Decrease in Tax Revenue A Major Contributor to Budget Gap

Monday, March 28, 2011 at 9:51 PM by

The Wisconsin Budget Project has released new analysis of state tax revenue showing that a decrease in state tax revenues played a major role in contributing to the budget gap.

State tax revenue in Wisconsin was growing at a moderate, sustained pace before the national recession hit. Between 2004 and 2007, the tax revenue going into the General Fund increased by seven percent (adjusted for inflation). This increase (and more) was wiped out by the national recession, which had a devastating impact on state tax revenues. The state collected over a billion dollars less in GPR tax revenue in 2010 than in 2007, as shown in the chart below, which is taken from the analysis.

State tax revenue was further decreased when the Legislature approved $117 million in new tax breaks for businesses and higher-income residents during the Special Session. In addition, the Governor’s budget bill proposes another $83 million in tax breaks for multistate corporations and investors.

Curbing spending will need to be part of the solution to the budget deficit, but policymakers should not overlook the fact that a significant decrease in state tax revenue was a major contributor to the state’s budget gap.

You can read the full analysis here.

Tamarine Cornelius

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