Governor Signs Property Tax Relief Bill; Assembly Shelves Dem Amendment with Much More Relief for Most Homeowners
Today Governor Walker signed a bill that provides $100 million of property tax relief over the next two years. The bill will do the following:
- Reduce property taxes by an average of $13 this year and $20 next year for people owning median value homes.
- Increase to $725 million the fiscal hole or structural imbalance in the next biennium (which means that first $725 million of new revenue is needed just to maintain flat funding).
- Reduce the projected balance at the end of the current biennium to $125 million, which is enough to cover three days of state spending.
The bill was approved by a lopsided vote in each house of the legislature. In the Assembly, all but 12 Democrats voted for passage of the bill, but not before they offered a substitute amendment that would have provide substantially more property tax relief and would have targeted much more of that relief to residential property owners. Read more
One of the factors contributing to a larger-than-anticipated state budget surplus is a decline of about $11 million in spending for the Homestead tax credit in fiscal year 2012-13. Considering how the surplus was bolstered by that spending reduction, and also by a sharp cut in state General Fund support for the Earned Income Tax Credit, it’s very disappointing that the large tax cuts enacted this year have done little if anything to help low-income households.
Advocates for the Elderly and Wisconsin Families Suggest Two Options
New data released today by the Legislative Fiscal Bureau (LFB) indicate that about 27% of the 2.8 million people who file income tax returns with the Wisconsin Department of Revenue wouldn’t benefit from the $750 million of income tax cuts proposed last week by Rep. Kooyenga. That’s not a shock, but it’s a contrary to Rep. Kooyenga’s assertion last week that his plan would “help out everyone in Wisconsin.”
The new LFB figures reveal the following:
- For tax year 2015, when the plan is fully phased in, the average tax change would be a savings of $290 per year.
- People making under $30,000, who represent 44% of tax filers, would get less than 2% of the proposed tax cut.
- People making over $100,000 per year, who comprise 15.6% of Wisconsin’s tax filers, would get 63.5% of the benefit of the Kooyenga plan.
Kooyenga Plan Would Cut Rates by $450 Million More than Governor, and Provide Larger Cuts to the Wealthy
Late today Rep. Dale Kooyenga shared with Jason Stein of the Journal Sentinel many of the details of the income tax tax plan that the Brookfield lawmaker plans to offer in the Joint Finance Committee. According to a Journal Sentinel article posted this evening, the proposed plan:
- Cuts state income tax rates by at least $780 million during the 2013-15 biennium, or about $450 million more than the Governor proposed.
- Eliminates about 20 tax credits, which will offset at least a small portion of the additional cost of the rate cuts.
- Leaves the Earned Income Tax Credit and Homestead tax credit unchanged – meaning the plan neither helps nor hurts most of the low-income families and elderly individuals who utilize those credits.
- Reduces the number of income tax brackets from five to three.
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.
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
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