State Medicaid Deficit Drops Sharply

Friday, April 4, 2014 at 4:43 PM by

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Can Wisconsin Grow Its Way out of a Deficit in the Next Budget?

Monday, March 3, 2014 at 8:22 PM by

Perhaps, but Further Budget Cuts Are Likely to be Part of the Solution

It appears that the Wisconsin Legislature is on the verge of passing a slightly amended version of the Special Session tax cut bill, which uses the projected state surplus in a way that leaves the state with a “structural deficit” of about $700 million at the beginning of the next session.  (See note below.)  The good news is that the way the Fiscal Bureau calculates structural deficits doesn’t make any estimate of revenue growth in the next biennium. The bad news is that it also doesn’t account for any spending growth, and it depends on fairly strong revenue growth over the next 15 months, which is by no means guaranteed.  (Technical correction: The structural deficit was reduced to $658 million by a Finance Committee amendment that requires $38 million to be cut/lapsed at the outset of the next biennium.) 

Proponents of the proposed tax cuts contend that tax growth in the next biennium can be expected to surpass the amount needed to close the structural deficit.  Read more

Assembly Rejects Democrats’ Alternative Plan for the Projected Surplus

Tuesday, February 11, 2014 at 9:02 PM by

Rejected Plan Included Larger Tax Cuts for Most People and Smaller Structural Deficit 

The Assembly approved the Governor’s proposals for the projected state surplus today, without any substantial changes, and rejected an alternative plan offered by Democrats.  That plan would have reduced the structural deficit, while also providing larger tax cuts to most Wisconsinites, and more funding for technical school training and K-12 eduction.

The plan offered by Assembly Democrats would have replaced the property tax cuts proposed by the governor with a $500 million increase in a current property tax relief program known as the First Dollar Credit.  That credit provides the same amount of property tax relief to the owner of a small home as the owner of a very expensive home or commercial property in the same school district. 

The major elements of the Democrats’ proposals are the following:

  • Decreasing property taxes by an average of $231 in 2014(15), or $100 more than the Governor’s plan.
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Low-income Families Contributed to the Budget Surplus

Sunday, February 9, 2014 at 8:24 PM by

New Analysis Examines Why the Surplus Should be Used to Help Low-income Wisconsinites

In his recent “state of the state” address, Governor Walker said that his plan for using the state surplus aims to “ensure we don’t leave anyone behind in our economic progress.”  I applaud the Governor for expressing that objective, but a careful analysis of his plan shows that state lawmakers should amend the special session tax bill if they truly want to accomplish the goal of not leaving behind the Wisconsinites who have been struggling the most in recent years. 

After analyzing where the surplus comes from and who gets the benefits, the Wisconsin Budget Project prepared a short paper that explains why some of the surplus should be used to make at least some modest improvements to the state Earned Income Tax Credit (EITC) and the Homestead Credit.  You can find that short document here:  “Top 10 Reasons to Increase Tax Credits for Low-income Households.”

Our analysis notes that the bottom 40% of taxpayers will get just 15% of the benefit of the Governor’s plan.  Read more

Taking Stock of the Earned Income Tax Credit on EITC Awareness Day

Friday, January 31, 2014 at 5:59 PM by

Despite Using Far More TANF Funds for the WI EITC, Total Spending Declines

Today is EITC Awareness Day, when the IRS works with community organizations, elected officials, state and local governments, schools, employers, and other interested parties to spotlight the Earned Income Tax Credit, and to encourage more eligible families and individuals to apply for the credit. The IRS estimates that one fifth of eligible taxpayers fail to claim and get this important credit. 

In recognition or EITC Awareness day, let’s take a look at the Wisconsin EITC, including some recently released data showing the declining value of that credit over the past years, and the role of that decline in adding to the state surplus.   It’s also a good time to consider the effectiveness of the EITC as a tool for helping make work pay for low-income families.    

As the Center on Budget and Policy Priorities pointed out in a January 31 paper, the EITC helps working families make ends meet and encourages them to keep working and to work more hours.  Read more

Categories: 2013-15 biennial budget, Blog, EITC, STATE TAXES, TANF | Comments Off

Plans for the Surplus Neglect the $93 Million Medicaid Hole

Thursday, January 30, 2014 at 7:48 PM by

Perhaps it’s unrealistic to think that the $93 million Medicaid shortfall will prompt current lawmakers to reconsider their decision to reject the enhanced federal funding. But is it too much to expect that they will at least provide some insights on the plans to close that budget hole before they enact a special session bill that uses every dollar of the projected $912 million surplus?

Do All Taxpayers Get the Same Benefit from the Governor’s Income Tax Proposals?

Tuesday, January 28, 2014 at 6:38 PM by

Governor’s Remarks Omit the Effect of Cuts to the Alternative Minimum Tax

In his State of the State address last week, Governor Walker talked about two tax cuts he plans to make using the state’s projected surplus:  a $406 million cut in property taxes and an income tax cut.  With respect to the smaller portion of that two-part plan the Governor said:

 “…we will reduce income taxes by $98.6 million.  To ensure we don’t leave anyone behind in our economic recovery, we will target this tax relief to the lowest income tax bracket.  If you’re a family of four making $40,000, your savings will be $58.  No one will get a bigger savings than that.”  (emphasis added)        

That’s an accurate description of the income tax rate cut the Governor proposed, but it’s far off the mark with respect to his full plans for cutting state income taxes.  The biggest problem with his statement is that Walker didn’t mention that his new special session bill will also cut the Alternative Minimum Tax – a change that benefits high income Wisconsinites and has a price tag that will grow to nearly $51 million per year by 2016-17.   Read more

Missed Opportunities in the Governor’s Budget Proposals

Wednesday, January 22, 2014 at 4:46 PM by

Tax Plan Increases Red Ink in Next Budget and Leaves Holes in This One 

Governor Walker conceded to reporters that his new tax cut proposals will increase the red ink in the 2015-17 state budget by about $100 million – meaning that lawmakers will have to grapple with a structural deficit of more than $800 million as the state goes into the next budget cycle.   

According to initial statements to the press corps, his proposal includes a $406 million reduction to property taxes, a $98 million cut in personal income taxes, and the use of nearly $323 million to adjust income withholding schedules (which costs the state up front, but reduces the subsequent refunds the state owes to income tax filers). Another $100 million or so will be put into the state’s rainy day fund. 

The deeper structural deficit is likely to be the most contentious aspect of Walker’s plan among Senate Republicans, but it is just one of many reasons why I think his proposal is extremely disappointing.   Read more

Increased Tax Revenue Creates Opportunities to Close Budget Gaps and Invest in the Future

Wednesday, January 15, 2014 at 5:58 PM by

A big jump in state revenue that will be announced soon gives lawmakers an excellent opportunity to invest in Wisconsin’s economic future and to put the state on a sounder fiscal footing by filling budget holes.

Top Ten Budget Project Blog Posts of 2013 Include Several 2014 Issues

Sunday, January 5, 2014 at 2:47 PM by

After the holidays, we decided to look back at Budget Project’s most widely read blog posts of 2013.   Many of those were written during the last couple of months, and a few are about significant policy issues that will be debated in the coming weeks and months. 

Among the 180 WI Budget Project Blog posts in 2013, the following ten generated the most hits on our website:

  1)  Governor Walker’s Tax Shift Plan Would Raise Taxes for Most  (Dec. 19)

  2)  Wisconsin’s School Funding Cuts among the Nation’s Deepest  (Sept. 12)

  3)  861,000 Wisconsinites Will See Cuts to Food Assistance This Fall  (Aug. 1)

  4)  Supermajority Amendment Puts Wisconsin’s Future at Risk  (Dec. 23)

  5)  Top Ten Things to Know about the Expiring Federal Unemployment Benefits  (Dec. 26)

  6)  Packers and Vikings Tie the Game, but What about Wisconsin and Minnesota?  (Nov. 25)

  7)  Thousands of Wisconsinites Stand to Lose Unemployment Benefits Unless Congress Acts  (Dec. Read more

Categories: 2013-15 biennial budget, Blog, income taxes | Comments Off