In a long Q & A format interview in the Capital Times, I described a number of the faults of the 2013-15 budget bill. One of the defects I mentioned in that interview is that the bill employs a “Robin Hood in reverse” strategy for allocating resources. Because the article doesn’t provide much explanation of the reasoning behind that charge, I feel obligated to elaborate.
Actually, I think there is a very broad range of reasons for concluding that the recently enacted budget shifts resources from the poor to the rich. A new Wisconsin Budget Project paper explains ten of those reasons, which are summarized more succinctly below:
1) Diverting federal block grant funds for low-income families – The bill siphons off funding from the federal block grant known as Temporary Assistance to Needy Families (TANF) and indirectly uses those funds to build up the state’s surplus, which helped lawmakers enact larger income tax cuts that primarily benefit the wealthy. Read more
Grover Norquist Neglects the Facts in Exhorting North Carolina to Follow Wisconsin Path
In a recent article, political commentator and conservative strategist Grover Norquist urged North Carolina lawmakers to make their state the “new Wisconsin.” He uses or misuses one piece of economic data to suggest that Wisconsin’s economy is thriving, while ignoring ample evidence that indicates otherwise. That argument shows the same sort of inattentiveness to or disregard of economic facts that led many conservatives to advocate that the U.S. should emulate the fiscal austerity policies being practiced in the European Union.
The one piece of economic evidence cited by Norquist and the article’s coauthor, Patrick Gleason, is that over the past two years, since Governor Walker signed the last biennial budget bill, “the state’s unemployment rate has dropped from 7.6 percent to 7 percent — below the national average.” It’s true that Wisconsin’s unemployment rate is below average – but that’s nothing new and can’t be traced back to a particular policy agenda. Read more
A new tax break for private school tuition will make Wisconsin one of six states that offer broad-based tax benefits for parents who pay for private school tuition.
The new tax benefit is included in the state budget that Governor Walker is expected to sign in the next week or so. The budget bill gives Wisconsin parents a tax deduction of up to $10,000 per child each year for private school tuition. Any tax filer, no matter how high his or her income, is eligible for this deduction. The deduction for private school tuition is expected to reduce Wisconsin tax revenue by $30 million a year, beginning in tax year 2014. You can read more about the tax break in our June 12th blog post, “Generous New Tax Break for Private School Tuition out of Line with Existing Tax Benefits.”
Once the budget is passed, Wisconsin will become the 6th state with broad-based direct tax benefits for parents who pay private school tuition. Read more
Budget’s Diversion of Funding for Low-income Families Is Based on Faulty Assumptions
When legislators take floor votes this week, they will decide whether and how much to cut spending for the Wisconsin Works (W-2) program, which aids unemployed low-income families, and whether they divert the savings to use for things like tax cuts for the wealthy. The arguments that state budget writers have used to support a W-2 cut are running up against some very inconvenient facts that contradict the Joint Finance Committee’s assumptions.
As I’ve written on other occasions (such as this blog post), the budget bill’s cut in W-2 spending is part of a strategy that siphons off money intended for low-income families – in order to free up General Fund dollars to use for other purposes, such as the proposed income tax cut.
The spending cut was based on the assumption that W-2 participation would decline steadily, beginning well before the start of the new biennium. Read more
A new tax break for private school tuition is larger than the tax break for college tuition, thanks to a last-minute addition to the state budget that was introduced and approved in the early hours of the morning.
The structural deficit that the state will face in the 2015-17 isn’t nearly as bad as some others created by state policymakers and/or unanticipated slowdowns in revenue. However, the combination of that budget hole and promises some lawmakers have made to keep cutting taxes could result in very austere times ahead for education and other important state investments.
A proposed income tax cut could hurt Wisconsin’s ability to be economically competitive, and would give significant tax cuts to the wealthiest while leaving out most low-income people.
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.
State Lawmakers Should Match Their Rhetoric by Making the Tax Cuts Help More People
I was surprised to read the following statement in a message that Governor Walker recently distributed via e-mail and tweet: “Including a tax cut in the 2013-15 budget will help those hit hardest by economic difficulties get back on their feet.”
It’s a great sentiment and I’d like to applaud the Governor for expressing it, but unless he’s working on a new tax cut plan that he hasn’t unveiled yet, it’s far off the mark. I think that if you took the Governor’s statement and changed “will” to “should,” there would probably be broad agreement in the goal of helping those hit hardest by the recession. And if lawmakers can agree on that goal, they should start working on passing a budget that will achieve it.
As it stands now, the Governor’s tax plan does little or nothing to help Wisconsin workers who are unemployed, working in minimum wage jobs, or working sharply reduced hours because of the deep recession and Wisconsin’s anemic recovery. Read more
The Joint Finance Committee (JFC) convenes again on Tuesday, June 4, in what is expected to be its last meeting on the biennial budget bill. The committee has to tackle three of the biggest parts of the budget – tax policy, K-12 education financing (including school vouchers), and Medicaid issues.
Many members of the majority party have said that they would like to provide more funding to public schools than the very small amount recommended by the Governor. But they have to balance their interest in doing that – by using some of the general fund surplus and increased tax growth in the next biennium – with their desire to use that funding to cut income taxes more than the Governor proposed.
Also, as I noted in Wednesday’s blog, proponents of the tax cuts have to balance the size of those cuts with the higher GPR cost of the Governor’s BadgerCare plan – which covers a lot fewer people at a much greater cost ($119 million more in 2013-15 and $460 million more from January 2014 through June 2020). Read more