Thursday, July 2, 2015

Not a huge WisGOP giveaway, but JFC still passing stupid tax policy

As you’d imagine, there is a lot to sort through in the tax omnibus that passed the Joint Finance Committee this afternoon. I’ll start with the big-line items, and then narrow it down to the smaller, more ridiculous special interest crap. Not surprisingly, these moves were pushed by State Rep. Dale (Koo-Koo) Kooynega, the Paul Ryan wanna-be who heavily promoted the prior tax cuts that have put this state in a major hole.

Since I’m a nice guy, I’ll begin with a minor positive note in the bill. There is a pause in the Manufacturers and Agriculture tax credit, which was on the books due to prior tax-cutting idiocy during the Age of Fitzwalkerstan, and as the Wisconsin Budget Project has pointed out, ended up being much larger than expected, and is a main reason behind the revenue shortfalls and budget cuts that had to result over the last 18 months.

The budget motion will keep rates at the same level that they were at in 2014 instead of cutting them further this year, adding $16.8 million in revenue for this budget in 2015-16. However, this is merely a one-shot measure, as that massive tax cut is then allowed to continue to its full giveaway amount for tax year 2016, continuing to expand the revenue hole, especially for the next 2-year budget.

But you know the GOP won't bank any extra tax revenue or (God forbid) spend it, so that extra $16.8 million is offset by two main tax cuts in the legislation. The first is what Koo-Koo Kooyenga calls a removal of the “marriage penalty”, which basically adds a small amount to the state’s standard deduction in 2016 for couples that make a combined $21,360 and $117,477. Seems like a relatively small amount, but the total price tag is estimated at $20.9 million.

In addition, Koo-Koo got one of his reductions of the Alternative Minimum Tax in there (Alternative 3 in this paper), but in a nice twist, it gets delayed until tax year 2017, so there’s only $6 million in lost revenue for this budget. However, that provision also blows a $55 million hole in the next budget, with no way to make up for it, and State Rep. Chris Taylor blasted the move since any cut in the AMT would overwhelmingly help rich Wisconsinites, as the Wisconsin Budget Project has mentioned.

It’s also clear that Republicans on the JFC are feeling the heat from the scandal involving the Wisconsin Economic Development Corporation (WEDC) improperly loaning out $124 million in taxpayer dollars. The first part of their solution is to take away $19.8 million in WEDC funds, and put it into the JFC’s bank for later, meaning that WEDC has to come back and justify getting that money (good luck getting those funds as the election nears…). Not a bad plan in itself. The motion also limits and eventually phases out almost all of WEDC’s loan programs as of July 1, 2017.

But you know the WisGOPs can't get it all right, because instead of getting rid of this corporate welfare, the LFB notes that it simply trades loans for more money in tax credit programs.
Increase the annual limit recommended by the Governor for the amount of business development tax credits that WEDC may allocate during a calendar year from $10 million per year to $17 million in 2016 and $22 million in 2017 and annually thereafter. As compared to the bill, increase estimated GPR tax expenditures for the credit by $1,750,000 in 2016-17.

Specify that WEDC may not originate new loans in excess of $10 million in 2015-16 and $5 million in 2016-17. Prohibit WEDC from originating a new loan after June 30, 2017. However, specify that this provision would not apply to the technology development loan program as it existed and was administered by the Corporation on January 1, 2015. Permit WEDC to originate new loans of up to $3 million from non-federal sources, annually, under the technology development loan program, and specify that no annual limit would apply to loans funded from federal revenues.
So the WisGOP want to “solve” WEDC's problem with a maneuver that will screw up future budgets. Not only does the expanded WEDC credits drop $1.75 million off of revenues for 2016-17, it grows to reduce the next budget’s revenues by more than $20 million. And it seems to give little extra scrutiny on how those tax credits are handed out, which means the cronyism that is central to the WEDC’s slushiness will continue. The JFC Dems had a tax package that would have banned recipients of aid from WEDC from outsourcing jobs, but that was shot down in a 12-4 party-line vote.

And lastly, here are a few things from the “ridiculous special-interest crap” portion of the Koo-Koo tax omnibus. It starts with an $11 million sales tax exemption to contractors that give certain materials to schools (including voucher schools), municipalities or non-profits. That’s the highest-ticket item, but far from the only one.

· The bill increases a tax stamp discount by 0.1% for “cigarette manufacturers, bonded direct marketers, and distributors.” You likely won’t get a break on that next pack of smokes, but it’ll give a break of $1.1 million to those businesses.

· There's a limit on the state sales tax for “amusement devices”, and it seems to indicate there’s no sales tax due as part of people putting in money for a pool table, darts, arcade games jukebox, items like that. I’m guessing that won’t drop my $1 dart game to $0.75, or give me 13 songs instead of 12 for my $5, but it will cost the state $300,000 in the next 2 years.

· There's a sales tax write-off for someone who sells farm-raised deer to a game farm or hunting reserve. Price tag: $210,000

· The bill defines pear cider as “hard cider” instead of “wine,” so it pays a cheaper excise tax. Price tag: $375,000.

And this may be chicken feed compared to what might go in the "end of the budget" omnibus that’s coming up later, when the real gifts get handed out. Ugh. Technically the tax bill is "revenue-neutral", because the bottom line for the budget actually gets better by $468,500. But that's done by improving year 1 by $37.7 million, and making year 2 worse by $37.2 million- a gimmick that means any shortfall in 2015-16 means major adjustments and cuts in year 2, because not only is there even less breathing room now in year 2, it's on top of $700 million in unspecified cuts that was the only way the original numbers could even balance.

If we lived in a place where certain politicians weren't completely bought off, the WisGOP legislators would have used the pause in budget deliberations to reflect on the current downward direction of the state's economy. Since Joint Finance's last meeting, we found out that Wisconsin lost more jobs than any other state in America in May and was revealed to be dead last in Midwest job growth during Scott Walker's first term. If they cared about acheiving quality results, they'd think "maybe all of this special-interest legislation and silly, unnecessary tax cuts that has dominated the 4 years of the Age of Fitzwalkerstan isn't the way to go," and they'd change course, possibly with some bipartisan taxing and spending deals with Democrats.

But instead of deciding to invest in the state, the WisGOP are going to cut transportation spending (more on that later), and double down on the trickle-down policies that have only succeeding in helping GOP campaign contributors, at the expense of everyone else in Wisconsin. They've made their choice, and I sure as hell hope the people in this state take notice, and choose wiser at the ballot box over these next 16 months.

1 comment:

  1. Jake, thanks for your close reading and explication of the budget papers. I had noted many of these things myself (as did the Jt Finance Dems!), but got hung up on open records. The smirks and smiles of the Republican legislators as they wreak disaster on the state's finances is a frightening sight, ain't it?