Homestead credit move means Republicans vote to raise taxes on the poorest

Every tax season, you may see flyers or messages from the Wisconsin Department of Revenue saying "GET HOMESTEAD CREDIT." This is a writeoff for low-income Wisconsinites designed to help them pay their property taxes and/or rent. Well, in light of Governor Walker's budget and action by Republicans on the Joint Finance Committee, less Wisconsinites will be able to follow the DOR's advice and get that Homestead Credit.

Here's how the Legislative Fiscal Bureau describes one of the many adjustments Walker was planning to make to the Homestead Credit, including cutting off 11,500 people from getting it at all, and this one involving a change in what type of income is counted when deciding who is eligible for the credit, and how he planned to reduce the credit for many others who make very little.

Currently, homestead credit claimants must report their household income in order to receive the credit. For the purposes of calculating the credit, household income is broadly defined to reflect most cash resources available to claimants. Claimant income starts with Wisconsin adjusted gross income (WAGI). Claimants are then required to report a number of statutorily-specified household income "addbacks" to WAGI, such as unemployment compensation, capital gains, business losses, contributions to IRAs, and child support. Some claimants who do not file an income tax return file a homestead only tax form, on which claimants must report components of WAGI that would have otherwise been reported on the income tax form, along with the same "addbacks" to income.

The Governor's proposed modified credit formula would reduce homestead credits for claimants with earned income below $7,300. Any claimant with $7,300 or more in earned income would receive the same credit as they would under current law. As mentioned earlier, the total number of claimants who would receive a reduced credit under the modified credit is estimated to be 10,800.

17. Under current law, the homestead credit erodes for claimants with household income greater than $8,060 as income approaches the maximum level of $24,680. Through this method, the formula is more generous to claimants with lower household incomes. The following table demonstrates the change in credits between the current law credit and the modified credit for eligible claimants under hypothetical combinations of household income, earned income, and property taxes. As shown, there would be no change in credit amounts for claimants with earned incomes greater than $7,300. However, claimants with earned income below $7,300 would receive reductions that would become greater as earned income declines from the $7,300 level.

That table showed that this could mean that individuals could face a tax hike up to $1,168, if an individual had no earned income and paid $1,600 or more in property taxes, with the biggest damage being done to people on the lowest ends of the income scale.

These changes come after moves in previous years that led to fewer people using the Homestead Credit, dropping from over 250,000 in 2011 to just over 191,000 in 2016. In addition, the credit doesn't go as far, as the Wisconsin Budget Project made this chart in 2015, and this number is even lower in the 2017-19 budget, going below $100 million.



So what did the GOPs on the Joint Finance Committee decide to do today? They made a number of changes to the Governor's proposal, some of which reduced the higher taxes on poorer Wisconsinites, and some of which may make it worse than the Governor's bill indicated. Here's a look at what the Joint Finance-approved proposal did.

1. It got rid of the sliding scale for poorer Wisconsinites that Walker wanted, which would have reduced the Homestead Credit over certain income levels. Instead, the credit is basically an all-or-none situation for those 10,800 people, and their income taxes won't go up as a result. This cost $5.2 million to maintain, but that number is more than offset by...

2. Not following Walker's recommendation to restore indexing in the Homestead Credit for inflation, which the Budget Project has noted is a major reason for the loss of the Homestead Credit's usage and value in recent years.

3. Requiring "disqualified losses" on businesses to be part of the income that determines whether someone can claim the Homestead Credit...which means that fewer people will get it.

4. A recalculation of how many people will use the Homestead Credit- which calculates that the Homestead Credit will pay $1.5 million less than the Walker Administration originally thought.

In addition, the JFC agreed with Walker's plan to limit the Homestead Credit to people (or their spouses) that are age 62 and over, or disabled, and to people who earned income. So younger low-income people or unemployed people who might be currently getting the Homestead Credit are going to be out of luck in the future, and paying higher taxes.

OH, but apparently we can't ask oligarchs Diane Hendricks or John Menard to pay extra income taxes to pay for free tuition at the state's tech colleges (this was a Dem motion that was turned down by WisGOP Joint Finance members today). Funny how these things work, eh?