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.

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Low-income people will continue to face steadily increasing property taxes unless the Legislature takes action to adjust an important property tax credit for inflation, according to a new analysis from the Wisconsin Budget Project.

The Homestead Credit lowers property taxes for owners and renters of limited means who are generally ineligible for the state’s Property Tax Rent Credit. More than a quarter of people receiving the Homestead Credit are 66 years old or older, and more than half of all recipients have income of less than $15,000 per year, according to the Wisconsin Department of Revenue. Unlike almost all of the state tax code, the Homestead Credit is not adjusted for inflation.

Because it is not adjusted to keep up with the cost of living, the value of the Homestead Credit has been significantly eroded by inflation and will continue to erode further unless policies change. As a result of the gradually decreasing value of the credit, low-income owners and renters are paying higher property taxes. Read more

It’s Déjà Vu All over Again for the Homestead Credit

Over the Groundhog day weekend I was working on the plot for a new version of the Groundhog Day movie – for a remake that I think Columbia Pictures should film in Sun Prairie.  Bill Murray would once again have the lead role, playing a retired former weatherman who now hosts the annual Ground Day event in Sun Prairie, and who has a crush on a Madison-area TV personality, played endearingly by Andie MacDowell.  Sun Prairie’s Jimmy the Groundhog will replace Punxsutawney Phil, of course; and I’ll have a small part as a geeky fiscal policy analyst (a bit of a stretch), in lieu of Ned – the nerdy insurance agent.

The story is set slightly before the next big Groundhog Day celebration.  It’s January 31 and our hero is paying his Sun Prairie property taxes, which isn’t easy for him now that he is retired and living solely on Social Security (after his ex-wife, who ran away with Ned, was awarded his modest pension from the TV station). Read more

Kudos to the WI Department of Revenue (DOR) and the Social Development Commission Volunteer Income Tax Assistance (VITA) program for scheduling an education seminar on the Homestead Credit program next week. 

The Homestead Tax Credit is designed to help low-income renters and homeowners in Wisconsin.  It provides well-targeted property tax relief to low-income households (with annual income less than $24,680), but many people who are eligible don’t claim the credit.  Thus, we’re very happy that DOR is partnering with local groups to help disseminate information about the Homestead credit.  (Please help spread the word!)  

The Milwaukee seminar on Thursday, January 24, will have two sessions:

     3:00 p.m. – 5:00 p.m. session for property owners and landlords

     6:00 p.m. – 8:00 p.m. session for renters, taxpayers and general public

Where: Social Development Commission, Jo’s Learning Center, 4041 North Richards Street, Milwaukee, WI 53212

For more information about the Homestead Credit and other state and federal tax credits for low-income households, see our flyer (available in English, Spanish and Hmong).   And see this DOR fact sheet about the Homestead Credit: 

Jon Peacock Read more

Important tax credit eligibility information for Wisconsin families.

It May Be Ground Hog Day for the Homestead Credit, But Not for Other Benefits

We noted earlier in the week that the Wisconsin Homestead Tax Credit is no longer being adjusted to reflect increases in the cost of living. Over the last two decades the maximum Homestead credit has remained virtually unchanged (except for tax year 2010), and the frozen formula means that a person living solely on a Social Security benefit could expect a Homestead Credit in 1991 with a value (in current dollars) more than two and a half times as large as the 2011 credit. To put it a little differently, for the past twenty years almost every day has been Ground Hog Day – with Bill Murray waking up to the same Homestead Credit formula (yet a steadily eroding credit).

Fortunately, it isn’t Ground Hog Day for other public benefits, which are typically adjusted each year to reflect changes in the cost of living. Read more

Thousands of seniors soon will pay higher property taxes according to a new report by the Wisconsin Budget Project. The Homestead Credit, which puts money back into the pockets of low-income seniors and helps them stay in their homes, will shrink this year, because state legislators voted to stop adjusting the credit for inflation.

As a result, a senior relying on Social Security can expect his or her tax credit to drop by $209, or 28 percent over the next five years, as shown in Chart 1. Other seniors will lose the tax credit altogether because their Social Security income will increase, but the income level that determines eligibility for the tax credit will be frozen.

The Homestead Credit lowers property taxes for owners and renters of limited means who are generally ineligible for the state’s Property Tax Rent Credit. Nearly a third of people receiving the Homestead Credit are 66 years old or older, and more than half of all recipients have income of less than $15,000 per year, according to the Wisconsin Department of Revenue. Read more

Each year WCCF updates a one-page brochure that helps educate people about the major refundable tax credits for low-income families — the federal and state Earned Income Tax Credit (EITC), the state Homestead Tax Credit, and the federal child tax credit.  Please help us get the flyer into the hands of low-income families who could benefit.

A few years ago, as part of EITC Awareness Day, the Secretaries of the Dept. of Revenue and Dept. of Children and Families encouraged state residents to check their eligibility for tax credits aimed at helping low-income workers and families. Their press release said an estimated 20-25% of WI taxpayers eligible for the EITC do not claim it on their returns.  An even larger percentage of eligible households don’t claim the Homestead credit. 

You can find the updated version of the tax year 2011 flyer on the WI Budget Poject website.  In addition to the English version, you can also get the flyer in Spanish and Hmong. 

Jon Peacock Read more