State lawmakers have 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 each August. This move would cost the state an estimated $13.2 million a year in lost tax revenue, and local governments an additional $952,000 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 sales tax holidays, 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; and
- 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.
As you’ve probably heard or read by now, Wisconsin got some bad news today regarding state tax collections – which are now expected to be $158 million less than previously expected during the 2015-17 biennium. But the good news is that some other re-estimates partially offset the revenue loss, bringing the net change to the 2015-17 budget to -$94 million (compared to the previous estimate), and the state’s reserves can absorb that hit.
The bottom line is that the state is now expected to finish this biennium with a “net balance” in the general fund of $70.2 million, instead of the $164.5 million net balance that had been estimated a few months ago. The key lesson to be drawn from the numbers released today by the Legislative Fiscal Bureau (LFB) is that tax collections and other revenue can be volatile and are difficult to predict, so it’s important to build a sizeable “ending balance” or budget cushion into each budget. Read more
Transportation Tax Increase Shouldn’t Be Biased against Low-income Wisconsinites
Proposed legislation to fix local road repairs is a bad deal for poor Wisconsinites who don’t have cars. The proposal would authorize a sales tax increase that would fall more heavily on poorer Wisconsinites because the sales tax takes a higher percentage of their income. What makes that particularly inequitable is that the bill precludes using any of the new revenue for transit (e.g. bus and van service). Read more
DOR Says Proposed Business Tax Cuts Could Cost $384 Million per Year
Legislators learned today that new corporate tax cut legislation “could reduce revenue by approximately $335 million to $384 million annually.” That news was contained in the Department of Revenue (DOR) fiscal estimate that was distributed this morning to members of the Assembly Ways and Means Committee half an hour before a public hearing on the bill.
The Assembly version of the bill is AB 623 and was introduced last week on December 29th. Early this week the chairperson of the Ways and Means Committee amended the agenda for today’s public hearing to add the new bill. The quick scheduling suggested that the bill might be on a fast track, and perhaps that will still be the case; however, the DOR fiscal estimate is likely to complicate any plans to rush the bill to the floor of the Assembly or Senate. Read more
Good Jobs First (GJF) announced today that Wisconsin taxpayers can now access nine years of economic development subsidy data in the organization’s searchable Subsidy Tracker database. The enhanced and expanded database developed by GJF now includes information about nearly 2,200 state and local subsidies for businesses in Wisconsin, totaling more than $1.8 billion.
The updated database adds nearly 30,000 new entries across the U.S. from 160 state and local programs, and 138 federal ones. Access to the database is free and unrestricted at: goodjobsfirst.org/subsidy-tracker. Read more
December 16, 2015: This blog post is revised to compensate for an error in figures from the U.S. Census Bureau that overstated the amount of tax Wisconsin residents pay.
Wisconsin is near average in many measures of government revenue and spending, according to new figures for 2013 that were released by the U.S. Census Bureau this week. 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 22nd 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.
State policy choices contribute to the growing divide in income and wealth between the richest and poorest Wisconsinites. Although most parts of the state and federal tax codes and federal entitlement programs are adjusted (“indexed”) each year for inflation each year, Wisconsin programs that assist low-income households are less likely to be adjusted for inflation. The decision to freeze those forms of assistance means they are steadily eroded over time – to the detriment of struggling low-income workers and their communities.
A recent article by Chris Rickert in the Wisconsin State Journal contrasted the erosion of several forms of public assistance – including Wisconsin Works benefits, the Homestead Tax Credit, and the state minimum wage – with a proposal by some GOP members of the state legislature to periodically adjust campaign contribution limits for inflation. I was reminded of that article by two new reports issued late last week that shed more light on the effects of not adjusting the Homestead Tax Credit and Wisconsin Works: Read more
Wisconsin lawmakers have passed tax cuts totaling $4.8 billion over six years, according to a new legislative memo released this week. These tax cuts have done little to boost job growth and have forced damaging cuts to Wisconsin’s public schools, universities, and health care system.
Lawmakers have passed dozens of tax cuts since January 2011, including millions of dollars in tax cuts that primarily benefit people with high incomes. And lawmakers aren’t slowing down – the total value of tax cuts has increased each year since fiscal year 2012, and is slated to go even higher, to nearly $1.7 billion per year in the two-year budget period that starts in July 2017.
Among the tax cuts passed since January 2011, according to the memo:
- A 2013 income tax rate reduction that gave an average tax cut of $1,440 to taxpayers earning over $300,000 but an average of just $86 for taxpayers who earn under $100,000.