Tony Evers’ Tax Increase Ideas: Shifting ‘Priorities’ Or ‘Recipe For Economic Disaster’?

Property taxpayers could be looking at higher bills for the first time in several years under Evers’ latest education budget proposal, which includes a 10 percent spending increase. #wiright #wipolitics Click To Tweet

Updated with a complete transcript of Evers’ remarks below

MacIver News Service | Sept. 24, 2018

By M.D. Kittle and Ola Lisowski 

MADISON – Tony Evers wants more money for government – a lot more. 

The secretary of the state Department of Public Instruction and Democrat candidate for governor proposes a big infusion of new revenue for everything from education to transportation.

How would Evers pay for it all? “There’s no definite plans at this time,” he said. He went on to insist, “Anything is on the table.”

Just how Evers plans to fund it all remains a bit murky, but one thing is certain: Somebody would have to pay for the candidate’s government expansion plans. 

During his annual State of Education Address at the Capitol Thursday, the public education chief laid out his plan to increase education spending by $1.4 billion in the next biennial budget, which would follow Republican Gov. Scott Walker’s historic investment in K-12 education, which boosted spending by $639 million in the current two-year budget.

Afterward Evers took – and seemed reluctant to answer – a flurry of questions from Capitol reporters, including MacIver Institute’s Ola Lisowski. How would Evers pay for it all? 

Yet to be determined, according to the candidate.  

“There’s no definite plans at this time,” Evers said. He went on to insist, “Anything is on the table.” 

Based on his public statements, anything could include a hefty gas tax. He’s open to 33 cents a gallon, but Evers shrugged off claims by Walker’s campaign that the Democrat would hike the state’s gas tax by as much as a buck a gallon.

The Walker campaign ad asserts Evers would raise various taxes. Evers again didn’t disabuse anyone of that notion during Thursday’s press gaggle. 

Evers said he is considering a broad range of possible tax hikes, “shifts,” and “revenue enhancements” to pay for transportation. 

Property taxpayers could be looking at higher bills for the first time in several years under Evers’ latest education budget proposal, which includes a 10 percent spending increase. That would be on top of the $636 million in additional ed spending Walker built into the state’s current two-year budget. 

“Last year when I made the largest actual dollar investment in state history he called it ‘pro-kid.’ Now he’s saying it’s out of whack,” Walker told MacIver News Service at an event in Milwaukee.

DPI documents, as well as the agency’s spokesman, maintain that property tax bills would not be impacted. Yet with all the increased spending and a crucial property tax control removed, that seems a stretch. Budget watchers say the loss of the state tax credit would be a big hit to homeowners in many communities, a loss that would not be offset by Evers’ funding formula ideas. 

Evers said Walker’s priorities are “out of whack.” 

The Republican governor on Friday remarked on how the times had changed.

“Last year when I made the largest actual dollar investment in state history he called it ‘pro-kid.’ Now he’s saying it’s out of whack,” Walker told MacIver News Service at an event in Milwaukee. “The fact is when he was running for superintendent he thought it was a pro-kid budget. When he’s running for governor he thinks it’s something different. This is just double talk from a politician.” 

Evers did call Walker’s 2017-19 spending plan a “kid-friendly” budget at the time the Legislature was working through the document. He has since criticized the governor and the Republican-controlled Legislature for not spending enough on education. At more than $11.5 billion over two years, the 2017-19 K-12 budget represents the largest state education investment in actual dollars ever. 

Evers has offered few details on where exactly he would find the additional $1.4 billion needed to fund the proposed spending increase. At Thursday’s press conference, he repeatedly denied the notion that taxes must necessarily go up. 

While he insists his goal is to “keep taxes reasonable,” Evers is drawing from the old redistributionist handbook. In short, higher taxes for higher earners in the pursuit of lifting the tax burden off of Wisconsin’s middle class, Evers insists.

But what Evers leaves out in his class warfare rhetoric is the number of small business owners that would be hit by higher income taxes.

But what Evers leaves out in his class warfare rhetoric is the number of small business owners that would be hit by higher income taxes. So-called “pass-through” businesses are taxed at the individual tax rate, not at the corporate rate. 

“Again, small business people and small farmers in this state hardly make enough money to be considered wealthy and to be in any kind of a major tax bracket,” Evers told reporters Thursday. “We have to prioritize our taxation policies so that we benefit the small business owners and the people of Wisconsin that are hard-working and can barely just get by.”

If small businesses are a priority, higher income taxes on pass-throughs would seem a contradiction.

The Tax Foundation notes that these sole proprietorships, S corporations, and partnerships make up the vast majority of businesses in the United States and more than 60 percent of net business income. Pass-through businesses account for more than half of the private sector workforce.

Evers dismissed a question about the potential negative impact his tax ideas could have on small businesses, manufacturers and farmers. On the candidate’s “table” of revenue ideas is doing away with the manufacturing and agriculture tax credit. The credit offers a significant share of state income taxes for operators of factories and farms. 

Democrats charge the tax credit, which delivered some $260 million in tax relief for critical Wisconsin industries in 2017, is nothing more than “corporate welfare.” 

“It would be difficult to design a better blueprint to ruin Wisconsin’s economy than what Tony Evers is proposing right now,” Manley said.

A study by the University of Wisconsin-Madison’s Center for Research on the Wisconsin Economy found more than 42,000 jobs were created between 2013 and 2016 thanks to the Manufacturing and Agriculture Credit. More than 88 percent of tax credit recipients were small businesses, with incomes less than $1 million.  

Scott Manley, senior vice president of Government Affairs for Wisconsin Manufacturers & Commerce, said raising taxes and eliminating job-creating tax credits is a “recipe for economic disaster and failure.”

“It would be difficult to design a better blueprint to ruin Wisconsin’s economy than what Tony Evers is proposing right now,” Manley said.

Bill Osmulski contributed to this report.

After receiving questions about this and a previous report, we decided to post a complete transcript of the media availability held by Tony Evers with his complete remarks.

[Tony Evers] – “Republicans, especially Scott Walker, continue to divert attention from their record and making assumptions about what my plan would do. Going forward we will be moving the state forward. We won’t be spending our time throwing hail mary passes to foreign corporations, we’ll grow our economy, we’ll actually invest in the people of Wisconsin, invest in our schools, invest in folks that are part and parcel of our state’s economy now, like young entrepreneurs. So I reject the assumption that taxes are going to be going up. And taxes have gone up under Scott Walker. All those millions of people that voted for referenda, school referenda. They did it because Scott Walker has decided not to fund public schools. Scott Walker’s roads are deteriorating to the point where municipality after municipality are passing wheel taxes to fund what the state used to fund. So I reject the notion that somehow I’m a tax and spender when Scott Walker’s been doing exactly that. Going forward, we will absolutely invest in the priorities that I’ve laid out, whether it’s in education, whether it’s in roads, making sure that we have good health care. And frankly, those things in the past, you know we have a reasonable increase we’re asking. Those budgets, in the good old days when apparently people forgot that they did increase taxes, were actually bigger increases than what we’re looking at. Tommy Thompson had a bigger budget than I do. It’s always about priorities. We found $4.5 billion for Foxconn, suddenly out of thin air, clearly the legislatures looking at possibly doing it once again for another Wisconsin-based firm but it’s always about priorities. We will work with the Legislature to make sure that taxes remain low in the state of Wisconsin but we will have different priorities than the present governor. 

[Ola Lisowski] – Your funding plan released on Monday would increase state support to DPI by $1.4 billion. Where does that money come from? 

[Evers] – Again, it’s around priorities. That’s a smaller increase than Tommy Thompson had several years ago. That money was found in the budget and I plan to do it again. Certainly part of it comes from the school levy tax credit and that will be applied so that districts don’t have to essentially raise the levy in order to capture something they already should be getting. But at the end of the day, that increase of 10 percent is doable within the present budget. It’s always been that way. It’s about finding priorities, and my priority is going to be around K-12 education.

[Theo Keith] – “If you’re going to increase funding without raising taxes, isn’t that a concession that the revenue picture has improved because of the economy being strong?” 

[Evers] “Not necessarily. We may decide to reduce expenditures in some areas. The budget-making process is, as you know, like watching sausage being made. We will, it will be our goal to keep taxes reasonable in the state of Wisconsin. I can’t say that it may look different, we may look at having taxes being shifted a little bit because we want to make sure our working people in the state of Wisconsin get a break. But the bottom line is, budgeting has always been about priorities. And this is no different, it’s just that my priorities are different from the governor’s priorities. My priorities are for the working people of Wisconsin, making sure that their kids go to strong schools, we should’ve taken the Medicaid money so that we have a good health system, all those things have been left aside during Scott Walker’s term. We plan to change that.”

[Patrick Marley] Would you make any changes to the individual income tax? 

[Evers] We will be looking at that. Clearly the tax credit situation is one that needs some attention. When we have 11 multi-millionaires in the state of Wisconsin receiving $22 million in tax refunds with no expectations, I say that’s a questionable practice. We will be looking at questionable practices. Again, budget-making is difficult, it’s about priorities and negotiating, and I feel confident we can have a budget for the state of Wisconsin that reflects the values of the people of the state and keeps taxes to a minimum.

[Press] Those taxes you’re referring to are from the man and ag credit, but would you want to revisit the brackets, the individual income tax brackets? 

[Evers] We may, we may do that. Again, I think we need to prioritize the working men and women of Wisconsin. As you saw in the recent research done that showed that we have 860,000 families in the state of Wisconsin that just barely make enough money or hardly make enough money to, and these are working families, to buy the necessities. Whether it’s food or …or childcare, that’s a lot of people in the state of Wisconsin and they need a tax credit too. So we’re going to do a lot of things to look at the tax structure in this state to make sure that A) we’re advantaging the people that need it the most and B) making sure that we continue to have economic development in this state that advantages local Wisconsin businesses. 

[Marley] Just to make sure I understand, essentially what you’re saying is something you would consider raising taxes on the wealthy and decreasing taxes on the middle class and lower classes?

[Evers] Anything is on the table. There’s no definite plans at this time. Alls I can tell you is when you see the figure of 860,000 families that are just barely struggling to do the basics in this state, clearly they need a tax break so we’re going to find a way to do that. 

[Press] But when you say anything is on the table that in fact was one of the posters that the Republican lawmakers had in their press conference prior to your remarks. What’s your message, then, to small business people and small agricultural people to reassure them that that doesn’t mean things are going to be tougher for them?

[Evers] Again, small business people and small farmers in this state hardly make enough money to be considered wealthy and to be in any kind of a major tax bracket. We have to prioritize our taxation policies so that we benefit the small business owners and the people of Wisconsin that are hard-working and are can just barely get by. Those people need a raise and most importantly they deserve to be treated as fairly as others in this state. 

[Scott Bauer] The governor has said you would increase the gas tax by as much as a dollar, is that true?

[Evers] Well the governor loves to distract from his record around roads. I have never said I would raise the gas tax by a dollar.

[Bauer] So you would rule that out? You’re not…?

[Evers] Well, it’s ridiculous. I mean who the hell would, frankly? The governor says that so that he can take us away from the whole issue of why we are struggling around this issue of transportation to begin with. There’s a reason people have signs on the highway that say “potholes are now called Scottholes.” He has absolutely abandoned his efforts around making sure we have a world-class transportation system. Everything is on the table, whether it’s revenue enhancements, whether it’s cutting back in other areas, but clearly the people of Wisconsin cannot afford to essentially borrow our way on transportation. 

[Bauer] So are you willing to say you would consider a gas tax increase but no higher than a certain amount? 

[Evers] We will discuss that when we get the Republicans and Democrats together. That, the people of Wisconsin actually want a bipartisan win on something, and they haven’t had one for a long, long time. I think this is something we can get bipartisan agreement on. And so I’m not going to be putting a marker out there now so Walker can talk about next thing he’ll be coming out with an ad that says we’re raising it $15 gallon. The bottom line is we’re going to have Republicans and Democrats work together so we can solve this problem.

[Brianna Reilly] Would you want to reinstate, reauthorize the Department of Commerce? 

[Evers] Yes. WEDC has not served its purpose. We would move back to the days where we had a Department of Commerce that controlled that. It’s all public money. As you remember when WEDC was formed it was supposed to be a public-private partnership, well, as it turned out it’s all public. We need to make sure the public is being held accountable that we have accountability to the public. The best way to do that is to have it be back in the Department of Commerce, a single organization. But the bottom line is we are going to move away from the idea that somehow we need to throw a hail mary pass every four years in order to make the economy grow in the state of Wisconsin. We have lots of young entrepreneurs that are two or three years in that want to expand their businesses that are not necessarily looking for a handout. We need to make sure that they get an opportunity to borrow from a local bank, keep that money local. But the bottom line is economic development in the state of Wisconsin should be a 72-county solution not a southeast Wisconsin vs. the rest of the state. We need to have everybody in the state of Wisconsin make sure they have access to economic development, technical assistance, and resources.

[Press] Back to the gas tax because I want to make sure that I’m clear, Mandela Barnes told me a couple of weeks ago that you all would have a transportation plan to the public, to the voters before election day. And you’re saying you’re not going to talk about what the gas tax potential increase would be this year?

[Evers] We will meet and work with legislators after inauguration. And maybe even before, after the election. But bottom line is this is a top priority for the the people of the state, we will meet if it’s before the inauguration and the subsequent election, doesn’t make any difference to me. We need to have a conversation. The people of Wisconsin would love to have Republicans and Democrats actually solve the problem. This is an area to do that. 

[Laurel White] You’ve been critical of Kimberly Clark and obviously Foxconn, are you saying that if you would be elected you would never back a similar tax incentive deal like those two? 

[Evers] I would never cut a deal that Scott Walker cut with Foxconn. Anybody of you in this room or any one of your readers or listeners, people in the TV audience, could’ve cut a better deal. It was a horrible deal. That aside, I am ready and willing to work with Foxconn to make sure that we hold their feet to the fire. The Kimberly Clark piece, I have no information to make a good decision on whether it’s a good idea or not. I need to see a deal.

[White] But what about a tax incentive deal for a company that says we’re going to leave Wisconsin if you don’t give us X? 

[Evers] Well it certainly gives us pause. If it’s Kimberly Clark, then it’s somebody else, then it’s somebody else. But I want to make sure I see the deal first before I say anything specifically. I can’t comment on it specifically. For Foxconn that’s a $4 or $5 billion deal that was cut by Scott Walker for a foreign company. It makes no logical sense. It’s just way too expensive. We’re subsidizing salaries, positions and that corporation for 25 years. That’s not where we want to be in this state. 

[Jessie Opoien] I understand not wanting to draw a line in the sand and say we will or won’t do this but shouldn’t voters have an idea of what options you’re more likely to consider or options that would be unacceptable to you?

[Evers] The people of Wisconsin are more concerned about having the roads fixed. The idea that somehow we’re going to magically come up with a solution at this point in time is wrong. We need to meet with the leaders, with Republicans and Democrats, we need to work with the construction industry. We need to sit down with the people that can help us answer that question. But everything is on the table, gas tax included. I know Robin Vos has talked about toll roads, all those things frankly that were part of the conversation several years ago when solutions were created and Scott Walker decided to start borrowing money. That’s 20 cents on a dollar for transportation goes to debt service which is outrageous. So the bottom line is I’m willing to listen, I’m willing to get people together, until we fix this thing.