Before Making New Tax Cuts, First Roll Back Recent Tax Increases

Wednesday, January 9, 2013 at 3:35 PM by

Governor Walker and state legislators have said that cutting income taxes is high on their priority list for Wisconsin’s next budget. But before making new tax cuts, state policymakers should consider rolling back the tax increases in the last budget –tax increases that largely hit working families and seniors on fixed incomes.

There haven’t been any specific proposals for income tax cuts yet – those will likely come when the Governor’s budget proposal is released in the next few weeks.  But both Governor Walker and State Representative Robin Vos (R-Rochester) who is Speaker of the State Assembly, have said they favor cutting income taxes. The income tax is the single biggest source of revenue for the state’s General Fund, and substantial income tax breaks could spur a new round of painful budget cuts.

Policymakers have their eyes set on new tax breaks in the coming budget period, but they have been mostly silent about the possibility of rolling back two substantial tax increases that were introduced in the previous two-year budget. Those tax increases were:

  • A $56 million cut over two years in the state’s Earned Income Tax Credit, which resulted in higher taxes for modest-income working families with children. This cut took more than $500 a year out of the pocket of a single working mother trying to support her three children on a minimum wage salary.
  • A $14 million cut over two years to a tax credit that helps make sure that seniors on fixed incomes and other people of modest means aren’t taxed out of their homes. In the most recent budget, the Legislature prevented the Homestead Tax Credit from being adequately adjusted for inflation, meaning that credit amounts will steadily decline over time, and seniors and others who receive the credit will pay more in taxes.

Legislators should proceed with caution in implementing new tax cuts, especially considering that there are several new or expanding tax cuts that are already in the works. (Read our recent report on new tax cuts and credits here.)  Before approving new tax cuts, the first priority of state policymakers should be to revisit recent tax increases, especially because those tax increases hit working families and seniors the hardest.

Tamarine Cornelius


Categories: 2011-13 biennial budget, 2013-15 biennial budget, Blog, In Focus State Taxes, STATE BUDGET | Comments Off on Before Making New Tax Cuts, First Roll Back Recent Tax Increases

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