Minnesota releases updated revenue and spending projections in early December of each year, and the new figures released today are very positive – a net gain in the Minnesota budget balance of about $1 billion. Let’s hope that Wisconsin can come close to matching that when our new tax and spending estimates are released in late January or February.
As we noted in a blog post about two weeks ago, many people across the country are watching Minnesota and Wisconsin carefully because of the very different directions that the two states have gone in fiscal and health care policy over the last couple of years. Because of the many demographic similarities between the two states, the divergent choices by policymakers set up an interesting experiment. In that context, today’s budget news from our neighbor to the west could be an early point in their favor, but we won’t have any basis of comparison in Wisconsin for another month or two. 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.
Workers in Wisconsin and across the U.S. must still cope with a relatively weak labor market. That is especially challenging for low-wage workers who are struggling with the declining value of the minimum wage, reductions in employer benefits like health care, and growing inequality. Those challenges are exacerbated in Wisconsin by budget decisions made by state lawmakers.
A new Wisconsin Budget Project issue brief examines how the how state budget choices are affecting low-wage workers in Wisconsin. It focuses primarily on the effects of the new budget bill, but also examines a few instances of how that bill continues or compounds the challenges for low-wage workers caused by the 2011-13 budget.
Some of the major effects include the following policy choices relating to health insurance, child care, taxes and unemployment insurance:
Making health insurance and care much more expensive for many parents now in BadgerCare
The 2013-15 budget bill cuts in half the income eligibility ceiling for adults participating in BadgerCare – reducing that cap from 200% of the federal poverty level to just 100%. Read more
Good Budget News, but Growth Falls Short of Rumored Expectations
Tax collections were $71.5 million higher than anticipated in fiscal year 2012-13, according to figures released Friday by the Wisconsin Department of Revenue. That’s very good news, although the size of the increase (0.5% above the amount projected in May) isn’t as large as rumors in the Capitol grapevine seemed to suggest. Some lawmakers are probably a bit disappointed if they were anticipating enough additional funding to bolster arguments for even deeper income tax cuts or to mitigate some of the spending cuts in the last two budgets.
I hope legislators aren’t disappointed to learn that half of the increased revenue ($35.75 million) will be deposited in the state’s “rainy day fund” (aka the budget stabilization fund). Under current state law, half of any increase in tax collections in a fiscal year, relative to the amount estimated when the biennial budget bill was enacted, must be deposited in the rainy day fund. Read more
Despite claims that Wisconsin is a high-tax state, Wisconsin is in the middle of the states in most measures of revenue and spending, according to new figures from the Census Bureau. Wisconsin ranked 19th among the states in taxes and fees per person in fiscal year 2011, before the deep spending cuts of the 2011-13 budget were implemented.
Some policymakers focus on Wisconsin’s ranking on taxes alone when evaluating Wisconsin’s revenue structure compared to other states. But focusing on taxes alone means that fees and other charges, which come from residents’ pockets much likes taxes do, are not taken into account. Combining taxes with fees and other revenue gives a broader and more complete measure of the money that state and local governments in Wisconsin collect from their residents.
The average amount state residents paid in taxes and fees is close to the national average. In 2011, Wisconsin residents paid an average of $6,346 in taxes, fees, and other charges to state and local governments, $34 higher than the national average. 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
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
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.