Wisconsin got a very positive jobs report last week, but the apparent good news from the preliminary May data did not carry over to last month’s tax collections. As a result, the state may finish the current fiscal year well below the revenue target included in the budget bill – creating a more precarious situation in the second half of the 2015-17 biennial budget.
The Department of Revenue released the May tax collections figures at about 4:00 on Friday, June 17. As is often the case when those numbers are released late on a Friday, the news wasn’t good. The new DOR figures show the following:
- Tax collections fell by $17.5 million (1.5%) in May, relative to the amount in May 2015.
- Although sales tax collections increased by $25 million compared to the same month of 2015, individual income tax revenue dropped by 6.3% ($31.5 million) last month, and corporate income tax revenue was off by $8.5 million (almost 35%).
Wisconsin residents strongly favor raising taxes on the wealthy and large corporations to reduce income inequality, a new poll shows. But instead of raising taxes on these groups, Wisconsin lawmakers have taken steps to give significant tax breaks to taxpayers with high incomes and corporations.
Two-thirds (66%) of survey respondents support raising taxes on the rich and big businesses, according to the spring 2016 Wisconsin Survey conducted by the Strategic Research Institute at St. Norbert College. Another 28% of respondents did not support raising taxes, and seven percent weren’t sure.
The poll results show that Wisconsin residents are alarmed about growing levels of income inequality and the widening chasm between the highest earners and everyone else. Wisconsin residents are right to be concerned. The share of income in Wisconsin going to the top 1% has reached its highest level ever, exceeding even levels reached prior to the Great Depression, and has more than doubled over the last 40 years. Read more
Wisconsin’s budget challenges were exacerbated this year when the Legislative Fiscal Bureau announced in January that state revenue would be substantially less than previously anticipated. That development didn’t stop legislators from introducing a broad range of bills relating to tax cuts, but it significantly limited the number of those tax bills (and spending proposals) that were enacted during the recently ended 2015-16 legislative session.
A new summary of the session describes some of the noteworthy bills relating to taxes that were considered by the legislature, as well as bills related to the budget process that got some traction. As that document explains, only a few of the significant bills were enacted:
- An abridged set of changes to corporate tax laws (Act 218) – We were especially concerned about a wide-ranging set of proposed changes to the corporate tax statutes, which the Dept. of Revenue initially estimated could cost the state as much as $384 million per year!
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
There’s been a lot of talk in Wisconsin over the last couple of weeks about the need to ensure that tax breaks and loans awarded by Wisconsin’s economic development agency are limited to businesses that are creating jobs and fulfill their job growth commitments. Yet almost no attention has been paid to the fact that the state’s largest tax credit for corporations is ballooning in cost and is distributed to businesses operating in Wisconsin regardless of whether they are expanding or slashing their workforce in our state. Read more
Legislators Can Avoid Deep Cuts without Raising Taxes
Wisconsin needs a budget that invests in the building blocks of a strong economy. Healthy families, safe and stable communities, and a well-educated workforce are assets critical to helping Wisconsin remain an attractive place to live, raise families, and do business. By strengthening these resources, the state budget can lay the groundwork for broad-based prosperity and an economy that works for everyone.
Unfortunately, the budget proposed by the Governor makes deep and unnecessary cuts to investments vital to Wisconsin’s long-term economic success. For example, the proposed budget would reduce resources for public education – a cut that would come on top of dramatic reductions in resources that have already occurred. The budget would also make deep cuts in state support for the University of Wisconsin System, giving a tremendous blow to one of the engines of Wisconsin’s long-term prosperity. The proposed budget would also make it harder for people with disabilities to get the help they need to contribute to their communities. 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