The second Joint Finance Committee (JFC) meeting this week will be on Wednesday, May 15, starting at 10:00. A full list of the items being considered can be found here, with links to each of the papers.
One of the significant areas of discussion will be the Department of Revenue (DOR) budget, which includes a net increase of 32 positions to improve tax collections and fight fraud. In another Budget Project Blog post today, Tamarine Cornelius explains that the new positions are expected to generate more than $6 in state tax revenue for each dollar invested.
Other agencies on the agenda Wednesday include DOA, DNR, a few DHS issues (Care Facilities and Quality Assurance), and Ag (DATCP). The outline below includes links to all six of the papers on DOR issues, as well as a very incomplete listing of other issues coming up Wednesday, with links to additional information and to some of the many Legislative Fiscal Bureau papers on those issues:
- Audit Bureau and Compliance Bureau Revenue Collection Personnel (Paper #555)
- Increased Resources for Debt Collection (Paper #556)
- Federal Audit Reports Enforcement Activities (Paper #557)
- Increased Resources for Delinquent Tax Collection Activities (Paper #558)
- Tax Fraud Enforcement (Paper #559)
- Veteran Employment Tax Credit (Paper #560)
- Capital Investment Program (Paper #100)
- Community Development Block Grant Administration (Paper #101)
- Regional Intergovernmental Affairs Positions (Paper #103)
- Low-Income Weatherization and Energy Assistance Program Allocation Changes (Paper #105)
- Contracted Services for Mental Health Clients (Paper #362)
Jon Peacock Read more
Will Lawmakers Use the Increased Revenue in Ways that Reduce the Structural Deficit or Exacerbate It?
State legislators working on the 2013-15 budget got some very good news today. A new paper from the Legislative Fiscal Bureau estimates that tax collections in the current fiscal year (which ends on June 30) will be $215 million more than previously anticipated. That stronger base of revenue is pushing up the amount anticipated in each of the next two years by $180 million, for a total (three-year) increase by the end of the 2013-15 biennium of $575 million.
Although today’s news could trigger fights about the best ways to use the increased revenue, the rosier revenue picture should nonetheless make it easier for the majority party to fashion a compromise that addresses the competing priorities of various Republicans, including adding to the meager K-12 education funding increase recommended by the Governor.
The biggest question in my mind is whether lawmakers will use the added revenue in ways that reduce the $664 million budget hole (“structural imbalance”) that the Legislative Fiscal Bureau said the Governor’s budget would create for the 2015-17 biennium. Read more
Income taxes are on the minds of many people today, at least among those scrambling to meet the April 15 deadline for filing their tax returns. We’ve been thinking of taxes as well, including the Governor’s proposal to cut the state income tax by an estimated $343 million over the next two years. See, for example, our recent fact sheet about the state income tax, our infographic on where your state tax dollars go, and this column in the Milwaukee Journal Sentinel.
Today is a good occasion to ponder the key questions about the proposal to cut income tax rates, and I’m going to focus primarily on one of those questions: Is the proposed income tax cut equitable?
Tax equity is a subjective term, but by many measures the Governor’s plan falls short. Although some of the proposal’s proponents have said on various occasions that it will provide tax relief for all Wisconsin taxpayers, that’s not the case. One needn’t look any further than the Dept. Read more
The income tax cut proposed for Wisconsin is more likely to hurt, rather than help the state economy, if past history in other states continues to hold true.
Critics of the income tax cut have raised a number of concerns about the proposal, including:
- Half of the benefit of the tax cut accrues to the top 20% of earners, even though its proponents have described the tax cut as being targeted at the middle class.
- Most workers earning $30,000 a year or less would not receive an income tax cut. These workers pay a higher share of their income in state and local taxes than the best off.
- The tax cut reduces state revenue by about $170 million per year, and is partly responsible for the projected re-opening of the state’s structural deficit in the coming years.
Added to this list of concerns is the fact that the tax cut is not likely to help Wisconsin’s economy, and in fact could do the opposite. Read more
The income tax cut proposed by Governor Walker would cut taxes for many Wisconsinites, but more than three-quarters of a million Wisconsinites would not receive any benefit from the tax cut. Nearly all the people who would not receive a tax cut make less than $30,000.
The proposed income tax cut would reduce income taxes for 73% of tax filers, according to an analysis from the Legislative Fiscal Bureau. The remaining 27% of tax filers – an estimated 757,000 people – would not receive any benefit from the income tax cut.
Nearly all of the tax filers who would not receive an income tax cut are low-income. More than half a million Wisconsinites who earn less than $10,000 a year would not benefit from the income tax cut. Another 166,000 people earning between $10,000 and $20,000 would not receive a benefit, as would 32,000 people who earn between $20,000 and $30,000. Read more
The state’s structural deficit is projected to re-open in coming years, thanks largely to the income tax cut proposed by Governor Walker and other recent tax cuts.
In 2013, the state’s General Fund is projected to have a structural balance of $146 million, which means that revenues were greater than state spending by that amount. But in coming years, state spending is projected to outstrip revenues, creating a structural imbalance that rises to nearly $350 million in 2017, as shown in the chart below. Based on these Department of Administration projections, state lawmakers would need to fill a hole of more than $600 million in the 2015-17 budget.
In the past, Governor Walker has placed a great deal of emphasis on the need to bring state spending in line with revenues. In his budget proposal for the 2009-11 budget, Walker pointed out that his budget reduced the structural deficit to an all-time low in the history of tracking this measure. Read more
Governor Walker has proposed an income tax cut that would benefit the highest earners the most, and would result in insignificant tax cuts for low-income Wisconsinites.
The Governor has been talking about his plans for an income tax cut for several weeks now, but the details of his proposal were revealed just last night, when Walker unveiled his two-year budget recommendations. He has proposed reducing the tax rate for three of the five income tax brackets, as shown in the table below. (The income amounts reflect the brackets for a married couple filing jointly; most of the brackets are lower for people filing singly or as head of household.)
|Income amount||Current tax rate||Proposed rate|
|Income over $14,000 and below $28,000||6.15%||5.94%|
|Income over $28,000 and below $211,000||6.5%||6.36%|
|Income over $211,000 and below $310,000||6.75%||No change|
|Income above $310,000||7.75%||No change|
If you’re among the fortunate Wisconsinites who have an annual income of more than $211,000 (after all deductions and exemptions) and you’re concerned you won’t enjoy any of the tax cut, you needn’t worry! You’ll actually get the largest cut, $300, because the tax rate will be reduced for all of your income up to the $211,000 level.
The estimated cost of the tax cut is $342 million over the two year budget period. Read more
Our state is expected to finish the current fiscal year with a balance of about $420 million. There have been scads of ideas for what to do with that money – most of which don’t seem to take into account that a balance isn’t an ongoing revenue stream. Let’s take a look at a few of the options.
Although the anticipated surplus is very good news, keep in mind that one of the main reasons for the expected balance is that state officials projected a $208 million deficit about a year ago and took steps to reduce spending to address the anticipated shortfall. As a result of a number of painful cuts and lapses that were subsequently made, coupled with a rebound in revenue from the low level anticipated a year ago, state lawmakers now find themselves in the very unusual position of carrying a solid balance into the next biennial budget.
Most legislators, especially fiscal conservatives, understand that a surplus or budget balance is a pot of one-time money that shouldn’t be committed to a permanent spending increase that isn’t sustainable. Yet they often don’t acknowledge that the same is true with respect to tax cuts. Read more