New Study on Itemized Deductions Released

Wednesday, August 25, 2010 at 4:12 PM by

The Institute on Taxation and Economic Policy (ITEP) has released a new study on itemized deductions for income taxes. These deductions have a negative effect on tax fairness, with most of the benefit accruing to high-income taxpayers. Most states follow in the footsteps of the federal government in their approaches towards itemized deductions, but the good news is that Wisconsin is in the minority of states that take a variety of approaches to limit the regressive nature of the deductions.

Itemized deductions represent a group of several separate personal income tax deductions available on federal tax forms and most states. Widely-used deductions include those for mortgage interest and charitable contributions. Taxpayers generally have a choice between using a standard deduction or itemizing their deductions, and using whichever is higher. This income is then shielded from income taxes.

Higher-income taxpayers disproportionately benefit from itemized deductions in part because their income is taxed at a higher rate. Read more

Categories: Blog, federal issues, income taxes, taxes | Comments Off on New Study on Itemized Deductions Released

What Tax Cut Proposals Could Mean for Wisconsinites

Monday, August 23, 2010 at 5:26 PM by

The Bush tax cuts are set to expire at the end of 2010, and President Obama and Congressional Republicans have offered competing proposals as to which aspects of the tax cuts should be continued. The two approaches would result similar effects for middle and upper middle-income taxpayers in Wisconsin, but they would have different impacts for low-income and especially for the very highest income groups.

President Obama has proposed making permanent the Bush income tax cuts for those making below $200,000 individually or $250,000 jointly and reducing the estate tax. President Obama is also advocating for making permanent the temporary expansions to the Earned Income Tax Credit (EITC) and Child Tax Credit that were included in the Recovery Act. These credits typically benefit lower income workers.

Congressional Republicans have proposed making permanent the Bush income tax cuts regardless of income, eliminating the estate tax, and not extending the EITC or Child Tax Credit expansion. Read more

Categories: Blog, EITC, federal issues, income taxes, Recovery Act, taxes | Comments Off on What Tax Cut Proposals Could Mean for Wisconsinites

CBPP Offers another Critique of Rep. Ryan’s “Roadmap for America’s Future

Friday, August 20, 2010 at 11:09 PM by

Representative Paul Ryan (R-WI) has been getting a lot of press in recent months, after developing specific recommendations for addressing the federal budget deficit. (See, for example, the major article in the Aug. 2 New York Times). He calls his plan the Roadmap for America’s Future (version 2.0).  A recent CBPP blog post critiques the Ryan Roadmap. 

Much of the media attention has, at a minimum, applauded Rep. Ryan for being one of the few conservative lawmakers to go beyond the usual platitudes about cutting taxes and somehow simultaneously reducing the deficit, by making more specific proposals about what would have to be cut. I agree that he should be applauded for not shying away from controversy and for generating some serious discussion of important fiscal policy issues.

Of course, the downside of unveiling specific elements of a plan that would slash taxes for the rich, while attempting to cut the deficit, is that there are a whole lot of people who would come out on the short end of the budget tradeoffs, and who are likely to oppose the plan if they understand the particulars. Read more

Categories: Blog, federal issues, taxes | Comments Off on CBPP Offers another Critique of Rep. Ryan’s “Roadmap for America’s Future

WBP Releases Analysis of Stimulus Benefits

Monday, August 16, 2010 at 5:07 PM by

Happy half-birthday to The Recovery Act!

Tomorrow marks the 18-month anniversary of The Recovery Act. To celebrate, the Wisconsin Budget Project has released an analysis that found that six types of direct benefits provided by the Act generated more than $3 billion for Wisconsin residents between February 2009 and May 2010. Wisconsin residents have received an average of $532 in direct benefits per person.

Most people know that the stimulus has provided funding for “shovel-ready” projects such as highway maintenance, but it is a well-kept secret that more than one in five stimulus dollars went straight into the pockets of people struggling to make ends meet.

The direct benefits and the amounts allocated in Wisconsin are:
• the Making Work Pay tax credit for workers – $1,547 million;
• additional weeks of jobless benefits for the long-term unemployed – $683 million;
• an additional $25 per week of jobless benefits – $324 million;
• a one-time “Economic Recovery Payment” to many elderly people, veterans and people with disabilities – $254 million;
• increased FoodShare benefits – $162 million; and
• health insurance premium assistance – $54 million. Read more

Categories: Blog, federal issues, food stamps, income taxes, Recovery Act, taxes, unemployment benefits | Comments Off on WBP Releases Analysis of Stimulus Benefits

Refund Anticipation Loans: Goodbye and Good Riddance

Wednesday, August 11, 2010 at 7:33 PM by

“Get your tax refund sooner!” advertise some tax preparers come tax season. Take out your glasses and read the fine print, though, because this way of receiving your tax refund is actually a loan, and one that carries a heavy price. Thanks to a policy change made by the IRS, these refund anticipation loans (also known as RALs) may be a relic of the past.

Here’s how it worked: RALs were secured by the tax filer’s expected refund, which was then assigned to a bank partnering with the tax preparation firm. A temporary account was set up at that bank to receive the refund from the government. The loan was paid to the tax filer within a day or two, and the refund arrived at the bank within a week or two.

For this convenience, filers pay high costs. The National Consumer Law Center and Consumer Federation of America found that effective annual interest rates for RALs ranged from about 40% to over 700%. Read more

Categories: Blog, EITC, federal issues, income taxes, taxes | Comments Off on Refund Anticipation Loans: Goodbye and Good Riddance

Tax and spending rankings: Test your knowledge with our quiz

Tuesday, August 10, 2010 at 2:00 PM by

The Wisconsin Budget Project recently analyzed the new U.S. Census Bureau data (from fiscal year 2008) regarding state and local revenue and spending, and we prepared a short paper showing the rankings and how they have change since 2000. We also prepared an updated version of our tax and spending quiz about how Wisconsin compares to other states.

Before you read any further, please take a look at the quiz and see how many of the 8 multiple choice questions you can answer correctly!

Anyone who gets at least 7 of the answers right wins a one-year free subscription to our Revenue Matters e-newsletter!! (If you miss two or more, you win a free lifetime subscription to Revenue Matters!)

If you got many of the answers wrong, you have plenty of company. Although fiscal year 2008 was the third straight year that per capita taxes and spending in Wisconsin were both below the national average, that story has yet to seep into public consciousness. Read more

Categories: Blog, spending, taxes | Comments Off on Tax and spending rankings: Test your knowledge with our quiz

The Bad News about the Good News

Monday, August 9, 2010 at 3:22 PM by

Wisconsin’s unemployment rate is inching downwards. That’s the good news.

Unfortunately, the lower unemployment rate means that Wisconsin residents will be eligible for fewer weeks of unemployment benefits: a maximum of 93 weeks, down from 99 weeks. That’s the bad news. What’s more, if our unemployment level continues to decrease (good news!), we may soon drop down to a maximum of 86 weeks of unemployment benefits (bad news).

Unraveling the reasons for the change in the number of weeks of benefits requires a little bit of math and a high tolerance for acronyms. The equation looks like this: 93 weeks of benefits available in Wisconsin = 26 weeks of UI + 47 weeks of EUC + 20 weeks of EB. Let’s take a closer look at that equation to break it down into understandable components.

Those 93 weeks of unemployment benefit – or 99, or 86 – are actually a combination of benefits from three separate programs. Read more

Categories: Blog, federal issues, Recovery Act, unemployment benefits | Comments Off on The Bad News about the Good News

U.S. Senate Approves State Help for Medicaid and Education

Friday, August 6, 2010 at 2:50 AM by

Finally some very good fiscal news for states and schools! The U.S. Senate voted 61 to 39 Thursday to pass a deficit-neutral bill that provides funding to states for Medicaid relief and education. The House plans to take up the bill, H.R. 1586, next week, probably on Tuesday, August 10. Although House passage seems likely, it is by no means assured.

The bill is expected to save Wisconsin about $185 million in the state share of Medicaid spending, and our state should receive about $180 million for education. How the education funding will be used in Wisconsin is still unclear. The Medicaid relief will help the state close a large portion of the $300 million shortfall in the state share of funding for Medicaid and BadgerCare Plus.

A comprehensive WCCF report issued Thursday examines the role that enhanced federal Medicaid cost-sharing has played in helping Wisconsin cope with a huge drop in employer-sponsored insurance during the recession.  Read more

Categories: Blog, federal issues, food stamps, Medicaid, Recovery Act | Comments Off on U.S. Senate Approves State Help for Medicaid and Education

Stimulus Effort Creates or Saves 63,000 Jobs in Wisconsin

Wednesday, August 4, 2010 at 9:08 PM by

The American Recovery and Reinvestment Act (ARRA) created or saved between 2.5 and 3.6 million jobs as of the second quarter of 2010, according to a recent report by the Council of Economic Advisors (CEA). The report estimated that 63,000 of those jobs were in Wisconsin.

These jobs come at a time of high need for the state. Wisconsin’s unemployment rate, which stood at a seasonally adjusted rate of 7.9% in June, would almost certainly have been higher without Recovery dollars. How much higher is hard to know, but if the number of unemployed workers in the state rose by that figure of 63,000, our unemployment rate would jump to 10.0%. The state hasn’t experienced unemployment that high since the 1980s.

Nationally, the sum of outlays and tax cuts related to the Recovery Act was $480 billion as of the end of the second quarter of 2010, with an additional $147 billion obligated but not yet outlayed. Read more

Categories: Blog, federal issues, Recovery Act | Comments Off on Stimulus Effort Creates or Saves 63,000 Jobs in Wisconsin

Senate Vote Delayed until Wednesday on Funding for Medicaid and Teachers

Monday, August 2, 2010 at 6:35 PM by

The U.S. Senate had scheduled a vote for late Monday afternoon (Aug. 2) on a bill that would provide Wisconsin an estimated $365 million, according to the State Budget Office.  However, the vote on that bill (HR 1586) has been delayed for a couple of days, because the Congressional Budget Office (CBO) said today that the costs exceed the offsets by $4.9 billion.  Senator Reid and others will take the next two days to recraft the package so it’s deficit neutral. 

Congress has been attempting for months to provide additional fiscal relief to states to avoid deeper cuts that would ripple through the economy and undermine the shaky economic recovery. However, the Senate has been unable to muster the 60 votes needed to break a filibuster of the bill.

Department of Health Services Secretary Karen Timberlake and Superintendent of Public Instruction Tony Evers held a conference call for the press on Sunday to draw attention to the Senate vote and to urge Wisconsin’s Senators to support the bill. Read more

Categories: Blog, EDUCATION, federal issues, food stamps, Medicaid, Recovery Act | Comments Off on Senate Vote Delayed until Wednesday on Funding for Medicaid and Teachers