Minnesota releases updated revenue and spending projections in early December of each year, and the new figures released today are very positive – a net gain in the Minnesota budget balance of about $1 billion. Let’s hope that Wisconsin can come close to matching that when our new tax and spending estimates are released in late January or February.
As we noted in a blog post about two weeks ago, many people across the country are watching Minnesota and Wisconsin carefully because of the very different directions that the two states have gone in fiscal and health care policy over the last couple of years. Because of the many demographic similarities between the two states, the divergent choices by policymakers set up an interesting experiment. In that context, today’s budget news from our neighbor to the west could be an early point in their favor, but we won’t have any basis of comparison in Wisconsin for another month or two. Read more
Today is Cyber Monday, the first day back in the office after Thanksgiving – and one of the biggest days of the year for online shopping. One thing that will be different this shopping season is that for the first time, Amazon will be collecting sales tax on purchases made by Wisconsin residents. Amazon’s move is expected to increase state revenue by $30 million in the first year.
Wisconsin residents always owed sales tax on purchases made online, but until recently, the state could not compel Amazon and other online-only retailers to actually collect the tax. Instead, Wisconsin residents were supposed to report their purchases and pay the sales tax on their income tax forms, something few people did. The fact that online-only retailers did not charge consumers sales tax – even though sales tax is owed on the purchases – gave online-only retailers a competitive advantage over retailers with “bricks and mortar” presences in the states. Read more
Governor Signs Property Tax Relief Bill; Assembly Shelves Dem Amendment with Much More Relief for Most Homeowners
Today Governor Walker signed a bill that provides $100 million of property tax relief over the next two years. The bill will do the following:
- Reduce property taxes by an average of $13 this year and $20 next year for people owning median value homes.
- Increase to $725 million the fiscal hole or structural imbalance in the next biennium (which means that first $725 million of new revenue is needed just to maintain flat funding).
- Reduce the projected balance at the end of the current biennium to $125 million, which is enough to cover three days of state spending.
The bill was approved by a lopsided vote in each house of the legislature. In the Assembly, all but 12 Democrats voted for passage of the bill, but not before they offered a substitute amendment that would have provide substantially more property tax relief and would have targeted much more of that relief to residential property owners. Read more
One of the factors contributing to a larger-than-anticipated state budget surplus is a decline of about $11 million in spending for the Homestead tax credit in fiscal year 2012-13. Considering how the surplus was bolstered by that spending reduction, and also by a sharp cut in state General Fund support for the Earned Income Tax Credit, it’s very disappointing that the large tax cuts enacted this year have done little if anything to help low-income households.
A new interactive tool created by the National Priorities Project (NPP) provides a very interesting way to visualize the major federal income tax breaks. The data tool allows you to see the size of the 10 major federal income tax breaks, and the results might surprise you.
The combined cost of the ten largest tax breaks is more than $750 billion this year, and the top two account for nearly half of the total. This web page compares those amounts, and the interactive tool allows you to also see who benefits from each and how the costs have changed over time. As you move your mouse over the bars in the graph on the left, the charts on the right-hand side will change to show information about a specific tax break.
Workers in Wisconsin and across the U.S. must still cope with a relatively weak labor market. That is especially challenging for low-wage workers who are struggling with the declining value of the minimum wage, reductions in employer benefits like health care, and growing inequality. Those challenges are exacerbated in Wisconsin by budget decisions made by state lawmakers.
A new Wisconsin Budget Project issue brief examines how the how state budget choices are affecting low-wage workers in Wisconsin. It focuses primarily on the effects of the new budget bill, but also examines a few instances of how that bill continues or compounds the challenges for low-wage workers caused by the 2011-13 budget.
Some of the major effects include the following policy choices relating to health insurance, child care, taxes and unemployment insurance:
Making health insurance and care much more expensive for many parents now in BadgerCare
The 2013-15 budget bill cuts in half the income eligibility ceiling for adults participating in BadgerCare – reducing that cap from 200% of the federal poverty level to just 100%. Read more
Good Budget News, but Growth Falls Short of Rumored Expectations
Tax collections were $71.5 million higher than anticipated in fiscal year 2012-13, according to figures released Friday by the Wisconsin Department of Revenue. That’s very good news, although the size of the increase (0.5% above the amount projected in May) isn’t as large as rumors in the Capitol grapevine seemed to suggest. Some lawmakers are probably a bit disappointed if they were anticipating enough additional funding to bolster arguments for even deeper income tax cuts or to mitigate some of the spending cuts in the last two budgets.
I hope legislators aren’t disappointed to learn that half of the increased revenue ($35.75 million) will be deposited in the state’s “rainy day fund” (aka the budget stabilization fund). Under current state law, half of any increase in tax collections in a fiscal year, relative to the amount estimated when the biennial budget bill was enacted, must be deposited in the rainy day fund. Read more
In a long Q & A format interview in the Capital Times, I described a number of the faults of the 2013-15 budget bill. One of the defects I mentioned in that interview is that the bill employs a “Robin Hood in reverse” strategy for allocating resources. Because the article doesn’t provide much explanation of the reasoning behind that charge, I feel obligated to elaborate.
Actually, I think there is a very broad range of reasons for concluding that the recently enacted budget shifts resources from the poor to the rich. A new Wisconsin Budget Project paper explains ten of those reasons, which are summarized more succinctly below:
1) Diverting federal block grant funds for low-income families – The bill siphons off funding from the federal block grant known as Temporary Assistance to Needy Families (TANF) and indirectly uses those funds to build up the state’s surplus, which helped lawmakers enact larger income tax cuts that primarily benefit the wealthy. Read more
Despite claims that Wisconsin is a high-tax state, Wisconsin is in the middle of the states in most measures of revenue and spending, according to new figures from the Census Bureau. Wisconsin ranked 19th among the states in taxes and fees per person in fiscal year 2011, before the deep spending cuts of the 2011-13 budget were implemented.
Some policymakers focus on Wisconsin’s ranking on taxes alone when evaluating Wisconsin’s revenue structure compared to other states. But focusing on taxes alone means that fees and other charges, which come from residents’ pockets much likes taxes do, are not taken into account. Combining taxes with fees and other revenue gives a broader and more complete measure of the money that state and local governments in Wisconsin collect from their residents.
The average amount state residents paid in taxes and fees is close to the national average. In 2011, Wisconsin residents paid an average of $6,346 in taxes, fees, and other charges to state and local governments, $34 higher than the national average. Read more
Grover Norquist Neglects the Facts in Exhorting North Carolina to Follow Wisconsin Path
In a recent article, political commentator and conservative strategist Grover Norquist urged North Carolina lawmakers to make their state the “new Wisconsin.” He uses or misuses one piece of economic data to suggest that Wisconsin’s economy is thriving, while ignoring ample evidence that indicates otherwise. That argument shows the same sort of inattentiveness to or disregard of economic facts that led many conservatives to advocate that the U.S. should emulate the fiscal austerity policies being practiced in the European Union.
The one piece of economic evidence cited by Norquist and the article’s coauthor, Patrick Gleason, is that over the past two years, since Governor Walker signed the last biennial budget bill, “the state’s unemployment rate has dropped from 7.6 percent to 7 percent — below the national average.” It’s true that Wisconsin’s unemployment rate is below average – but that’s nothing new and can’t be traced back to a particular policy agenda. Read more