More Tax Relief Or More Spending?

Governor, Senate, and Assembly offer plans to spend the “surplus”

Feb. 14, 2020 | MacIver News Service

By Bill Osmulski

Every January the State of Wisconsin faces a difficult decision thanks to a decade of government reforms and responsible fiscal policy – what to do with its budget surplus.

The Legislative Fiscal Bureau (LFB) announced on Jan. 24th the state is on track to collect an additional $818.2 million in taxes by the end of next fiscal year more than the state budget originally projected. By law, half of that goes straight into the rainy-day fund. Every decision maker in the state capitol has an idea of what to do with the other $400 million.

Gov. Tony Evers initially said the state needs to be cautious with its decision. He dismissed the idea of using the money for tax relief.

“Well, that’s a one-year deal. Where are we going to find the money to make that happen the next year and the next year and the next year? I think, is that something that should be discussed, absolutely. I’m open to having discussions about that, but I’m not open to one-time expenditures of money that we know is going to be an ongoing issue,” Evers told Adrienne Pedersen on WISN’s Up Front on Jan 26th.

Less than two weeks later, Evers changed his tune. He proposed a plan to spend $250 million in state aid to school districts, plus another $10 million in sparsity aid, and then $130 million in equalization aid for property tax relief. This increase in education funding would likewise be a “one-year deal,” and lawmakers would be pressured to find ways to maintain it in the next state budget.

“We don’t have to choose between investing in our kids and reducing property taxes—we can do both. My plan recommits to our promise of two-thirds state funding for our schools and will provide $130 million in property tax relief through equalization aid. This is a no-brainer, folks. We know the bipartisan support is there, we just need elected officials to put people before politics,” Evers said in a Feb. 6th press release.

The Senate started floating the idea of property tax relief and paying off some of the state’s general obligation bonds. Nothing was ever formally proposed.

Ultimately, Assembly Republicans presented their plan on Friday, February 14, 2020.

Assembly Republicans’ plan includes $214.5 million in individual income tax relief, $44.7 million in new exemptions for personal property, and an additional $100 million debt service payment. These changes would all apply to taxes in 2020.

The income tax cut will occur through increasing the standard deduction. The deduction for “married joint” filers will go from $20,470 to $23,170 (for incomes under $144,670), for “individual” filers from $11,050 to $12,510 (for incomes under $120,361), for “head-of-household” filers from $14,280 to $16,170 (for incomes less than $54,504) and for “married separate” filers from $9,720 to $11,000 (for incomes less than $68,684). The average filer would see a $105 reduction in their income taxes for 2020, and $300 when combined with other tax cuts in the current budget.

Senate Republicans are on board with this plan.

“The size of our budget surplus was much higher than I ever anticipated. After discussions with the Senate Republican caucus and Speaker Vos, I fully support the direction we’re headed with this plan. Wisconsin Republicans are once again putting taxpayers first. Our reforms have left the state with a massive surplus that belongs to the taxpayers,” Senate Majority Leader Scott Fitzgerald said in a statement on Friday.

Fitzgerald pointed out that Republicans are responsible for $13 billion in tax cuts in Wisconsin over the past ten years.

“This smart budgeting over the last ten years is paying big dividends for our Wisconsin taxpayers,” Rep. Joan Ballweg (R- Markesan) said at the Assembly press conference on Friday. “These pro-growth reforms and tax cuts are increasing incomes. We continue to have low unemployment. That has contributed to our strong economy.”

The Joint Committee on Finance will take it up on Monday. The Assembly is expected to vote on it on Tuesday.