Policymakers Should Make Investments that Help Put People on the Path to Economic Security
Today’s U.S. Census Bureau report shows that our state’s gradual economic recovery still hasn’t substantially expanded economic opportunity for working people and families in Wisconsin. Median incomes are still well below their pre-recession level (adjusted for inflation), and our state’s elevated poverty levels have yet to begin declining.
According to the new Census Bureau data, Wisconsin’s overall poverty rate edged up slightly last year to 13.5%, which is roughly one in seven state residents. Although the small increase from 13.2% in 2012 is not statistically significant, the change over the last five years is very clear. There were about 755,000 Wisconsinites living in poverty last year, an increase of 186,000 since 2008, when the overall poverty rate was 10.4%.
“We simply can’t accept three quarters of a million Wisconsinites living in poverty as the ‘new normal,’ ” said Ken Taylor, executive director of the Wisconsin Council on Children and Families (WCCF). Read more
Concerns about increases in income inequality were voiced from a surprising perspective today, when Standard and Poor’s (the bond rating agency) issued a lengthy report titled “Income Inequality Weighs On State Tax Revenues.” The report concludes that “disparity is contributing to weaker tax revenue growth by weakening the rate of overall economic expansion.”
The authors offer this explanation for the correlation between income disparities and economic growth:
“…rising income inequality is a macroeconomic factor that acts as a drag on growth. There is evidence, although not conclusive at this point, that the higher savings rates of those with high incomes causes aggregate consumer spending to suffer. And since one person’s spending is another person’s income, the result is slower overall personal income growth despite continued strong income gains at the top.”
An article in today’s Washington Post sums up the findings in clearer terms:
“Even as income has accelerated for the affluent, it has barely kept pace with inflation for most other people. Read more
Increasing Both the Earned Income Tax Credit and the Minimum Wage Would Strengthen Wisconsin’s Families
State lawmakers who want to help Wisconsin families recover from the recession should move to boost both the state’s earned income tax credit and its minimum wage. Each policy on its own helps make work pay for families struggling on low wages, but improving them at the same time goes further to putting working families on the path to economic security and opportunity, according to a new report from the Center on Budget and Policy Priorities.
Low wages make it hard for working families to afford basics like decent housing in a safe neighborhood, nutritious food, reliable transportation, quality child care, or educational opportunities that put families on a path to greater economic security.
But, state lawmakers have tools that can help address stagnant low wages. One, increase the state Earned Income Tax Credit. Two, raise the state minimum wage and make future increases automatic to keep up with inflation
These policies both are targeted to assist only those who are working, helping them to better afford basic necessities, including the things that allow them to keep working, like car repairs and child care. Read more
Structural Deficit Calculation Jumps to Nearly $1.8 Billion
It’s remarkable how quickly the state’s fiscal picture can turn around, even during a period when the national economy is on the mend. During the campaign season two years ago, GOP incumbents were making a big deal of the fact that they had eliminated the state’s structural deficit. Today we learned from the Legislative Fiscal Bureau (LFB) that the structural deficit has returned with a vengeance; the new figure of $1.766 billion is the third largest structural deficit estimated by the LFB since 1997 (for the 10 biennial budgets from 1997-99 through 2015-17).
Although that turnaround in the state fiscal picture is surprising to many people, it shouldn’t be. Wisconsin lawmakers have a long history of banking on surpluses that are estimated during the first half of a biennium (especially in election years) and promising tax cuts and/or spending levels that aren’t sustainable and that lead to big deficits. Read more
Budget Repair Bill May be Needed to Bring Budget Back into Balance
It’s been widely reported that state tax revenues fell well short of projections for the budget year that ended in June. But the nature of Wisconsin’s two-year budget means that the budget hole is likely to be bigger than many commentators realize, if current trends continue.
We already know that tax revenues fell $281 million short of projections for budget year 2013-14. That’s not good, but the end-of-year fund balance is enough to cover the shortfall, so it the shortfall doesn’t present any immediate problems.
The shortfall is likely to lead to bigger difficulties in 2014-15, the second year of the budget. Tax revenues for 2014-15 were projected to grow by 3.5% over 2013-14 amounts. But with 2013-14 revenues coming in so much lower than expected, 2014-15 revenues will be growing from a lower base. If 2014-15 revenues grow the originally projected 3.5% from the new, lower base, then at the end of the next budget year, Wisconsin would have a second shortfall of about $291 million. Read more
Last week we learned that state tax revenues fell far short of projections for the budget year that just ended. The shortfall means that next year the state is likely to face another round of budget cuts — cuts that slow economic growth and reduce investment in education, health care, and our state’s workforce.
The irony is that not too long ago, state lawmakers were trumpeting Wisconsin’s budget surplus, which neared $1 billion over two years. But instead of using those resources to build up a meaningful budget cushion, state lawmakers rushed to pass tax cuts. Legislators were in such a hurry to cut taxes that they passed a $100 million property tax cut last October in just four days, leaving little time for public debate. Lawmakers also passed two other major tax cut packages in 2013 and 2014.
The three big tax cut packages hurt the state’s bottom line, but they didn’t do much to lower taxes for Wisconsin’s lowest-wage workers. Read more
State revenue collections fell $281 million (2.0%) short of projections during the fiscal year that ended on June 30. Rather than growing by 1% as anticipated, state tax collections fell by 1%, and that will cause a substantial jump in the state’s structural deficit.
For the past month or so I’ve been scratching my head wondering when we would get an update from the WI Department of Revenue on state tax collections during the fiscal year that ended on June 30th. I’m not the only one who has been anxiously awaiting those numbers; four Democrats in the state Senate sent a letter yesterday to Secretary Huebsch asking when the FY 2013-14 revenue numbers will be released.
“Given the numbers we’ve seen to date, the delay is already fueling concern that they will show a revenue shortfall. How significant that shortfall is could have a wide ranging impact not only on future budgets but the current budget as well.”
I share the concern about the potential for a revenue shortfall. Read more
Conservatives Critique “Tax Cronyism,” and Progressives Critique the ALEC Report
I was pleasantly surprised to learn recently that the American Legislative Exchange Council (ALEC) has issued a report calling on policymakers to end the wasteful subsidies given to corporations by state and local governments. Their report titled The Unseen Costs of Tax Cronyism: Favoritism and Foregone Growth criticizes special tax breaks for certain companies, which it points out tend to increase the tax burden on other companies and put them at a competitive disadvantage.
Corporations are very good at extorting costly subsidies from state and local officials, but some of those corporations and a growing number of policymakers are realizing that these incentives aren’t an effective way to promote economic growth. As WCCF intern Jelicia Diggs wrote in a recent WI Budget Project blog post, a number of businesses in the Kansas City area have prevailed on Missouri legislators to call a ceasefire to the use of incentives for pirating corporations across the border with Kansas. Read more
New Report: How Wisconsin Lawmakers Have Broken with Tradition and Undermined a Legacy of Investment
Four years ago Wisconsin was made a promise. The promise was that the best way to generate economic growth was through significant tax and spending cuts. The tax and spending cuts have occurred, but unfortunately for all of us, the promised job growth has not.
That’s the conclusion of a new Budget Project report released today, called “Breaking with Tradition: How Wisconsin Lawmakers Have Shortchanged a Legacy of Investment in the State’s Future.” The new report reviews the many changes policymakers have made recently in how Wisconsin supports it schools, communities, and workforce.
Lawmakers have made dramatic tax cuts since 2011, totaling $1.9 billion over four years. But the value of the tax cuts was not equitably distributed. Half the value of the major tax cuts packages in 2013 and 2014 went to the top 20% of taxpayers by income, and the remaining 80% shared the other half.
The tax cuts have contributed to deep cuts to public schools and higher education in Wisconsin. Read more