Federal budget update - still nothing close to decided

Not that this should surprise anyone, but when Republicans say their budget plans don't cut Medicaid, they are claiming something that is literally impossible. The Congressional Budget Office (CBO) confirmed it this week (read the report here if you want).

Here is CBO confirming the obvious. To meet House budget resolution's target that Energy and Commerce Committee make at least $880 billion in mandatory spending cuts and Medicare is excluded, deep #Medicaid cuts are absolutely necessary as there isn't much other spending. www.cbo.gov/publication/...

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— Edwin Park (@edwincpark.bsky.social) March 5, 2025 at 4:24 PM

And the Wisconsin Medicaid Coaliton gave a quick summary of what those numbers translate to.

The CBO analysis finds the committee has only $581 Billion in spending that is not Medicaid or Medicare. Congressional leadership has long promised no cuts to Medicare which would mean a minimum of $299 Billion in cuts to Medicaid, and only if it made deep cuts to other safety net programs. In fact, eliminating every program besides safety net programs only adds up to $135 Billion.

Last week the U.S. House of Representatives passed a Budget Resolution that commits the House to $2 Trillion in cuts, with at least $880 Billion in cuts assigned to committee covering Medicaid. Based on previous proposals from House Budget Committee Republican leadership, the $880 Billion in cuts are widely anticipated to come from the Medicaid program.

Remember that what passed the House wasn’t any type of specifics, but an outline of a budget with total numbers, and the committees that would figure out the details. If the Senate were to agree to this budget resolution (which they haven’t yet), then we’d have to get into the actual programs and specific programs that get cut to make the US budget match up with those numbers, or at least the same amount of deficit.

As a reminder, here are the required changes in all the committees to match up to the budget resolution of $4.5 trillion in tax cuts over the next 10 years.

So, each committee will write legislation that adheres to the instructions set in the budget resolution. Here's what the House budget resolution calls for:

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— Bobby Kogan (@bbkogan.bsky.social) February 25, 2025 at 7:22 PM

The Senate passed its own budget resolution in February that would have increased spending on macho Trumpian stuff like border security and defense, and planned to wait until later to do the taxing and budget cuts part. But it now seems that they will try to jam everything into one mess of a bill, although any Senate outline that gets revealed won’t come out for a while.

Senate Republicans adopted a budget reflecting their desired, two-bill strategy, which would have put the tax changes in a separate bill later this year. They are now switching to the one-bill track, but not before they address necessary changes to the House product to pass muster with their members.

The Senate Finance Committee, Thune noted, has quietly been socializing ideas with Senate Republicans on the tax piece and Senate Republicans are expected to talk about the House budget during their own closed-door lunches this week. It will mark the first chance leadership will have to take the temperature of the whole group at once.

Senate GOP leadership staff also briefed senior Senate Republican staffers during a meeting on Monday, indicating that they were still in the very early stages of ironing out a deal on the House budget resolution. Senate Republicans hold multiple staff meetings, which are run by leadership offices, at the start of every week.

While Senate Republicans grapple privately with the House budget resolution, Senate Republicans are expected to focus floor activity next week on a much closer deadline: funding the government.

Oh yeah, there’s that too!

The government shutdown deadline is looming for a week from Friday, and deals with the current year budget, to allow spending for the next 6 1/2 months. It is not the 2026 budget that would have the Medicaid cuts and GOP's tax giveaways in it. While House Speaker Mike Johnson says he plans for a vote on Tuesday to avoid a shutdown, let’s see if that actually happens.

If not, it could quite a different case of March Madness up on Capitol Hill next week. And we'd better not see one Dem vote for anything put up by the GOP until the unauthorized dweebs at DOGE and Elon Musk are driven out of DC, because otherwise we can't guarantee that our tax dollars will go anywhere other than the pockets of the crooks getting 6 figures to make things more inefficient in DC, and to screw things up for everyday Americans.

Manufacturing struggles to start 2025, and that's before any tariffs

We had another day of concerning economic news for America. Even though the Manufacturing Index from the Institute of Supply Management (ISM) showed expansion for the 2nd straight month, it was considered a disappointing. That,along with other Trumpian stpudity,caused the DOW Jones Industrial Average to give up all of its 600+ point gain from Friday.

Timothy Fiore chairs ISM's Manufacturing Business Survey Committee, and his notes are ominous.

…Demand weakened, while output stabilized and inputs, for the first time in several months, contributed to PMI® growth. Indications that demand weakened include: the (1) New Orders Index dropped into contraction territory, (2) New Export Orders Index continued expanding, but at a slower rate, (3) Backlog of Orders Index continued in contraction, but moved upward, and (4) Customers’ Inventories Index moved further into ‘too low’ territory. Output (measured by the Production and Employment indexes) was stable. Factory output marginally expanded compared to January, indicating that panelists’ companies are being cautious about ramping up output in the face of economic headwinds. The Employment Index moved back into contraction, as panelists’ companies continued to release workers. More companies cited ‘attriting down’ as the best process, with destaffing not as urgent as it was in the second half of 2024. Inputs — defined as supplier deliveries, inventories, prices and imports — revealed the first signs of supplier difficulties due to some pull-forward deliveries and discussions about who will pay for tariffs. Inventories recovered somewhat as a result.

Then you go inside the numbers for both February and for January, and it seems evident that a one-time pre-tariff bump in orders from January has gone away, and that manufacturing suppliers and businesses are raising prices even before the tariffs are put in place.

The data complements Friday’s report that told us the dollar amount of imported goods went up by nearly $35 billion in January compared to December (11.9%), including a $22 billion increase in industrial supplies and a $6 billion increase in consumer goods. That spiked the trade deficit in goods by more than 25%, and caused the Atlanta Fed to project a decline in economic growth for the first quarter of Trump Presidency 2.0. There also was a sizable increase in new orders for manufactured goods for January. But that increase was almost entirely due to a jump in nondefense aircraft and parts, and that sector also is the cause behind a large jump in unfilled orders in manufacturing. That overall increase in new orders nearly reversed monthly declines of 1.8% in December and 2.0% in November.

However, that same report has a significant 2.5% decline in new orders for motor vehicles and parts in January. It was the 4th consecutive month that new car and parts orders have gone down, and by (seasonally adjusted) dollar amounts, it's the lowest in 2 ½ years. That's a significant turnaround from the end of 2024, where cars and auto parts accounted for nearly 1/5 of the country’s GDP growth of 2.3%.

And sales of cars in America were even worse, as inflation-adjusted auto sales declined by 6% in January. It was a key reason behind a surprising 0.5% drop in inflation-adjusted consumer spending for that month, which was the other reason we saw projections of economic growth falling on Friday.

Again, these worrying numbers in January happened before tariffs were imposed. And Pras Submramanian of Yahoo Finance mentions that the price tag will be noticeable.

The Anderson Economic Group (AEG) found that vehicles like EV crossovers could have price hikes of over $12,000 depending on the vehicle if proposed tariffs of 25% go into effect on Canadian and Mexican imports. According to news reports, Trump is expected to decide on tariff levels today.

The tariffs don't just affect vehicles imported from those countries, but also parts that cross over the border many times during the production process, adding to additional tariff costs. The costs would almost all be passed on to US buyers, the study said.

Other popular vehicles, like a standard, gas-powered crossover, could see hikes of at least $3,500, while pickup trucks — a staple of working-class Americans and small business owners — could see costs jump as much as $8,000 due to the tariff effect.

Full-size SUVs could see costs rise by $9,000, and small cars could see a hike of $6,200.

With all of these imports coming into the country, and the threat of tariffs raising prices, it’s hard to see where consumer demand rebounds for these items any time in the near future. Sure, January has volatile numbers due to seasonality. But weak numbers for February and March might put things on a point of no return.

Given the huge amount of front-running of orders, imports and inventory, a lack of demand for manufactured goods should cause cutbacks in both production and jobs. And that would mean even more rough times for American manufacturing after 3 years of stagnation and/or decline in the sector, which started with the Federal Reserve raising interest rates in early 2022.

A Bad Friday for US economic reports

We now have more proof that the economy hit the skids in January, with consumer spending going down, even as Americans got a solid starting-year boost in their wallets.

The Federal Reserve's preferred inflation gauge eased modestly last month, data indicated Friday, but personal spending figures showed one of the biggest pullbacks in three years, suggesting further weakness in the world's biggest economy….

The BEA's headline PCE inflation index quickened to an annual rate of 2.5%, matching Wall Street's estimate and slightly below the 2.6% pace recorded in December. The BEA said prices rose 0.3% on the month, following a 0.3% reading in December.

The BEA also noted that personal incomes for January rose 0.9%, more than double Wall Street's estimate and the 0.3% forecast, while spending slumped 0.2% compared with the 0.7% advance in the prior month.

A slowdown in consumer spending, which was also evident in the Commerce Department's January reading of retail sales, is crucial for an economy that relies on the services sector for around two-thirds of its growth.

An even bigger drag on growth came with another report on Friday, which showed a massive boost in imports ahead of Trump taking office, which led to a big jump in the trade deficit for goods.

The U.S. trade deficit in goods widened sharply in January, most likely as businesses front-loaded imports ahead of tariffs, potentially positioning trade to be a drag on economic growth in the first quarter.

The goods trade gap surged 25.6% to $153.3 billion last month, the Commerce Department's Census Bureau said on Friday. Goods imports vaulted 11.9% to $325.4 billion….

On Thursday, Trump said a 25% tariff on Mexican and Canadian goods would take effect on March 4, after being delayed for a month, along with an extra 10% duty on Chinese imports, on top of 10% already imposed. Other duties aimed at imported steel, aluminum and motor vehicles will either soon go into effect or are in fast-track development.

Looking at the report that goes over the trade in goods, it looks like the biggest front-running was done in industrial supplies (up nearly 33% in January vs December!), but there was also a $4 billion increase in imported capital goods, and nearly $6 billion more in consumer goods.

That huge jump in imports without a corresponding increase in exports also subtracts from economic growth, and combined with January’s drop in consumer spending that we’ve now seen for both retail sales and this spending and income report, and the Atlanta Fed had a stunning change in how things look for Q1 so far.

Sure, a lot of this is based on the trade imbalance deducting 3.7% from the GDP totals. But the Atlanta Fed’s estimate for consumer spending growth’s boost to the economy has gone down by more than 2/3 as data has come in throughout February. And this January data was before the Trump/Musk layoffs and chaos hit the federal government and its contractors.

So as March dawns, it seems unlikely that the economy is doing much to reverse the downward track that it was on in the first month of 2025. If we get honest data in the coming weeks that shows February was as bad as January (that’s a definite if with this crew) , when do we start seeing demands to do something about a coming recession? And for Trump/GOPs to pay an increasing price for the reckless austerity and trade policy that upended what was a solidly growing economy in late 2024.

And oh yeah, have I mentioned that the government is slated to shut down with the debt ceiling being breached in 2 weeks? GOOD TIMES!

Medicaid stuff and what it might do to Wisconsin's budget. And Wisconsinites

I wanted to riff a bit about where we are at with Medicaid, both as part of the discussions around GOP Tax Scam 2.0, and in how this might affect our state's budget.

You may have heard that the GOPs in the House were able to cobble together a budget bill yesterday, squeaking it through without another vote to spare. I heard some people take on an attitude of "Medicaid is now doomed!" following that vote, and that's not close to true. As Bobby Kogan of the Center for American Progress tells us, what was voted on yesterday was an OUTLINE of a budget, and there are plenty of steps left.

So, the next step is for the House and Senate to agree to an identical budget resolution. The Senate passed a very different version. It called for the same SNAP cuts but much smaller Medicaid cuts - and no tax cuts. This is the next place where we can stop them.

— Bobby Kogan (@bbkogan.bsky.social) February 25, 2025 at 7:22 PM

If we fail, then after that, committees can begin writing legislation. Usually the House goes first. If taxes are involved, the House must go first. At least one chamber needs to go through the full committee markup. In this thread, I'm going to assume that's the House.

— Bobby Kogan (@bbkogan.bsky.social) February 25, 2025 at 7:22 PM

So, each committee will write legislation that adheres to the instructions set in the budget resolution. Here's what the House budget resolution calls for:

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— Bobby Kogan (@bbkogan.bsky.social) February 25, 2025 at 7:22 PM

You'll notice that there aren't any specifics besides what committee adds or reduces spending, or in what way the Ways and Means Committee would cut taxes by up to $4.5 trillion over 10 years.

It's that Energy and Commerce item of $880 billion in cuts where Medicaid comes in, since that is where Medicaid funding is determined. Which led to this pathetic attempt at spin by GOP House leadership last night.

Upcoming Senate debate notwithstanding, it is absolutely WILD that Speaker Johnson said "Do a word search… it doesn't even mention Medicaid in the bill" and Steve Scalise said "This bill doesn't even mention the word Medicaid a single time" about a budget resolution requiring E&C to cut $880B

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— Adrianna McIntyre (@adrianna.bsky.social) February 25, 2025 at 7:37 PM

It is literally impossible to get $880 billion in savings over 10 years from that committee without deep cuts to Medicaid. That's not a liberal take, it's MATH.

So now this budget resolution heads to the US Senate, and the one Wisconsin US Senator that does actual work had an event in Milwaukee this week to discuss the potential Medicaid cuts.

Check out this article from FDL Reporter: Sen. Baldwin, Democrats raise alarm about potential cuts to BadgerCare Plus, other Medicaid programs www.fdlreporter.com/story/news/2...

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— dampman.bsky.social (@dampman.bsky.social) February 24, 2025 at 6:25 PM

"Congressional Republicans are ripping away health care from our most vulnerable to fund tax breaks for their wealthy friends," Baldwin said in a press conference last week with other Democrats. "Cuts of this size will endanger the health and lives of millions of Americans….

"In Wisconsin, about one in five residents are covered by Medicaid in some form. Last fiscal year, close to 1 million people, more than half of them children, were covered by BadgerCare Plus, the state's largest Medicaid program, in an average month. Hundreds of thousands more, including low-income seniors and disabled people, were covered by other Medicaid programs, such as Family Care and the Katie Beckett program.

Together, the programs in Wisconsin cost more than $12 billion to run each year. Federal taxpayers pick up more than half of Wisconsin's Medicaid expenses. For most Medicaid services, for every 40 cents in state dollars spent, the federal government pays 60 cents.

And that's an amount that would go up Back in September, the Wisconsin Department of Health Services (DHS) said that even if Medicaid wasn’t expanded in the state, there was still expected to be an increase in Federal funding of over $1.73 billion in this biennium, and total FED funding of $16.85 billion overall. Governor Evers’ Administration later estimated the FED increase would be even higher, at $2.65 billion. That’s because of an expectation of increased costs of services and higher enrollments over the next two years (in what was estimated to be a growing economy, mind you).

In addition, Evers’ budget asks for Medicaid expansion under the Affordable Care Act, which would increase FED coverage of costs by $2.51 billion, while reducing the share of state tax dollars by more than $1.9 billion (costs are higher in the program overall because the number of Wisconsinites eligible for Medicaid would go up).

Those numbers were based on the current laws of 2024, with Biden-era incentives and extra coverage for Medicaid expansion staying on. Now throw that into reverse, where not only do the Federal incentives for Medicaid expansion and increased coverage not get used, but also where the Feds cover less of any expense associated with the Medicaid programs that currently exist (a likely way that Trump/GOP would find “savings” to pay for their tax cuts to the rich).

If more state tax dollars are going into BadgerCare services, the $4.3 billion that we are slated to have in the bank on July 1 will go away quickly.

Another aspect to possible GOP health care "savings" was outlined in a different Journal-Sentinel story on how Trump/GOP wants to cut funds that help Americans figure out their options under Medicaid and other health care programs.

This month, the Centers for Medicare and Medicaid Services said it would cut funding nationwide for navigator programs, which help enroll people in health coverage, to $10 million, a drop of about 90%.

"A cut of this size will impact our ability to provide all the services and all the information in as timely a way as possible," said Allison Espeseth, director of Covering Wisconsin, the navigator program for the state.

Federal funding makes up about three-quarters of Covering Wisconsin's budget, Espeseth said. The cuts would occur starting in its next budget cycle in late August, she said….

Navigators differ from insurance brokers in key ways. Brokers, who rely on commissions, were far less likely to help consumers sign up for Medicaid, the publicly-funded insurance program for low-income people, or for the Children's Health Insurance Program, also known as CHIP, according to a 2022 survey by the health policy research group KFF.

Last year, Covering Wisconsin helped enroll more than 9,600 people in marketplace coverage or in Medicaid, Espeseth said. More broadly, the agency assisted around 60,000 people with questions or other issues that year, she said.

And those navigators have been especially busy in recent years, as Wisconsinites were de-enrolled from Medicaid after COVID-era laws expired, which led many people to seek health care through the Obamacare exchanges. There also was a boost given through the Inflation Reduction Act that was passed by a Dem-run Congress and signed by President Biden in 2022, which expanded tax credits to people who got their coverage on the exchanges.

As the Legislative Fiscal Bureau reports, Wisconsin had a record number of sign-ups for coverage under the Obamacare exchanges in 2024, with more likely to have signed up in this year.

While this may not be directly related to Medicaid cuts, those enhanced subsidies for ACA exchange policies need to be renewed by the end of the year. And the Kaiser Family Foundation went into what would happen if expanded subsidies are allowed to expire on January 1.

If the enhanced subsidies expire, monthly premium payments for the vast majority of Marketplace enrollees will increase sharply starting January 1, 2026. Among subsidized enrollees living in states that use Healthcare.gov (where data are available), premium payments would have been an average of 93% higher in 2024 without the enhanced tax credits. (Wisconsin is one of those states). If these enhanced subsidies expire, the Congressional Budget Office (CBO) projects that there will be an average of 3.8 million more uninsured people each year. Unsubsidized premiums will also likely rise as healthier enrollees drop their coverage. While some state-based Marketplaces offer additional premium financial assistance for certain enrollees, the amount of and availability of these state subsidies would not be enough to fully replace the federal enhanced subsidies….

The expiration of the enhanced premium tax credits would mean that people with incomes over four times the poverty level are no longer eligible for financial assistance. Prior to the availability of enhanced subsidies, ACA Marketplace premium assistance eligibility capped at 400% of poverty (which is $60,240 for a single person or $81,760 for a couple in 2025). If enhanced subsidies expire, Marketplace enrollees making just above 400% of poverty will encounter the “subsidy cliff” and would face the full price of a Marketplace plan. If the enhanced subsidies expire, a 60-year-old couple making $82,000 (401% of poverty) would see their premium payment for the benchmark silver plan, on average, at least double in the vast majority of congressional districts. The benchmark silver premium for a 60-year-old couple at this income would triple or more, on average, in 328 congressional districts.

A 40-year-old Marketplace enrollee in the contiguous U.S. making $31,000 (206% of poverty) would see monthly premium payments in 2025 rise by $95 (a 165% increase) from $58 to $153. (Alaska and Hawaii have different poverty guidelines). Nationally, there are 75 congressional districts where at least 10% of the population is enrolled in the Marketplace. For a 40-year-old making $31,000, premium payments would at least double on average in all 75 districts. 62 of these districts are in Florida, Georgia and Texas. 38 of these 62 districts are represented by Republicans while 24 are represented by Democrats.

Under the enhanced phase out caps, Marketplace enrollees with incomes up to 150% of poverty currently pay zero (or near zero) dollars for a benchmark silver plan. Should the enhanced subsidies expire, enrollees in this income group will be on the hook for some of the cost of their premiums if they want to keep a silver plan. Before the enhanced subsidies went into effect, Marketplace enrollees at this income group paid about 2-4% of their income for a benchmark plan. A sizeable portion of the Marketplace population benefits from zero dollar premiums, with 42% of HealthCare.gov enrollees in 2024 paying nothing for Marketplace coverage (up from 14% of HealthCare.gov enrollees in 2021).

That increase in out-of-pocket costs would be a hell of a sticker shock for a lot of people as 2026 begins, and Trump/GOPs would rightfully be blamed for it, especially if those "savings" are done to lower taxes for the rich.

And the more that Trump/GOP would reduce Federal funds to pay for health care services, it reduces the funds available for any kind of tax cuts in Wisconsin. That's true whether you're talking about the extra funding to allow property tax cuts like Gov Evers wants in his budget, or the general income tax cuts that Wisconsin Republicans seem to support. So maybe WisGOP’s state legislators should try to get in touch with their Congressional counterparts and tell them that it isn’t a good idea to mess with Medicaid at this point, for multiple reasons. Or else they’ll all be out of power in 2027 (well, even more likely to lose power than they already are).

Econ reports and stock market shows people already losing faith in Trump 2.0

Friday was a rough day for those of us that follow data on the US economy. Let's start with the housing market, which showed a drop in sales for January.

Newsletter: Existing-Home Sales Decreased to 4.08 million SAAR in January calculatedrisk.substack.com/p/nar-existi... It is likely sales will be down year-over-year in February with a combination of slightly higher mortgage rates, and due to a bump up in sales last year in February 2024.

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— Bill McBride (@calculatedrisk.bsky.social) February 21, 2025 at 10:06 AM

And the 30-year mortgage is still around 7%, keeping housing unaffordable for a lot of Americans. Not good there, either.

We also got a monthly checkin for the overall economy on Friday. And that showed a change in direction....downward.

That’s the first contraction in Services PMI since January 2023. @cnbc.com

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— Carl Quintanilla (@carlquintanilla.bsky.social) February 21, 2025 at 9:03 AM

Ugh. Although if you want a positive on it, at least the manufacturing index wasn't contracting like it was for the 2nd half of 2024! Maybe.

Oh, we also got an update on how US consumers are feeling? Well given that consumer spending was strong to end 2024, and wage growth is continuing, that'll give us a lift, right?

US consumer sentiment plunges over tariff and inflation fears:

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— CNN (@cnn.com) February 21, 2025 at 11:44 AM

The University of Michigan’s latest survey, released Friday, showed that US consumer sentiment declined in February for the second consecutive month, according to a final reading, down by a steep 10% from January. That was double the decline initially reported earlier this month. It’s a stunning about-face after American consumers and businesses grew hopeful (briefly) about the economy’s future following Trump’s election in November. The latest decline in consumer sentiment was driven by worries over Trump’s tariffs potentially jacking up prices.

A new CNN poll released Thursday similarly showed pessimism on the rise because of prices: Nearly two thirds of US adults nationwide, 62%, said they feel Trump’s isn’t doing enough to address inflation. The Michigan survey showed that Americans are now fearful of higher inflation on the horizon.

On the campaign trail, Trump promised to “bring down prices, starting on Day One.” Clearly, that didn’t happen. In January, consumer prices climbed at the fastest monthly pace since August 2023, increasing 0.5% from December.

And that was despite delusional Republicans not having their consumer sentiment fall at all. So imagine how bad it looks in the 60% of America that isn't in a Bubble of BS?

How did the stock market react to all this? Like it was realizing that things are already getting bad under Trump/GOP, and wasn't going to get better any time soon.

Why is the stock market down today? S&P 500 and Dow slide in worst day of 2025. #news #worldnews

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— News HQ (@newshq.bsky.social) February 21, 2025 at 9:55 PM

Stocks tumbled on Friday after weaker-than-expected economic reports suggested that President Trump's policies could be impacting U.S. business activity, while consumer sentiment dropped to a 15-month low.

Both the S&P 500 and the Dow Jones Industrial Average slumped 1.7% on Friday, marking their worst one-day declines since December 18, according to financial data firm FactSet. The tech-heavy Nasdaq composite index dropped 2.2%.

A preliminary report from S&P Global found U.S. business activity is nearing stall-speed, with growth decelerating to a 17-month low. Activity for U.S. services businesses unexpectedly shrank, and many businesses in the survey reported slumping optimism because of worries about policies from the Trump administration, including the potential for new tariffs and domestic spending cuts.

And that loss of nearly 750 points in the DOW came after a drop of more than 430 points on Thursday. Although to be fair, the S&P 500 is basically unchanged in the 1 month since Trump took office, so what happened at the end of the last week doesn't show a longer-term trend AT THIS POINT.

But if there's another month of disappointing retail sales, and if Elon Musk and Donald Trump's chainsawing of federal agencies starts showing up in higher unemployment numbers? And if we get a bad report at the end of this week on US consumer spending and incomes? Then the recession may well be in motion, and you'll see more people realizing that having a bunch of bro-ligarchs and Fox News talking heads in charge isn't a way to run an economy. Or a country.

A few taxing budgetary thoughts

Been busy with Badger hoops and real life, but yes I am aware that our Governor just put out a new 2-year budget for Wisconsin. Lots to look at, and even more than a typical budget, with over 1900 pages in the actual bill.

Yeah, I'm not going to read all that, so give me the 167-page Budget in Brief instead. And I'm going to concentrate on the tax side of the bill for this segment - don't worry there will be plenty of spending choices to discuss soon enough.

The Evers Administration cites a recent Wisconsin Policy Forum report that says Wisconsin had its state taxes at their lowest % of income since at least 1970, cited another Policy Forum report that says Wisconsin ranked 35th in state and local tax burden as % of income in 2022 (the most recent year measured). This leads the Evers Admin to proclaim in the Budget in Brief: "The days of Wisconsin being a high-tax state are over."

Much of the tax relief in this budget would come in the form of lower property taxes. This includes something I've wanted to see for a while - sending more state money to public schools and local governments and cutting property taxes in the process.

That K-12 aid is how much more is going to schools beyond the higher per-student revenue limits, and the county and municipal property tax aid is an incentive where places that freeze or reduce their property tax levies get a bonus payment equal to 3% of that levy. Unfortunately, I do not see a similar incentive to encourage communities to get rid of their local wheel taxes (although that wouldn't be a bad thing to run on in 2026. Just saying...).

The Homestead Credit expansion and indexing the income levels for inflation is something Evers has called for in the past, and Republicans have refused to go along every time. And a result, less than half the number of Wisconsinites get the Homestead Credit compared to how many got it when Scott Walker and the Wisconsin GOP took power in 2011. The Evers Administration reiterated this with a telling chart that shows how many fewer Homesteaders there have been as inflation-indexed Social Security payments have increased.

As I’ve mentioned before, I’m not a big fan of using the School Levy Tax Credit in general, because it gives bigger benefits to people who own higher-value properties, and because that money doesn’t go into the classroom. It’s a credit that has gone up exponentially in the last 15 years, which makes it seem like we’re putting more money into K-12 schools, but it doesn’t do anything to improve education. And its growth is in sharp contrast to the nearly-universal First Dollar Credit, which isn't really any larger than it was in the early 2010s.

On the income tax side, there are two main tax cuts from Governor Evers that would give most of their benefits to Wisconsin's lower-class and middle-class taxpayers.

The largest of these proposals is an expansion of the personal exemption from $700 to $1,200 for each exemption claimed by a filer. For a median income family of four, this means that an additional $2,000 of their income will no longer be subject to the Wisconsin individual income tax, providing a savings of just over $100 annually for that family. Overall tax relief for all filers will total $112.4 million in fiscal year 2025-26 and $113.5 million in fiscal year 2026-27.

To provide additional tax relief to Wisconsin working class families with children, the Governor recommends greatly increasing Wisconsin's supplement to the federal Earned Income Tax Credit (EITC) for working families with one or two children. Targeted tax relief through EITC has been shown to be effective in reducing child poverty, yet Wisconsin's credit for those with one or two children lags most other states and should be increased. Beginning with tax year 2025, the Governor's budget will increase the percentage of the federal credit that filers with one dependent child may claim from 4 percent to 16 percent. For filers with two children, the rate will increase from 11 percent to 25 percent. These increases in the proven EITC program will encourage work while providing needed relief to low- and moderate-income families with children. Under the Governor's budget, over 140,000 filers with children will receive $58.4 million in fiscal year 2025-26 and $58.5 million in fiscal year 2026-27. Average tax relief for these taxpayers will be over $400 annually.

There's also an tax exemption for income on tips that is estimated to be around $7 million a year, which is defined as tips received "by an employee from the customers of the employee's employer." And just like with Trump's call to do so at the federal level, I think that's such an expansive definition of "tips" that it could get abused to hell, and I don't like it.

While there over $4 billion in the state's bank to start this biennium, most of the property tax decreases will show up as higher expenditures at the state level. So to help pay for those property tax reductions and a sizable increase in spending on state services and other needs, Evers wants to raise taxes on the richest Wisconsinites. This includes a new millionaires’ tax bracket that goes above the current top rate of 7.65%.

The new top bracket rate of 9.80 percent, will only apply to those with taxable income of $1 million or greater. This change will help pay for the Governor's property tax relief proposals as well as additional relief for working families. Wisconsin's top bracket will remain just below our neighbor Minnesota's top tax rate of 9.85 percent, but the high earnings threshold is unlike Minnesota, which imposes its highest bracket on $330,410 in taxable income for a married couple and $198,630 for a single filer. The new Wisconsin tax bracket would affect only approximately 0.3 percent of Wisconsin filers and raise additional tax revenue of $719.3 million in fiscal year 2025-26 and $578.4 million in fiscal year 2026-27.

While there will be those who claim that increasing Wisconsin's top marginal rate will put the state at a competitive disadvantage, the example of Minnesota is instructive in disproving this notion. Despite its supposedly uncompetitive top marginal rate, Minnesota continues to enjoy a large per capita income premium over its lower tax peer states, such as Michigan, Indiana, and Wisconsin.

Interesting that the Evers Admin brings up our neighbors to the west, as the recently released Quarterly Census of Employment and Wages says Minnesota had the fastest job and wage growth in the Midwest between Sept 2023 and Sept 2024, and had average weekly wages that were more than $200 above both Wisconsin and Indiana. But Robbin’ Vos says we don’t want to go in the direction of them, noooo.

Evers also is repeating his request to limit the increasingly costly Manufacturing and Agriculture tax credit to the first $300,000 in activity, and in limiting a currently-existing cut in capital gains taxes to single Wisconsinites that make $400,000 or less and married couples that make less than $533,000. Those 2 moves alone would bring in another $660 million in the next fiscal year.

Put it together, and it means that there is a sizable increase in both tax revenues and spending in this budget. Compared to where the Evers Admin's estimates and budget requests from November had us, the state is now slated to tax and spend there is $2 billion more in both categories next year under the new Evers budget, and while the expenditure gap is mostly closed in FY 2027, the Evers Admin estimates that they'd collect another $1.5 billion in taxes under the new budget to close the gap between taxing and spending.

Is it a realistic budget? Not especially, although it gives a good insight on the ability to do a lot of things that Republicans would claim we are incapable of affording these days. And Evers' budget would be a clear shift in tax burden, as Wisconsin homeowners would be likely to pay less in property taxes, lower and middle-income people would have a decent income tax cut, while the richest Wisconsinites would pay more in income taxes.

And as JR Ross of WisPolitics noted in this week's episode of "Rewind" on Wisconsin Eye, it is interesting that we saw Governor Evers' tax plans before the GOPs in the Legislature came out with their plans to give away the billions that we have in the state's bank account. That was NOT what Robbin' Vos and company were saying last month, and it tells me that the narrower margins from fair maps are keeping the WisGOPs from being able to have enough members to sign on to any stupid idea that is out there.

I'm sure they aren't going to give Evers what he wants, but let's see if the GOPs realize that some kind of property tax relief and school funding increases are going to have to happen, or else their reign over the Capitol has a sizable chance of ending with the next election.

Drop in retail sales and higher prices don't mean recession yet. But if it keeps happening...

In addition to the horrendous HR work that Elon Musk's crew is pulling in DC, there was bad news on the overall economy released on Friday. Retail sales had a surprising loss for January, not a good sign when 2/3 of this country's economy is based on consumer spending.

American shoppers pulled back on their spending last month for the first time since August as stubborn inflation continued to bite and harsh weather curbed economic activity.

Retail sales plunged 0.9% in January from the prior month, the Commerce Department said Friday. That’s down sharply from December’s upwardly revised 0.7% gain and well below economists’ expectations of a 0.4% decline. The figures are adjusted for seasonal swings but not inflation.

Shoppers reined in their spending across multiple categories last month. Specialty stores and auto dealers were hit hardest, with spending falling 4.6% and 3%, respectively.

I'd quibble with one item there, as retail sales are not adjusted for inflation. So the 0.9% decline is even larger than it seems, given that it came in spite of the 0.5% increase in prices that consumers paid last month.

I will agree with the point that the drop in auto sales skews the picture, as sales beyond autos were only down a little bit after a jump in December. It seems likely that consumers pulled some purchases of autos and other products ahead in November and December as the prospect of tariffs loomed with Trump's inauguration in January.

It also doesn't look like prices are coming down any time soon in this country, as the Producer Price Index followed up a 0.5% increase in December with a 0.4% increase in January. And even more concerning to me is that prices further up the supply chain were rising by more than that.

Some of this might be profiteering to front-run on the tariffs, but it also means that there's nothing in the pipeline that will keep prices from rising in the coming months.

UW-Madison professor Menzie Chinn put a lot of this information together, and while the inflation-enhanced drop in retail sales is concerning for January, it just retraces the growth we saw in the second half of 2024.

Professor Chinn adds that he doesn't think there's any recession happening in this country until jobs start getting lost and income growth slows down.

Oh, did we say job loss?

List of ALL DOGE Layoffs This Week - And Potential Danger krassencast.com/p/list-of-al...

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— Krassensteins (@krassenstein.bsky.social) February 15, 2025 at 8:52 AM

🚨NEWS: Massive layoffs are about to hit the IRS -- around 10,000 employees -- potentially in the middle of filing season. Of particular interest to the DOGE: Cutting IRS enforcement capabilities. -- with @jeffstein.bsky.social + Hannah Natanson

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— Jacob Bogage (@jacobbogage.bsky.social) February 14, 2025 at 2:31 PM

Tribal Organizations Say Trump’s Mass Layoffs Have Life-or-Death Consequences flip.it/ISlLk0 so, despite centuries of law, treaties, contracts & common sense, DOGE categorized anything Native American as “DEI”—& cut off funding for everything… including hospitals, police, fire fighters & schools.

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— Sarah Szalavitz💡 (@dearsarah.bsky.social) February 15, 2025 at 7:23 PM

Seems like if some people slowed their spending for another month or two, whether they are threatened by unauthorized techno-dweebs or because they simply choose to, this country would fall into recession pretty quickly.

We're not there yet, but you can sure see where things are heading.