New Income Tax Cut Proposal More than Doubles the Size of the Governor’s Plan
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.
According to figures from the Department of Revenue, about 800,000 tax filers have no net income tax liability. As a result, they won’t benefit at all from this proposal, which is very disappointing since low-income households generally pay a larger percentage of their income in state and local taxes than the highest income Wisconsinites. One small measure to reduce that glaring deficiency would be simply to restore the practice of annually adjusting the Homestead tax credit for inflation, as the state does with almost all the rest of the tax code.
In contrast to the Governor’s plan, the Kooyenga plan will also reduce the rate for people in the top bracket – who nevertheless would get much of the benefit from the Governor’s proposal because they benefit substantially from the cut in the very wide middle bracket.
Rep. Kooyenga has promised to unveil more details on Tuesday. We’ll learn then how much of the cost is offset by eliminating tax credits, and that will help in figuring out to what extent the new plan is financed with the one-time carryover of the surplus from the current fiscal year.
If, as I fear, that carryover is the key to financing the spending and tax cuts in the 2013-15 budget, then the state will go into the 2015-17 budget with a very large hole to fill. I raised that concern in the Journal Sentinel article. More importantly, so did Senator Ellis, who has long been a deficit hawk and is a respected voice in the Senate GOP caucus.
We’ll share more details as they become available. In the meantime, see our overview of the major drawbacks of the income tax cut proposals.