" to doing businesses in Wisconsin. She noted that Trek began with a few people working out of a barn and now employs about 1,000 workers.

"Wisconsin is a great place to do business," she said, and lower taxes were not a priority for the company, the Beacon reported.

Republicans in Wisconsin have taken Burke to task for lauding Trek on the campaign trail without pointing out that it uses the Subchapter S loophole.

The Milwaukee Wisconsin Journal Sentinel reported in 2013 that Burke did not pay state taxes during the early 1990s. A Burke spokesman said that she was not actually with the family company at the time and that records to the contrary were in error.

Trek also was the recipient of a $875,000 state loan while Burke was Wisconsin Secretary of Commerce. The funds were used to construct a new factory, and $392,300 of the credit was forgiven, the Beacon reported.

Burke is running against GOP incumbent Gov. Scott Walker in a tight race, with a Magellan Strategies poll showing them tied, according to Real Clear Politics.

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