Some fear liability limit bill protects drunken drivers in civil cases
By Patrick Marley and Jason Stein
Milwaukee Journal Sentinel
Jan. 11, 2011
Madison — Key Republican officials pledged to examine a bill aimed at curbing lawsuits to ensure it doesn't provide more protections for drunken drivers in civil cases brought by victims or their families.
That issue - raised in a hearing Tuesday by the stepfather of a victim in a notorious drunken driving case - was just one of a host raised as lawmakers waded into the details of a series of bills from Gov. Scott Walker seeking to boost the state's economy.
"It would be virtually impossible to receive punitive damages in OWI cases," said Paul Jenkins, whose stepdaughter Jennifer Bukosky was killed in April 2008 by intoxicated driver Mark M. Benson.
On another front, fiscal estimates for the bills Republicans plan to pass in a special legislative session showed the proposals would expand the state's budget deficit by more than $128 million over the next two years.
That will add to a two-year shortfall already estimated at up to $3.3 billion and the new tax cuts will mean lawmakers will have to cut even deeper to balance the state's books.
And on Tuesday, Walker said he supported a proposal to cut the capital gains tax. That would force an additional more than $124 million in cuts a year, past fiscal reports suggest.
"The old adage is if you're in a hole, you stop digging," Sen. Tim Carpenter (D-Milwaukee) said during a hearing Tuesday on a bill to make contributions to health savings account exempt from taxes.
Walker didn't say where he would cut the budget to pay for the tax breaks, but he pledged to balance the two-year budget he will introduce next month.
"We will no doubt next month present a budget that is balanced without a tax increase and we'll account for all the (tax) changes we're proposing," he told reporters. "But there's no doubt . . . we've got to send a clear message to tell employers not only can they stay here, but they can grow and invest here."
That pro-business message is already attracting interest, he said. Walker met Monday with a midsize manufacturer - which he declined to name - that he said is considering adding about 200 jobs.
Walker called a special legislative session to help the economy when he was sworn in last week. Legislative committees began holding hearings on some of those bills Tuesday, and leaders said the Senate and Assembly could begin voting on them as early as next week.
The bill on cutting the capital gains tax isn't part of the special session, but could be taken up during the regular legislative session that is happening at the same time as the special session.
At a gathering sponsored by the Wisconsin Bankers Association Tuesday, Walker called the proposal to repeal the recent increases in the capital gains tax "a great idea."
In 2009, Democrats who then controlled the Legislature changed the law so just 30% of capital gains would be excluded from taxation - cutting in half the former exclusion of 60%.
A bill circulated Tuesday by Sen. Randy Hopper (R-Fond du Lac) would initially restore the previous level, so that 60% of capital gains would be excluded for taxation in 2012. His bill would eliminate taxes on capital gains in 2014.
A fiscal estimate on the bill has not yet been drafted, but past estimates suggest restoring the tax break to its earlier level would cost the state $124 million a year.
Whether Republicans who control the Legislature would move forward with the idea was unclear Tuesday, as they put their energy into the special-session bills that they said would boost the economy.
More details on the bills emerged Tuesday in committee hearings and budget memos:
Liability lawsuits. Drawing the most debate in a packed hearing Tuesday was a bill providing businesses and individuals more protections from lawsuits.
At the hearing, business owners and trade groups praised the bill for reducing a key worry for businesses while victims and family members in negligence cases said it might hurt their ability to get justice in court.
Bill supporters said Wisconsin law was out of the mainstream in several areas, such as a controversial 2005 state Supreme Court decision that allowed a case against seven paint manufacturers to proceed even though the plaintiff could not prove who made the lead-based paints that he said poisoned him as a child. But Democrats on the committee pointed to national studies that have shown that Wisconsin's climate for lawsuits compares favorably to that of other states.
Tom "Cap" Wulf, an owner of Wulf Bros. heating and air conditioning business in Sturgeon Bay, said litigation costs were a constant concern for him. He said he favored provisions in the bill that would raise the threshold for allowing expert witnesses in legal cases, saying he felt that expert witnesses in legal actions against his businesses often lacked real expertise.
"It reduces costs. It opens up opportunities," Wulf said.
Wulf said he wasn't sure if he would hire more employees if the bill passed, though he said it could make it easier for him to obtain insurance if he wanted to move into other lines of business.
Jenkins, of Mequon, raised concerns about a separate provision raising the threshold for winning punitive damages in lawsuits so plaintiffs would have to prove that defendants acted "with intent to cause injury to a particular person" or with a knowledge that their action would lead to that result. Currently, the plaintiff must prove only that a defendant acted maliciously or with intentional disregard for a victim's rights.
Benson, a former physician, was sentenced to 30 years in prison for the crash that injured two children and killed Jenkins' stepdaughter, her unborn child and another child. Benson last year settled the civil lawsuits filed against him for $3.67 million plus undisclosed punitive damages.
Committee chairman Rep. Jim Ott (R-Mequon) acknowledged that the drunken driving issue could be a concern and said before the bill reached the Assembly floor that "this will be addressed." Walker spokesman Cullen Werwie also said that Walker was open to changes to the bill if needed to protect drunken driving victims.
Walker said there would still be ways for people to take action against those who had done wrong. He said trial attorneys were releasing a lot of "subjective information."
"They make a lot of money off of cases like this. They're the ones who are the primary ones affected by this financially," Walker said.
Health savings accounts. One of the bills debated in committee Tuesday would exempt contributions to health savings accounts from income taxes. The measure, long supported by Republicans, would lower revenue by $48 million over the next two fiscal years.
If passed quickly, the tax break would take effect this year.
The federal government and 46 other states provide tax breaks for health savings accounts. That puts Wisconsin at a competitive disadvantage in trying to attract businesses, Revenue Secretary Rick Chandler said.
But Rep. Sandra Pasch (D-Whitefish Bay) questioned whether the state could get more bang for the buck by putting $48 million toward some other effort to create jobs.
Tax cuts. A separate plan by Walker for tax cuts for small businesses would lower revenue by $40 million a year.
Taken with the bill on health savings accounts, that would lower revenue by $128 million in the next two-year budget.
The bill would allow a business with gross receipts of $250,000 or less to claim a nonrefundable tax credit of 15% of its total tax liability. The credit would phase out gradually until a business reaches gross receipts of $500,000.
The proposal differs from one Walker made on the campaign trail, when he said he would cut one percentage point of the tax rate for businesses with 50 or fewer employees. He said his new plan would help the same type of companies, but observers have said it appears to help fewer employers.
A separate plan to provide tax credits that eliminate the tax liabilities of new companies for the first two years of operation would have little impact on the state budget because they would draw mostly small businesses with little tax liability, according to a review by nonpartisan budget analysts and the Department of Revenue.
According to the Legislature's budget office, Walker's administration has identified 416 companies that could come to the state. But only a fourth of them would qualify for the tax break because it would not be given to firms that have done business in Wisconsin in the last 10 years. Those companies have annual tax liabilities of around $2,700 apiece.
If enacted, the state would lose about $280,000 a year in revenue, according to the Legislative Fiscal Bureau.
Walker said he was open to changing the 10-year provision so that businesses that operated in Wisconsin more recently would qualify for the tax break.
Tax credits. Another bill by Walker would increase the Economic Development Tax Credit program by $25 million, bringing it from $73 million to $98 million.
The fiscal bureau wrote in a memo that the increased credits in the program likely would not be needed until sometime after July 2013. But Walker said he wanted more money for the program because he planned to be aggressive in using it to increase business activity in the state.
The credit is given to businesses that create jobs, make capital investments, provide job training, or locate or retain corporate headquarters in Wisconsin.
Also Tuesday, Walker's new Commission on Waste, Fraud and Abuse met for the first time. The commission is charged with finding $300 million a year in savings and is to make its first round of recommendations by July 1.