3,800 to 1 = Ratio of WI Families Hurt by Tax Credit Changes, Compared to the Estates Benefiting from Estate Tax Cut
In the next two or three months, Congress will have to choose between two starkly different tax options that have divided the U.S. House and the Senate. It’s a choice that has been overshadowed by other parts of the debate over expiring tax provisions, but it will be a telling vote on legislative priorities.Lawmakers can extend a tax break for a tiny number of wealthy estates. Or – for about the same amount of money – Congress can continue improvements to two tax credits that encourage work and help millions of people pull themselves out of poverty.In Wisconsin, the tax break for wealthy estates would benefit only 40 estates a year, according to a new report Read more . In contrast, the improvements to the tax credits would give a boost to 155,000 low- and moderate-income working families in Wisconsin.
H.R. 8 Includes Bush Tax Cuts for the Rich, Reduced Estate Taxes, and Higher Taxes for Low-income Working Families
In the next day or two, the House is expected to vote on tax legislation (H.R. 8) that would substantially increase the federal deficit while doing the following:
- extending all the Bush-era income tax cuts, including those that exclusively benefit the richest two percent of Americans;
- extending the 2010 temporary estate tax cuts that exempt all but the richest 0.3 percent (estates up to $10 million per couple); and
- ending tax credit improvements for low- and moderate income families enacted as part of the American Recovery and Reinvestment Act of 2009 (ARRA).
H.R. 8 would ensure that no millionaire or billionaire would lose a penny of tax cuts, but 13 million middle- and lower-income families would lose tax benefits – including almost three-quarters of low-income families with children and 37% of all families with children. Read more
Thousands of Wisconsinites – perhaps tens of thousands – owe their jobs to the Recovery Act. Nationally, the Recovery Act increased the number of people employed by between 200,000 and 1.5 million in the first quarter of 2012, according to a new report by the Congressional Budget Office. If one-fiftieth of that increased employment occurred in Wisconsin, then the Recovery Act increased the number of employed Wisconsinites by between 4,000 and 30,000 in 2012. That’s a significant boost, especially considering the very limited job growth in Wisconsin over the last year.
The Recovery Act (officially known as the American Reinvestment and Recovery Act) was passed in early 2009 with the goal of stimulating the economy, creating jobs and cushioning the worst effects of the recession. The Recovery Act included a temporary mixture of tax cuts, fiscal relief for states, and enhanced support for families affected by the crisis.
The effects of the Recovery Act on the economy peaked in 2010, but some effects are still being felt.
IRP Research Shows Antipoverty Programs Reduced Unofficial Poverty Rate in Wisconsin in 2010
A report released Wednesday Read more by the Institute for Research on Poverty (IRP) at UW Madison examines the effects of the antipoverty programs on the poverty rate in Wisconsin. Not surprisingly, the official measure of poverty shows an increase in Wisconsin between 2009 and 2010. However, the IRP’s alternative gauge of poverty (the “Wisconsin Poverty Measure” or WPM) showed a decrease in the poverty from 11.1% to 10.3%.Whereas the official poverty measure is based just on pre-tax cash income, the WPM uses a broader lens that also examines taxes, tax credits, and “near cash” income such as food stamps. Last year the IRP concluded that from 2008 to 2009 the alternative poverty measure was flat in Wisconsin, because the drop in families’ income was offset by tax credits and food assistance benefits, which were enhanced that year by the federal Recovery Act.
It’s too soon to allow the federal unemployment benefits program to end at the end of the year, as will happen unless Congress acts to extend it. Federal unemployment benefits provide a boost to the economy, by putting money in the pockets of people who will spend it right away. These benefits act as a lifeline for families struggling in an economy that has only one job opening for every four people looking for work.
Re-authorizing federal unemployment benefits is important not just for the national as a whole, but for Wisconsin in particular. Job growth in Wisconsin has been slower than anyone wants, and recent jobs figures in Wisconsin are downright grim Read more . Between July and October 2011, Wisconsin lost 21,200 jobs – about as many jobs as there are in all of Douglas County. Over the last year, the national unemployment rate has slowly declined, but Wisconsin’s hasn’t budged.
Severe budget cuts to public education in Wisconsin have resulted in thousands of job losses, larger class sizes, and fewer academic opportunities for students, according to a new survey. Many districts used the last of one-time federal money to fill this year’s budget holes, and anticipate that the cuts in the next school year will be the same or deeper than the cuts made this year. That means that the bleak condition of public education in Wisconsin is likely to stay the same or worsen next year.
In the 2011-13 budget, the Legislature made enormous cuts to the state’s public K-12 education system. According to the Center for Budget and Policy Priorities, Wisconsin’s cuts to education Read more were the second-largest in the country when measured on a dollars per student basis. Wisconsin schools will receive $635 less per student in state support in 2012 than in 2011. The figures for reductions in state support are massive, but do not fully represent the revenue lost to schools.
Over the last three years, Wisconsin residents received $4.7 billion in direct payments from the federal government in the form of extended unemployment benefits ($3.2 billion) and payroll tax cuts ($1.5 billion). These payments, which were aimed at stimulating the economy and helping families hit hard by the recession, will expire at the end of the year unless Congress takes action.
These two emergency federal supports put money into the pockets of struggling Wisconsin families and injected much-needed dollars into the local economy, saving thousands of jobs and reducing the severity of the recession. These benefits supported consumer spending during a critical period, when the economy was severely weakened by a major financial crisis, and helped sustained demand for business products across the country and in Wisconsin.
Wisconsinites received $833 per person from these two forms of federal aid over this period: $573 from unemployment benefits and $260 from the payroll tax cut.
President Obama has announced his American Jobs Act, a package that includes $447 billion in tax cuts and new spending aimed at increasing employment and upgrading infrastructure across the country.
Here’s what the American Jobs Act would mean for Wisconsin, in dollar amounts and numbers of jobs supported. The figures are taken from materials posted by the White House.Continuation and expansion of the payroll tax cut: President Obama has proposed extending and expanding a temporary decrease in individual payroll taxes. This provision would give a $1,580 tax cut to a typical Wisconsin household with an income of $51,000.President Obama has also proposed temporarily reducing payroll taxes paid by employers. This would cut payroll taxes for 110,000 small businesses in Wisconsin.
Infrastructure investment Read more : As part of this package, the federal government would invest $575.4 million in highway and transit modernization in Wisconsin, which would support approximation 7,500 local jobs.
As the economic recovery continues to flounder, policymakers are coming to some sort of consensus that action is needed to help address the nation’s economic ills. What’s missing so far is a consensus on what form that action should take. President Obama’s plan, which he announced last night, includes a combination of tax cuts and spending aimed at providing a temporary boost to the economy. Republicans have indicated a willingness to consider some aspects of his proposal. Read more
Given that lawmakers are going to be debating the best way to drag the economy out of its current funk, now is a good time to scrutinize the track record of the last significant effort to jumpstart the economy. More than two years have passed since the federal Recovery Act was put into place in 2009, and researchers have had time to study the effects of the stimulus and determine whether the results were worth the cost.
Texas Governor Rick Perry is making waves with his entry into the Republican race for president. He’s also making waves with his anti-Washington rhetoric, vowing to make Washington “inconsequential” to most people’s lives.
Fortunately for Texans, he didn’t take that same anti-Washington approach during the recession, when the state made significant use of Recovery Act dollars to stem its budgetary shortfall and lay the groundwork for the subsequent economic recovery. News reports at the time indicated that Texas used stimulus funds to plug 97% of its budget shortfall for fiscal 2010, a figure higher than any other state’s.
Governor Perry has championed his state’s job creation as a model for what he might be able do if he were elected president. Jared Bernstein, a senior fellow with the Center on Budget and Policy Priorities, has pointed out that it was actually the creation of a large number of public sector jobs Read more that kept the Lone Star economy afloat during the worst years of the recession.