On tax cut vetoes, we should care about real Wisconsinites, not the "average" ones

I saw this headline in the news (and the Wisconsin GOP's framing of it), and immediately shook my head.

The average tax cut under the plan Evers heavily modified will be $36, compared with the $573 under Republicans' plan, a new analysis states. https://t.co/akhvCodtE6

— Wisconsin State Journal (@WiStateJournal) July 7, 2023

The framing of “average” tax cut is wildly misleading. Let’s use notes from that same analysis from the Legislative Fiscal Bureau to get a better idea of how these dueling tax plans would have worked for everyday Wisconsinites, and to see just how much (or how little) Evers' vetoes reduced that tax cut.

Let's start with another way LFB says the WisGOP tax plan broke down.

--Filers with Wisconsin AGI under $100,000 would represent 72.9% of all filers with a tax decrease, and would receive 19.7% of the estimated decrease. Their estimated average tax decrease would be $155 in tax year 2023.

--Filers with Wisconsin AGI of $100,000 or more would represent 27.1% of all filers with a tax decrease, and would receive 80.3% of the estimated decrease. Their estimated average tax decrease would be $1,698 in tax year 2023.

That’s not much for the 73% of Wisconsin tax filers that don’t make 6 figures. And certainly not worth imploding the state’s budget to the point that there would be a multi-billion dollar structural deficit in 2 years.

Under the tax cut that Evers allowed to become law, those sub-$100K filers still get some relief, but the richer Wisconsinites don’t get the windfall that they WisGOP would have given them.

--Filers with Wisconsin AGI under $100,000 represent 72.8% of all filers with a tax decrease, and receive 61.7% of the estimated decrease. Their estimated average tax decrease is $31 in tax year 2023.

--Filers with Wisconsin AGI of $100,000 or more represent 27.2% of all filers with a tax decrease, and receive 38.3% of the estimated decrease. Their estimated average tax decrease is $51 in tax year 2023.

And even that extra context doesn’t tell it all. More than 2/5 of tax filers in Wisconsin have incomes of $50,000 or below, and for them, Evers’ vetoes don’t change much at all. Most taxpayers making under $20,000 won’t see any decrease in their income taxes (because they have zero state tax liability), and only once the $40,000 to $50,000 level hits does the difference between the two tax cuts start to meaningfully grow.

I also want to clear up some confusing reporting that even I don’t always drill down and explain well enough. We need to separate what we usually associate as “income” (how much you make in wages, investments and other types of money-making) with taxable income. Because in Wisconsin, those can be quite different numbers for a lot of people.

So if you’re single and make $12,760 or married and make a combined $23,620, your taxable income is ZERO. If you’re above that level, also subtract $700 for each individual or dependent exemption, and another $250 if you’re over 65 years of age. Only if you have any income remaining after that do you even start paying Wisconsin income taxes.

This means that single Wisconsinites making $38,000 and married couples making $55,000 won’t be affected at all by Governor Evers’ vetoes of the highest tax brackets – they weren’t in those tax brackets. The handful of dollars back are better than nothing, but you know what is likely more important, especially at this lower income levels? Better wages, a higher quality of life, adequate social services, and more access to health care and child care.

I do think a bigger conversation is there to be had regarding Evers’ veto of the GOP’s elimination of the 3rd tax bracket, which would have reduced that tax rate from 5.3% to 4.4%. That’s quite a drop, and would have been something that could have saved hundreds to a few thousand dollars for a lot of Wisconsin families on top of the $55 or so they’re going to get with what Evers signed into law.

But also notice the wide range of taxable incomes that happen within the 5.3% tax bracket that WisGOP wanted to collapse.

Here's a breakdown of that income tax cut--it would collapse the state's 4 brackets down to 3. pic.twitter.com/VD5v77elai

— Will Kenneally (@willkenneally) June 22, 2023

And when we're talking about actual (not "taxable") income in the 4.65% (now 4.4%) tax bracket, it's really $38K for singles and $55K or so for married couples. That's a very different existence vs a single filer making $300K or a married couple that pulls down $400K. Maybe we should be have a tax structure that deals with that reality, and split up this tax bracket. The current federal tax brackets have a break point at $182,100 for single filers, and that seems like a logical place to me.

Using the same ratio that currently exists between single and married joint filers in Wisconsin, this would place the joint filer break point somewhere around $242,000 (some of this disparity is made up with the $480 married couple credit for two-earner couples). If you’re Governor Evers, why not offer a compromise where the 4.4% income tax rate now goes all the way to $182K/$242K? The LFB already estimated a slightly smaller expansion of the 4.65% bracket to have a price tag of just over $1.04 billion for this budget, so cutting the 5.3% bracket to 4.4% for incomes below $182K/$242K might total $1.4 billion, or about $700 million a year (that’s my very rough estimate, but hey, let’s try it and find out!).

And the richest Wisconsinites would also get in on that tax cut, just like they did when the 2nd-highest tax bracket was cut from 6.27% to 5.3% in the last state budget.

If WisGOPs turn that down, it pretty much wrecks their (already-weak) talking point about how “Evers/Dems didn’t want to cut taxes for middle-income everyday Wisconsinites.” Seems like a good way to go, if you ask me.

If Evers wants to hang onto the $3.5 billion that’s projected to be in the state’s bank account for this budget, and see what things look like in early 2024 with new revenue estimates, I think that can work as well. At that time, Evers could resurrect his early 2022 idea of giving a one-time $150 rebate for each individual/dependent exemption that a Wisconsinite claims. That was estimated to cost $816.2 million at the time, and would likely be a similar amount today.

And with new maps possibly in place in early 2024, maybe there would be enough WisGOPs willing to stop playing games, and take the smaller tax cut package that gives benefits to all Wisconsinites. In the process, they might look like someone other than clueless puppets of oligarchs, whose only answer on fiscal policy is to go back to the same failed trickle-down BS that hasn’t delivered for decades, and stop funding services and public goods that Wisconsinites want and depend upon.