Increased Tax Revenue Creates Opportunities to Close Budget Gaps and Invest in the Future
A big jump in state revenue that will be announced soon gives lawmakers an excellent opportunity to invest in Wisconsin’s economic future and to put the state on a sounder fiscal footing by filling budget holes.
In an interview today, Governor Walker said that new revenue estimates for the 2013-15 budget, which will be released soon by the Legislative Fiscal Bureau, will be hundreds of millions of dollars above the projections that the current budget bill was based on. According to a Journal Sentinel article today, sources said the revenue increase “could approach $1 billion through mid-2015.”
A big increase in revenue is very welcome news, but not a huge surprise. State tax collections reported by the Dept. of Revenue have been strong in recent months, and as I noted in a previous blog post, Minnesota announced in early December that it now anticipates an increase of about $1 billion in its budget surplus.
Under current statutes, after the Wisconsin budget is passed, half of any revenue increase has to be allocated to the state’s Rainy Day Fund, and the Governor acknowledged today that some of the increase would be used to build up that fund. However, Governor Walker said he will propose a plan next week to cut income and property taxes, and to adjust the state’s income tax withholding tables (to reduce the amount withheld, which would also reduce tax refunds).
Before lawmakers decide to use the increased revenue for tax cuts, some other ideas merit their attention. First, legislators and the Governor should start by putting the state’s fiscal house in better order by reducing debt and filling holes in current budget commitments. For example, the state has a deficit of about $93 million in its Medicaid budget, and a potential hole of at least $19 million in funding for the welfare to work program. Lawmakers could also use the increased revenue to pay down state debt, which has increased by more than a fourth during the last five years.
The improved revenue picture also provides an opportunity for lawmakers to make responsible investments that will improve our state’s future economic competitiveness. In particular, we should invest in the K-12 and higher education systems, and also in early education where the long-term payoff is the greatest.
Another high priority should be to reverse the tax increases for low-income families enacted in the 2011-13 budget, when lawmakers cut the state Earned Income Tax Credit and ended the annual inflation adjustments for the Homestead Tax Credit. (Read more here about the need to reverse those tax increases.)
In short, let’s seize this opportunity to develop a bipartisan, fiscally responsible approach that helps all Wisconsinites. That approach should close budget holes, invest wisely in Wisconsin’s infrastructure and our people, and undo recent tax increases for some of our state’s most vulnerable households.