Governor Walker has proposed a back-to-school sales tax holiday, a gimmick that would reduce the resources available to support Wisconsin’s schools, university system, and communities, without providing any real economic benefit.
Under the proposal, purchases of school supplies, computers, and clothing would be exempt from the sales tax for one weekend in August. This move would cost the state an estimated $11 million a year in lost tax revenue, and local governments an additional $750,000 a year in lost revenue. This reduction in revenue would make it harder for Wisconsin to make the kinds of investments in education, health, and workforce systems that can spur economic growth.
A sales tax holiday would do little to boost consumer spending or give a tax break to Wisconsin families with low incomes. There are a whole host of downsides to a sales tax holiday, including:
- Instead of encouraging consumers to spend more money, sales tax holidays simply shift the timing of the spending;
- A sales tax holiday on back-to-school items involves lawmakers picking winners and losers among types of goods that should be exempt from the sales tax;
- Sales tax holidays are not an effective tool for giving a tax cut to individuals with low incomes, since a large amount of savings is also given to people in higher income groups as well.
Governor Walker has proposed increasing the state’s Earned Income Tax Credit for some families, a move that would improve child well-being and expand economic opportunity for families with low and moderate incomes. He included the measure in his proposal for the budget period that runs from July 2017 to June 2019.
Expanding Wisconsin’s EITC would give a much-deserved break to working parents with low and moderate incomes. The EITC lets working families keep more of what they earn to help meet basic needs and pay for things that allow them to keep working, such as child care and transportation. This tax credit offers working parents a hand up by encouraging and supporting work. It’s a modest investment that can make a big difference in the lives of families.
The EITC also boosts local communities and economies across the state. It puts more money in the pockets of low-wage workers, who then spend it at local businesses to pay for things like groceries and child care. Read more
Tomorrow is April 18th, the deadline for most people to file their income tax forms without penalty. (April 17 is a holiday in Washington, D.C., pushing off the deadline for filing until today.) We hear a lot of negative messages about taxes on this day. But this Tax Day, let’s remember that creating jobs and building broad-based prosperity requires investing in what works – and we can’t do that without taxes.
To build a strong Wisconsin economy, we need to invest in assets that help businesses thrive and help hard-working people climb into the middle class. That means Wisconsin needs to continue our tradition of supporting high-quality schools and preschools, an affordable university system, a healthy workforce, and a clean environment.
Taxes make these investments possible.
When state lawmakers cut income taxes for the wealthy or for corporations, we undermine our ability to support important services that Wisconsin businesses and residents rely on every day. Read more
Wisconsin is a better place when we all do well. Unfortunately, while the wealthiest have seen their incomes skyrocket in recent decades, incomes have stagnated for the middle class and those who struggle hardest to make ends meet. It’s becoming harder to make it to the middle class and stay there.
Wisconsin’s state and local tax system, like the tax systems in most states, makes this problem worse. If you look at who pays taxes in Wisconsin, it turns out that middle-class and low-income families pay a bigger share of their incomes in state and local taxes than the wealthiest households in the state. We call on financially-stressed families to pay 8.9 cents out of every dollar they earn in state and local taxes, while the wealthiest households pay just 6.2 cents out of every dollar of income. And many corporations pay little or nothing in income taxes.
Wisconsin is near average in many measures of government revenue and spending, according to figures for 2014 that were recently released by the U.S. Census Bureau. That’s nothing new, as Wisconsin has been near the middle of the pack for about a decade now.
- Wisconsin state and local governments ranked 24th among the states in the amount of taxes, fees, and other charges that they collect from state residents on a per-person basis, and 21st when that amount is measured as a share of personal income.
- Wisconsin ranks 25th in total government spending per person and also 25th when the amount is measured as a share of income.
There are many different ways to measure public revenue and spending, and Wisconsin ranked very close to the middle in nearly all of them, with two exceptions:
- Wisconsin ranked 16th in the share of income that governments collect from state residents in taxes.
A tax break that has cost far more than originally anticipated has resulted in enormous tax breaks for a wealthy few, according to a new analysis from the Wisconsin Budget Project.
The Manufacturing and Agriculture Credit nearly wipes out state income tax liability for manufacturers and agricultural producers in Wisconsin. Only about three out of every thousand individual income tax filers receive this tax break, but in 2017 alone the credit will cost the state $299 million in reduced revenue. Looking ahead, the cost of the credit swells even more, ballooning to more than $650 million for the upcoming two-year budget period that starts in July 2017.
The cost of this tax cut has taken lawmakers by surprise. In fact, the credit is now estimated to cost more than double what lawmakers originally thought when the amendment creating the credit was quietly slipped into the 2011-13 budget bill.
Nearly all the value of the tax break goes to the very wealthy. Read more
Mediocre Revenue Projections Beat the Low Expectations
A modest upturn in the state revenue projections and a significant reduction in state spending estimates have created a much better outlook for the state budget.
Before elaborating on the latest numbers, which were released by the Legislative Fiscal Bureau (LFB) last week, I have to admit that the new state tax collection numbers are considerably better than I expected when I wrote a very cautionary blog post about the next state budget a week or so ago. This is one of two recent occasions (along with my prediction that the Packers would lose to Dallas) when I am very happy to have been wrong.
Although the new revenue forecasts are also significantly better than the Department of Revenue projected two months ago, they are nothing to brag about. In fact, the latest tax collection estimate for the current fiscal year is $281 million less than the estimate that the biennial budget bill was based on. Read more
Many Wisconsin low-income families miss out on their full tax refund because they do not claim tax credits for which they are eligible —particularly the Earned Income Tax Credit, the Homestead Tax Credit, and the federal child tax credit. Please help us get these flyers, which explain the eligibility for these credits, into the hands of low-income families who could benefit.
January 18th UPDATE: Sometimes it feels good to be wrong — like when the Packers outperform my pessimistic predictions and when new state revenue forecasts are stronger than I anticipated. So I’m very happy that the revised revenue projections released this afternoon by the Legislative Fiscal Bureau (LFB) are considerably better than I expected when I wrote our Jan. 17th blog post. (Read more here.)
The new LFB numbers indicate that a combination of lower-than-expected spending and higher-than-expected tax revenue will be enough to maintain a comfortable budget balance in the current fiscal year, and also enough to fund the amounts requested by state agencies in the next biennium. That’s a huge relief after the very slow revenue growth from July through November, which suggested that the next estimate of revenue collections was likely to be down, rather than up. This year’s revised revenue collections are still below the level forecasted a year ago, but are now expected to be considerably stronger in the next biennium than the Department of Administration estimated in November. Read more