Sunday, September 3, 2017

Next week's WisGOP tax changes could handcuff Wisconsin's future

First of all, it appears obvious that Gov Walker's gimmick of a $1-a-week income tax cut will be taken out. This move would do next to nothing to help the average Wisconsinite, but would have cost over $203 million in this budget. Given the underfunding in many other areas of the budget, those funds are needed elsewhere to make Walker's Christmas Tree of Poses into something that has an outside chance of working in the real Wisconsin. Likewise, Walker's stupid idea of a sales tax holiday in August is also apparently gone, so that's another $17 million of breathing room.

But that doesn't mean there might not be more tax giveaways added into the 2017-19 budget. Let's go back to the Senate Republicans’ budget proposal from 6 weeks ago, and let’s look at some of the tax changes they wanted.

Here’s one relating to Governor Walker’s proposed increase in the school levy tax credit, which reduces some of the property taxes you pay for public schools. Walker wanted to bump this up by $87 million to $940 million starting next year, but the Senate GOP want to reduce that and take it slow on getting the increase in place.

Decrease the distribution amount for the school levy tax credit in 2018-19 by $60,000,000 GPR compared to the bill, from $940,000,000 to $880,000,000, for property taxes levied in December, 2017, and payable in 2018. Subsequently, increase the distribution by $42,630,000 GPR in 2019-20 from $880,000,000 to $922,630,000, beginning with property taxes levied in December, 2018, and payable in 2019, and in each year thereafter. The ongoing distribution amount would be $17,370,000 less than the $940,000,000 recommended by the Governor under the bill.
Basically this change would mean 2 things.

1. The increased write-off on your school taxes would be in 2 steps over the next 2 years- a small amount this year (and only costing $20 million instead of $87 million) and then a slightly larger decrease ($42.6 million) that comes off of your 2018 taxes.

2. Because the extra $42.6 million won’t be paid out until July 2019 (due to a prior accounting trick that’s been part of this credit for years), that means the $42.6 million won’t be counted in this budget. Instead, it’ll be added to the $1 billion structural deficit in the 2019-21 budget, meaning we fall even further into the hole for that one. Neat move, huh?

We also haven't seen what will happen with other property tax initiatives and GOP gimmicks designed to lower those bills. I find it interesting that the JFC voted to lower advertising for the Wisconsin Lottery last week, but put off voting on the amount of the Lottery property tax credit till Tuesday. This makes me wonder if they're going to follow with the Senate GOP's plan to use tax dollars to supplement lottery operations.
Increase funding for the credit by $4,064,300 SEO in 2017-18 compared to the bill to reflect the following: (a) a decrease of $10,935,700 SEG associated with a reestimate of the current law credit; and (b) an additional $15,000,000 SEG available for the credit distribution due to $15,000,000 GPR being provided to fund lottery retail compensation costs, which are typically funded with lottery and gaming revenues. Increase funding for the credit by $25,755,900 SEG in 2018-19 compared to the bill to reflect the following: (a) a decrease of $4,244,100 SEG associated with a reestimate of the current law credit; and (b) an additional $30,000,000 SEG being available for the credit distribution due to another $30,000,000 GPR being provided to fund lottery retailer compensation costs. With these adjustments, total funding for the credit will increase from $167,432,900 to $171,497,200 in 2017-18 and increase from $169,089,700 to $194,845,600 in 2018-19.
Not only is it sketchy to use regular tax dollars for what is supposed to be a self-sustaining lottery, it also spends $45 million in limited tax dollars, and would raise the structural deficit by another $60 million for the next budget.

There also is the chance that the GOP-run Joint Finance Committee will try to buy down the property taxes of businesses by cutting the personal property tax. This is one of those initiatives that only the WMC and ALEC crowd want to see happen, which is likely why the GOPs will do it, (as they will get a nice kickback in donations in return). Here was the original plan in the Senate GOP's budget.
Exempt watercraft, machinery, tools, patterns, furniture, fixtures, and equipment from the property tax, and classify certain items that are currently assessed as personal property, but which have characteristics similar to real property, as real property, effective with property assessed as of January 1, 2018. Create a state aid program administered by DOR to make annual payments to each local jurisdiction that imposed property taxes on personal property in 2017, and set each jurisdiction's payment equal to the amount of property taxes levied by the jurisdiction in 2017(18) on property exempt under this provision, beginning in May, 2019.
That second part is noteworthy, because it means that more state tax dollars will be used to prevent homeowners from getting higher property taxes as a result of this. The original Senate GOP plan was to use $239 million to get rid of the personal property tax entirely, but JFC co-chair John Nygren said in late August that a lack of money will limit that buy-down to around $75 million...for now.

There have also been rumblings that Republicans would like to put together yet another giveaway to the rich, in the form of this move, which was part of the Senate GOP’s budget from July.
Eliminate the state AMT [Alternative Minimum Tax], effective in tax year 2017. Estimate decreased tax revenues of $7,700,000 in 2017-18 and $6,700,000 in 2018-19.
If you go back to 2013, the LFB said 74% of the Wisconsinites who paid the AMT made $200,000 or more, and they paid 77% of all AMT collections. The numbers are likely a bit different now that the M&A credit and other giveaways to the rich are more in force, but the distribution likely isn’t much different. $14.4 million in 2 years may be less than 0.5% of the total state budget, but you can bet the disproportionately rich people that would benefit from AMT repeal in Wisconsin will notice….which is exactly the plan for the ALEC crew.

Naturally, the GOPs on JFC want to slam this through along with the Fox-con and other items in one large package on Tuesday, to avoid drawing attention to any particular giveaway or the wreck that the state budget is going to be in 2 years due to the pre-election buydowns. We need to be prepared to let others know just how badly the combination of these relatively small non-Foxconn initiatives will handcuff the state for years to come.


  1. This comment has been removed by the author.

  2. One detail I left out. Wisconsin's AMT has already been reduced for 2017, due to action,in the 2015 budget. That is costing the state $55 million already.

    The $14 mollion to eliminate the state's AMT is ON TOP OF THAT, making the total tax cut $69 million. And going overwhelmingly to the richest Wisconsinites