Friday, January 8, 2010

Wyo's Manufacturing Tax Exemption and Gender Wage Disparity

Reports on tax break finds pay gap

This is Part III of an ESPC analysis of state tax policies and policy proposals and their potential effect on the Wyoming economy

By Sarah Gorin
ESPC researcher

Wyoming ranks consistently at or near the top in “gender wage gap,” the difference in wages paid to men and women. A study commissioned by the Wyoming Legislature in 2003 examined factors contributing to Wyoming’s gender wage gap, including:

1. A concentration of women in part-time work, either by choice or due to lack of necessary support services such as adequate child care;
2. Relatively low wage levels in female-dominated occupations, such as teaching and nursing;
3. High wages in male-dominated occupations such as mining and construction, which are major players in Wyoming’s economy.

In 2004, the Wyoming Legislature enacted a sales and use tax exemption for purchases of manufacturing equipment. Wyoming’s manufacturing sector is relatively small, and economic development proponents argued that a tax exemption similar to ones offered in other states would give Wyoming “another tool in the toolbox” to attract manufacturers to our state.

The Equality State Policy Center opposed the tax exemption, arguing in turn that tax exemptions do not drive location decisions, and that other states’ tax structures enable them to potentially recoup revenues lost from a sales tax exemption.

For example, in a state with personal and corporate income taxes, there is the possibility of replacing the revenues lost from a sales tax exemption on manufacturing equipment – if indeed the exemption attracts a manufacturer – because the company and employees will then pay income taxes.

Wyoming could recoup lost revenues only from property and sales taxes paid by the manufacturing company and its employees, which might or might not make up the difference.

In addition, some other states have enacted “clawbacks,” where state tax exemptions or other incentives are stopped and even recovered from businesses which fail to produce promised jobs and tax revenues.

Although the ESPC was not successful in stopping the exemption for purchases of manufacturing equipment, we successfully advocated for an amendment requiring reporting on the results of the tax exemption. And because gender wage gap was very much on everyone’s minds at the time, the reporting requirements included reporting wages paid to men and to women.

The reporting proved problematic as a first-time effort, since there were no baseline data to compare to, and there was no structure in place to identify manufacturers who might avail themselves of the tax exemption. However, the Department of Revenue worked diligently and began producing reports that showed wages paid to men and women (full- and part-time), and benefits offered to employees in the manufacturing sector.

The ESPC recently compiled all the reports and the results were rather interesting (see spreadsheet here of the last two years, which have comparable data).

The shaded boxes show where there are significant wage gaps between men and women in the same broad job category within the manufacturing sector.

Caveat: these data are compiled from employer surveys, and the employers chose individually how to list their data in the six categories offered by the Department of Revenue. The data are not tied to national manufacturing codes and unfortunately cannot be compared to regional or national data on manufacturing wages.

Nevertheless, the data do raise red flags that beg further investigation. For example, when 423 full-time female employees in the administrative/clerical category in FY 2008 earn, on average, nearly $7/hour less than 157 male employees in the same category, it stretches the imagination to believe that all 423 of those females are that much less qualified than the 157 males to justify making 70% of the males’ wages.

Approximately $32 million in revenues have been lost due to the tax exemption for purchases of manufacturing equipment (through FY 2008). The tax exemption is set to expire at the end of 2010, and several business organizations are lobbying to extend it. We at the ESPC think some questions need to be answered first.

Part IV, The Jobs Budget