Problematic Tax Cut Proposal Advances

Thursday, February 6, 2014 at 2:19 PM by

The tax cut package proposed by Governor Walker is expected to easily pass the Assembly, but some Republican senators are expressing hesitation at approving legislation that digs a deep hole in the next budget.

The tax package sailed through an Assembly committee yesterday, passing on a party-line vote and clearing the way for a vote on the Assembly floor next week.

The Senate has been less eager to approve the package, with Senate leaders citing the need to avoid throwing the budget out of balance in the future. One modification to the Governor’s proposal that may find more favor in the Senate, according to the Journal Sentinel, is to keep the tax cuts largely as the Governor has proposed, but skip the $117 million contribution to the state’s rainy day fund that is included in the package and instead keep that money in the state’s main account. This move would avoid creating a larger hole in the state’s next budget, but would do so by eliminating the most fiscally responsible part of the Governor’s plan.

The Wisconsin Budget Project blog can be a valuable resources for following the debate about the tax cut proposal, and the effects the proposal would have on the budget and on taxpayers. Here are recent posts that address various aspects of the tax cut:

  • Term Budget Planning and Measuring Effects of Tax cuts (February 5) – Wisconsin lacks certain key, proven budget-planning tools that would give us a better idea of the size of the hole the tax cut would dig in future budgets. Adopting a current services baseline, and projecting revenues and spending for at least five years into the future would add important information to the current debate about the tax cuts.
  • Plans for the Surplus Neglect the $93 Million Medicaid Hole (January 30) – The Governor’s plan for the projected surplus uses every bit of it for tax cuts and other purposes, leaving nothing to address a $93 million shortfall in the Medicaid budget.
  • Do All Taxpayers Get the Same Benefit from the Governor’s Income Tax Proposals? (January 28) – The Governor has said that the income tax cut portion of the tax cut package gives all taxpayers the same benefit. But that statement overlooks changes he has proposed to the alternative minimum tax, which would predominantly benefit a small group of high-income tax filers.
  • Proposal Would Divert Money from Rainy Day Fund for Tax Cuts (January 27) — The tax cut proposed by Governor Walker would divert more than $300 million that would otherwise be deposited in the state’s rainy day fund, and use that money for tax cuts instead. The result is that there will not be enough in Wisconsin’s rainy day fund to ride out an economic downturn.
  • Top 5% of Wisconsin Residents Get 18% of Tax Cuts Proposed by the Governor (January 24) – Lawmakers should consider alternatives to the Governor’s proposal that would better target tax reductions to those who are struggling the most to pay their property taxes.
  • Missed Opportunities in the Governor’s Budget Proposals (January 22) – The Governor’s tax cut proposal digs a deep hole in the next budget, ignores current budget holes, fails to reverse tax increases for low-income households, and bypasses opportunities to invest in measures that would improve Wisconsin’s economic competitiveness.

Tamarine Cornelius

Categories: Blog, income taxes, rainy day fund, STATE BUDGET, STATE TAXES, taxes | Comments Off on Problematic Tax Cut Proposal Advances

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