Every $1 Invested Generates $6 in Additional Revenue
Governor Walker has made it clear that he is a fan of smaller state government. That’s why it’s notable that he has proposed adding 32 full time equivalent (FTE) positions at the Wisconsin Department of Revenue. The positions would focus on improving delinquent tax collections, reducing fraud, and following up on federal audits of state tax filers.
The legislature’s budget committee is scheduled to make a decision on Wednesday on whether to add the positions.
Here is the breakdown of how the new positions would be allocated by purpose:
- Delinquent tax enforcement, 15 FTE. Staff filling these positions would encourage or force individuals and businesses to pay delinquent taxes.
- Tax fraud enforcement, 13 FTE. Staff filling these positions would review income tax returns and tax claim forms for errors and fraud. Special scrutiny would be paid to returns claiming the Earned Income Tax Credit or the Homestead Credit, both of which benefit low-income Wisconsinites.
Upping the Ante on an Act 10 Tactic (of Tapping TANF) Helps Free up Funds for Tax Cuts
The “budget repair bill” signed by Governor Walker two years ago today contained a number of significant changes that didn’t get a lot of attention at the time, since they were overshadowed by the tumultuous debate about the collective bargaining measures. One of those was a budget shell game that removes $37 million per year from the federal block grant known as Temporary Assistance for Needy Families (TANF).
The two-year anniversary of the signing of Act 10 is a timely opportunity to take note of that maneuver because the Governor is proposing to double down on that strategy in the 2013-15 budget. His proposed budget bill increases the size of the TANF transfer by $27 million per year.
As we explained in a WCCF blog post in July 2011, the budget repair and biennial budget bills reduced by $111 million over three years the TANF funding available for intended purposes like the Wisconsin Works program (W-2) and child care subsidies for low-income workers. Read more
New 50-State Study Provides Detailed Profiles and Comparisons of Tax Systems
Like most state tax systems, Wisconsin takes a much larger share from middle- and low-income families than from wealthy families, according to the fourth edition of “Who Pays? A Distributional Analysis of the Tax Systems in All 50 States,” released today by the Washington-based Institute on Taxation and Economic Policy (ITEP).
Combining all of the state and local income, property, sales, and excise taxes Wisconsin residents pay, the average overall effective tax rates by income group are 9.6% for the bottom fifth of Wisconsinites; 10.7% for the middle fifth: and 6.9% for the top 1%. The full report is online at www.whopays.org.
The report’s findings illustrate why state lawmakers need to be very careful about the effects of new tax proposals on the distribution of state and local taxes. They need to consider the combined effect of all state and local taxes, rather than focusing only on the income tax. Read more
UWM Study Examines Income Challenges for Single-parent Families in Milwaukee County and Inner City
Shortly before Christmas, researchers at the UW-Milwaukee Employment and Training Institute (ETI) released a very interesting and sobering analysis of income trends and challenges for Milwaukee’s low-income families, particularly single mothers raising children. Their report includes an analysis of the income tax records of Milwaukee County family tax filers (with dependents) from 2007 through 2011.
One of the key findings of the report by Lois Quinn and John Pawasarat is that the cut to the Wisconsin earned income tax credit (EITC) in the 2011-13 budget bill cost Milwaukee County families $7.7 million when they filed their 2011 tax returns. Some of the other findings relating to the EITC include the following:
- Inner city Milwaukee “working poor” families were hit the hardest, losing $4.3 million, which was a drop of 25% relative to their 2010 credits (compared to 22% for EITC recipients in the county as a whole).
Important tax credit eligibility information for Wisconsin families.
If you don’t read the WCCF blog, let me bring you up to date on what we know and don’t know about funding in the next biennial budget for the state’s Earned Income Tax Credit (EITC).
The Dept. of Children and Families’ budget request for the 2013-15 biennium recommends a large reduction in one of the funding sources for the EITC. Beginning in fiscal year 2014-15, DCF proposes cutting $37 million from the portion of the credit’s funding that comes from the block grant known as Temporary Assistance for Needy Families (TANF). But since the rest of EITC funding is the responsibility of the Dept. of Revenue, the DCF recommendation doesn’t tell us whether the intent is to reduce total EITC funding or only to shift the funding sources.
In a post on the WCCF Blog on Monday, I explain why a funding shift could be a good thing for important programs for low-income kids, such as the Wisconsin Shares child care subsidy program. Read more
Preliminary DHS Document Seeks a $647 Million GPR Increase
Monday was the deadline for state agencies to submit their 2013-15 budget requests to the Department of Administration. Nearly all of those requests can be found on the DOA website.
One agency whose budget isn’t there is the Dept. of Revenue. (I’ve noticed before that their request has come much later, so perhaps DOR has a different deadline.) I’m anxious to see what they request for the Earned Income Tax Credit because the Dept. of Children and Families budget proposes a $37 million cut in TANF block grant funding for the EITC in the second fiscal year.
That proposed cut represents the amount of TANF funds that are being used each year in the current biennium to supplant state GPR funds for the EITC. Reversing that decision could be a good thing, since it would free up TANF funds to help meet needs in child care and W-2, but only if the DOR budget includes GPR funds to avoid another cut in the EITC (which was reduced in the last budget). Read more
Wisconsin families with children could lose $139 million in tax credits next year – nearly $900 per affected family – unless expansions of two tax credits aimed at working families are preserved. President Obama and Congressional Democrats have proposed extending the expanded credits, and Congressional Republicans favor letting the expansions expire.
In jeopardy are the Child Tax Credit and the Earned Income Tax Credit, both of which were expanded by the Recovery Act in 2009. The effect of expanding the credits was two-fold: the credits helped pump more money into the economy to boost consumer demand, and they also helped mitigate the worst effects of the recession for the families receiving the credits. The expansions are set to expire at the end of 2012, at the same time the Bush tax cuts expire, the temporary payroll tax cut expires, and the federal unemployment program ends.
President Obama has proposed to make the expanded versions of the tax credits permanent. Read more
Big Change #2: Corporations and Well-Off Are Paying Less in Taxes, and Working Families are Paying More
One year into the state’s two-year budget period, corporations and well-off individuals are paying less in taxes than they did before the budget, and working class individuals and families are paying more.
The budget included two significant tax breaks that have already kicked in. One tax change that benefits multi-state corporations partially rolls back a recent law that made it difficult for big businesses to shift their income between different states to avoid taxation. This tax break reduced the state income tax these corporations pay in Wisconsin by $9 million in fiscal year 2012 (which ended on June 30, 2012), and will cut their tax liability by another $37 million this fiscal year.
A second tax cut in the budget reduced the tax that individuals pay on their capital gains, or profits from investments. Read more
Over 140,000 Wisconsin families will get smaller tax refunds from the state as a result of cuts to the Earned Income Tax Credit (EITC) made by legislators in the 2011-13 state budget, according to a new analysis by the Wisconsin Budget Project. While the Legislature was cutting $56 million from the EITC–effectively raising taxes on low-income working families– businesses and higher-income residents were receiving about $210 million in new tax breaks.
The cuts to the EITC mean a single mother with three children who works full-time at the minimum wage will see her tax credit reduced by $518 for tax year 2011, from $2,473 to $1,955. That is the equivalent of a week-and-a-half of her pay, as shown in the chart below. For a family with two children, the credit will be reduced by up to $154, from $716 to $562, the equivalent of more than 20 hours of work at minimum wage. Read more