Cara Lombardo

Milwaukee Journal Sentinel

Milwaukee County Executive Chris Abele has paid nothing in state income tax since 2000.

Abele, a Democrat and multimillionaire, is among a group of well-known and wealthy people with zero-dollar tax returns, including members of the SC Johnson family and Beloit billionaire Diane Hendricks, the owner of ABC Supply and a key fundraiser for Republican presidential candidate Donald Trump.

Records obtained by the Journal Sentinel show Abele paid $0 in state income tax from 2001 to 2014. A spokeswoman declined to comment on his 2015 state income tax return, which is not yet publicly available.

Graphic: Avoiding income taxrare among high earners

Some high earners manage to avoid owing state income tax, often through a combination of business losses and itemized deductions. They are a small group — in 2014, less than 1% of filers with incomes above $90,000 had zero tax liability, according to data from the state Department of Revenue. That accounted for 3,840 of the nearly 3 million returns filed.

The Journal Sentinel requested state income tax records for 30 local and state officials and executives for the past three years. Abele was the only elected official who didn't owe state income taxes.

Three of Wisconsin's billionaires sometimes pay zero state income tax

Charitable donations can decrease tax bills to an extent. Other tax laws are written to encourage investment. For instance, the laws allow investors who take risks on young or unprofitable companies to use losses from those companies to decrease their own taxable income.

But critics question a system that allows some of the highest earners to avoid owing any state income tax.

"The tax laws are written by and for the rich," said Matthew Rothschild, executive director of the Wisconsin Democracy Campaign, a liberal nonprofit group that advocates for transparency in politics.

For those who do pay taxes, he said, it's an "outrageous double standard."

Abele said he uses the tax benefits available to him, just as anyone would.

"I don't begrudge people for using coupons," he said. "If people are concerned about it, they should change the law."

Charitable Donations

Voters re-elected Abele by a wide margin earlier this year after he gave his campaign nearly $4 million of his own money. He has been county executive since 2011 and earns a salary of around $130,000 a year. He is well-known for investing in start-up companies and holds board positions on several companies and nonprofits.

Abele said his personal income tax liability has been offset by hundreds of thousands of dollars in charitable donations to causes including the Boys & Girls Clubs, the Urban League of Milwaukee and the MATC Promise program. He said he routinely gives more than he can write off and had nearly $1 million of unused charitable deductions at the beginning of 2015.

"If I was interested in just avoiding taxes, then I'm very inefficiently doing it," he said.

Christa Baldridge, a Milwaukee-based CPA and shareholder of the accounting firm Schenck SC, said charitable donations can significantly reduce taxable income — but usually only by about half.

"It would be hard to owe no taxes without having business losses and itemized deductions such as property taxes in the mix," she said.

Abele has those, too. He owns a home on Milwaukee's east side assessed at $2.4 million and two condos in the Moderne high-rise downtown assessed at a total of $2.8 million He said he pays "boatloads" in property taxes; taxes due for those three properties totaled $155,000 in 2015.

He also has investments in several companies — another factor that Baldridge said contributes to a zero-dollar tax liability.

Because young companies are especially likely to post losses in the early years, an investor such as Abele could use those losses to cancel out income from other investments. The same is true of real estate investments. Losses can be carried forward for up to 20 years.

By continually making new investments or recognizing old losses, individuals can prolong when they show taxable income and owe taxes.

Abele has owned stakes in several corporations and LLCs over the years, according to his statements of economic interests filed with the county ethics board.

Abele or his second wife, Miriam (from whom he's been separated since last year), held at least 10% stakes in several companies at different times between 2011 and 2014, including a real estate firm, an information systems consulting firm and two start-ups.

He also reported interests in several LLCs including a marketing firm, a waste management service and Ward4, Milwaukee's largest co-working space.

Abele is also a managing director of CSA Partners, a venture fund focused on start-up companies, including Docalytics and Openhomes.

Daniel Potter, managing director of family wealth planning services at Grant Thornton in Milwaukee, said encouraging investment is exactly the point of the tax laws.

"In most cases, tax rules are on the books to incentivize investors to use their personal capital to take risks and create jobs," he said.

It's not unusual for a high-income individual who has business losses not to pay income taxes for a year or two, and then when those investments or businesses turn around, pay quite a bit in taxes, said Dale Knapp, research director at the nonpartisan Wisconsin Taxpayers Alliance.

But Abele paid no state income tax for 14 years in a row.

"I don't know a lot of wealthy people, but I would think that would be somewhat unusual," Knapp said.

Abele said his federal income tax was also low and "probably zero" for much of the same period.

He said he thinks most people would take the trade-off of his donations and investments in the community, which are several times what his state income tax would be.

Abele Paid In The Past

Records show Abele paid state income tax three times before his long streak of zeros: $1,300 in 1997, $116,000 in 1998 and $176,000 in 2000. He moved to Milwaukee in the mid-1990s after growing up in Massachusetts and attending Lawrence University in Appleton.

Abele inherited much of his fortune from his father, who co-founded Boston Scientific, a publicly traded medical device company.

Abele's tax record was frequently questioned by his opponent in his first run for county executive, but not in his two campaigns since then.

In his 2014 statement of economic interests, Abele reported 11 board positions or directorships he held in addition to his county job, including positions with nonprofits like the local and national Boys & Girls Clubs, an investment company bearing his name and the Victory Fund, a PAC focused on electing LGBT candidates to public office.

The statements of economic interests require only limited details. The amount of income earned from other sources like board positions, the values of investments and personal real estate holdings outside Milwaukee County are not required to be disclosed.

Abele's full tax returns, which only he can release, would allow voters to see the specific credits and tax laws he used. The Department of Revenue discloses only the total amount of net income tax paid by an individual in a given year.

"It's up to voters to decide whether it's an issue for a public official like Abele not to pay taxes," Knapp said. "If we don't like some of the tax laws that people are taking advantage of, you need to change the tax laws. They're there for a specific reason."