Tuesday, August 18, 2015

Outside of super-rich, few Wisconsinites will get tax, fee breaks

Even though the state budget was signed over a month ago, there are still recent releases that are putting some of the last-minute tax moves into perspective. The Legislative Fiscal Bureau recently put out its report on tax and fee changes in the 2015-17 state budget, and you will find that Walker’s budget actual did raise net taxes and fees, albeit by a small amount in a total budget of more than $73 billion.
In summary, the changes included in Act 55 [the state budget] would increase net taxes by $19,205,000 ($30,145,000 in 2015-16 and -$10,940,000 in 2016-17) and would increase net fees by $10,046,600 ($4,057,500 in 2015-16 and $5,989,100 in 2016-17). In addition, it is estimated that measures included in AB 21to enhance the collection of current taxes would generate an additional $124,710,000 ($35,270,000 in 2015-16 and $89,440,000 in 2016-17).
The largest share of the fee increases come from $7.7 million in raised admission fees to State Parks, Forests and Trails, along with higher camping fees on those lands. The budget bill also has $1.45 million in additional surcharges/fines that are slapped onto refunds of fraudulent unemployment payments, as well as $1.41 million from a $50 additional surcharge for DUI convictions, which will go to the state’s Safe-Ride Program. Also noteworthy is the largest decrease, a $2.1 million reduction due to a cut of $75 on the fee assessed to health care providers to give data to the Department of Health Services.

As for the $19.2 million in tax "increases" - most of it is actually made up of limitations of certain corporate tax cuts. One is a pause in the Manufacturing and Agriculture Credit, which puts off a cut in that tax rate by 0.501% for this tax year, and adds $16.8 million in revenue for this fiscal year (but has a larger cut coming to make up for it in 2016). Another is $21.8 million resulting from a 2-year delay in a 2014 bill that allowed lenders to get refunds of sales taxes paid in cases of bad debt (seems like a very narrow giveaway). Very few areas in this budget have actual increases in tax rates compared to prior years, but instead are modifications from previous giveaways that have blown such a hole in current and future budgets.

Those budget holes also limited the chances for the Wisconsin GOP to throw in even more tax cuts, but a couple of initiatives got through that’ll have a bigger punch in the future. Steven Walters at Urban Milwaukee has a good rundown on these new tax measures, and while many of these will be familiar to you, it is nice to see it all in one place.

Here are the largest-ticket tax breaks that were included in the budget.
*More than 690,000 taxpayers will get a new tax break worth a total of $21 million, but not until they file 2016 income taxes. The first step on fixing the so-called “marriage penalty” will only be worth about $30 per taxpayer, however.

*About 35,000 tax filers will save about $24.2 million when they file their 2017 income taxes, because they will no longer be subject to the Alternative Minimum Tax (AMT). Without that new break, the number of taxpayers owing the AMT would have soared from 7,656 in tax year 2012 to 38,500 in tax year 2017. As a result of the change, about 2,100 taxpayers will pay the AMT in tax year 2017.
Of course, this AMT tax cut was the fallout from prior WisGOP tax cuts which reduced the rates on upper-income Wisconsinites, forcing many more of these richer Wisconsinites to be susceptible to the AMT. Both I and the Wisconsin Budget Project have previously noted that this “make-up” bill on the AMT ends up almost exclusively helps Wisconsinites who make over $200,000.

This revenue cut from the AMT change is relatively small for the 2015-17 budget, but the hole gets much larger in the next budget, as the Fiscal Bureau notes:
When fully implemented in the 2017-19 biennium, these provisions would reduce income tax collections by an estimated $25.4 million in 2017-18 and $29.9 million in 2018-19.
But that $55 million budget hole does’t seem to faze State Rep. Dale (Koo-Koo) Kooyenga, who was the heaviest promoter of this AMT tax cut. In his typical smug style, Koo-Koo gets off a partisan shot in Walters’ column, and somehow exempts himself and the Wisconsin GOP from the screw-up that resulted from the previous rounds of Koo-Koo tax cuts that he and his party voted for.
"Politicians didn’t realize what they had created," Kooyenga said. "Not a single Democrat understands the AMT."
Dale’s such a silly boy. This Dem understands the AMT completely- it’s designed to make sure rich people don’t avoid paying income taxes. And this situation presents itself because the rich and connected are more able to lobby for, create, and take advantage of targeted tax breaks than the average everyday worker does. Your reckless tax cutting policies may have convinced enough rubes to vote GOP in 2014, but it sure screwed up things for now and the future.

Call me crazy, but maybe Koo-Koo should worry a bit more about delivering an economy that’s going to grow rather than come up with new ways for his rich campaign contributors to game the tax code. Especially when the “solutions” to rigging the tax code in favor of the lobbying classes ends up gutting services and raising taxes and fees for the everyday Wisconsinite, and stagnating the state’s job and wage growth.


  1. And how many people recall that the original "minimum tax" legislation was signed in 1969 by RMN which provided the original model that the Wisconsin AMT was based upon?. Of course there was a significant lowering of the maximum tax bracket from 70% to 50% that RMN saw as the justification for his approval, but the measure did extend the 5% income tax surcharge to May, 1970. The surcharge had originally been 10% and had been put in place by LBJ to pay for the Vietnam War.

    Wait? A 70% top marginal rate?, a surcharge tax? a tax for pay for a war? What kind of country was that?

    Well see it's this way. Many Boomers like myself grew up in a country with excellent local schools, widespread unions, ever-increasing median wages, an inexpensive university system and a government that furnished well maintained infrastructure and provided for technical and scientific research, as well as social support programs. Thing was our parents paid for all that with their sacrifices. Today, my generation still wants all those same things and, just like we were kids, we want someone else to pay for them. But our parents are gone. What to do?

  2. The GOP will push for a tax cut in 2016 and Walker will sign it.

    They all need it. It's an election year.

    It will be justified when revenue projections come in higher than expected.

    It won't be a tax cut for working class people but it doesn't have to be. All that they need is the illusion of the tax cut for the Journal Sentinel to put on the headline.

    Walker gets to brag about it on the Presidential campain and the local GOP get stump speaches at home.

    Best part for the GOP is when the State runs out of money and they get to cut spending and screw the poor and middle class.

    A win, win situation for them.

    1. They can try, but they'd need to have the revenue to give them the cushion to do so. And with $1.1 billion in unspecified cuts already built into the budget, along with $500-$850 million of borrowing for roads, good luck trying to justify that, or find a way to legally do it.

      I also bet the property taxes won't go down for many like the LFB is projecting, so as people pay for higher property taxes, asking for another unfunded income tax cut might be the last straw that gets the Dems in power after 2016.