Walker tax gimmicks are far too late, won't help us today, and cost a lot of money

Losing in the polls and after his campaign's racist dog-whistles ended up backfiring, Scott Walker is going to the only “new strategy” he has left, more tax giveaways.

Walker, who has championed holding the line on taxes in past budgets, announced Monday he would create a new tax credit for parents paying for child care and would seek a 50 percent increase in a refundable tax credit for low-income seniors 62 and older — a housing credit that was cut in the most-recent state budget.

The measures accompany a $1,000-per-year credit for college graduates in Wisconsin to help pay off student loans that Walker announced previously. Walker also is proposing again to soften the penalty for married couples receiving a tax credit for the working poor — a measure lawmakers on the Legislature's budget-writing committee rejected….

Walker's increase for a tax credit aimed at helping low-income seniors who own homes would be tied to inflation in future years and would cost $61.8 million in the first year and $72.7 million in the second, according to the Department of Revenue.

Walker also is seeking a new tax credit to cover 20 percent to 35 percent of child care expenses, depending on the income of a parent or guardian. Up to $3,000 of expenses per child may be claimed. ….

The first indication to me that this is nothing but a desperate gimmick is that neither the child care credit or Homestead Credit would go into effect until the 2020 tax year, which means individuals wouldn’t get a dime from these proposals for well over 2 years from now. There’s no immediate relief or plans to immediately deal with the problems going on today, but it makes for a nice talking point for the last 7 weeks of the campaign.

None of Walker’s brand new tax credit ideas had a price tag on the topline numbers of the Wisconsin Department of Revenue’s budget request, but if you dig into the narrative, you can find it. And it’s not a small bit of money.

Let’s start with that child care credit, and recognize the way these credits work today.

A claimant’s allowable expenses generally may not exceed the earned income of the claimant or the claimant’s spouse. Depending on the claimant’s adjusted gross income, the [federal tax] credit may be worth between 20% and 35% of the claimant’s allowable expenses, up to a maximum annual amount of $3,000 if there is one qualifying dependent and up to $6,000 if there are two or more qualifying dependents.

Under current Wisconsin law, individuals may claim an income tax deduction based on their qualifying child and dependent care expenses. The state deduction has the same $3,000 or $6,000 qualifying expenses limitation that applies federally.

Walker’s proposal would
1. Turn that state deduction (of income) into a credit that writes off taxes by a certain amount.
2. Use the federal standard of 20-35% of expenses as the amount of the credit.

The DOR estimates that would triple the amount of write-off for an upper-middle class family with a child in care. Sounds great. What does it cost?

The provision reduces revenue by $52.9 million in fiscal year 2021 and similar amounts annually thereafter.

In other words, this would be $41.3 million less than the $100-per-child bribe Walker and WisGOP pulled this Summer, and do more to deal with the real barrier to work and economic activity that child care costs are. Like many other things with Walker, where was this before you started losing in the polls?

The Homestead Credit expansion is even more of a crass electoral move, as an attempt to get the votes of older people who may be tired of Walker’s act. It’s also an admission of failure, as the Wisconsin Budget Project notes that the Homestead Credit was cut by Walker and WisGOP in the current state budget.

The budget includes several changes to the Homestead Credit, which reduces property taxes for owners and renters with low incomes. The overall effect of the changes to the Homestead Credit will be that individuals with low incomes will pay $10 million more in property taxes during the next two years compared to what they would otherwise pay if no changes were made to the Homestead Credit. The bill ends eligibility for this property tax relief for an estimated 11,400 households who have no earned income.

As mentioned earlier, the Homestead Credit would start with the property tax bills that come out in December 2020, cost $61.8 million in its first year, and eventually grow to $72.7 million.

Another idea deals with preventing a marriage penalty on the Earned Income Tax Credit (EITC) for newly-hitched couples. Right now, the credit phases out at $18,700 for unmarried people, or $24,000 for married couples. In a situation where both individuals make $15,000 (for example), getting married would make both of them ineligible to receive the EITC, as their combined incomes would be $30,000.

So here’s how this “reform” solves that situation.

Allows newly married couples to claim a state EITC equal to the larger of their joint EITC or the amount(s) that they individually claimed in the year prior to marrying. Eligible couples can use this provision for up to three years, allowing time for new households to adjust.

Good idea, and it’s a very small price tag ($1.4 million in 2021, $2.8 mil in 2022, $4.3 mil thereafter). But why only newly-married couples? Why not everyone in these income brackets? And while we’re at it, why not raise the state’s minimum wage past $7.25? Right now, two full-time workers in this situation could make so little that they’d be stuck with the EITC “marriage penalty”, and that seems bad on a lot of levels.

(A quick aside- Isn’t it amazing how Republicans try this “kinder, compassionate” act around election time? It’s almost like they know their past policies haven’t worked out, and that voters don’t buy into RW garbage on the economy. Of course, if the people of this state are stupid enough to keep the Republicans in power after November, Walker and the other WisGOPs will go right back to giving away the state’s resources and treasury to their corporate contributors at the expense of everyone else. )

Let's move on to the “new graduate tax credit”. The idea is that once someone graduates from a Wisconsin-based college or tech school, they get a $1,000 tax credit a year for five years, as long as they stay. And the Wisconsin DOR says the price tag is huge

Based on anticipated graduation and retention rates fo students obtaining post-secondary degrees, the credit will increase costs by approximately, $8M in FY20, $62M in FY21, $114M in FY22, $164 in FY23, $213M in FY24, and $255M in FY25. Given the significant cost in time and money of obtaining a degree, the estimate does not include an adjustment for a significant influx of new graduates.

Wait, so it could be even MORE than this? Given the $2 billion in combined deficits between the General Fund and the Transportation Fund, where are we coming up with the money to pay for this again?

In addition, the new graduate credit wouldn’t affect anyone who graduates college until May 2019, so current graduates from Wisconsin colleges aren’t getting anything out of this, nor are they getting any relief from their student loans, which could have a major effect as to whether they stay in lower-wage Wisconsin, or how much other economic activity they take on.

As you can see, these combined proposals will cost around $178 million for FY 2021. But they hit full force in the 2021-23 budget, and their costs explode to a total that exceeds $531 million.

Add in Foxconn (which is slated to be paying out more than $600 million in that ‘21-‘23 budget) and other Walker tax giveaways, and what kind of public investments are going to be around by 2022-2023? If the roads are a mess, the schools have fallen even further than they already have, and the environment and water quality are even more degraded, it’s going to take a lot more than $1,000 a year to encourage young talent to stick around a state like that.

Lastly, the WEDC out-of-state scam marketing campaign to encourage younger adults to relocate to Wisconsin is back as a budget request. We're already blowing $6.8 million this year on this campaign, and Walker and WEDC want to continue for the next 2 years, at a price tag of $5 million a year.

You know, instead hundreds of millions of dollars in more tax giveaways of money we don't have, I know a better way to make young workers and others want to stay in the state. Booting Governor Dropout out of office, and reinvesting in the schools and quality of life that used to make Wisconsin an attractive place to live in.

Even better, all Wisconsinites will benefit from not having a dopey Dropout Governor and the new investments. This is in stark contrast to Walker's desperate proposals, which are limited to the poll-driven demographics that he’s struggling with, and leaves the rest of us out of the equation. Fair taxation and spending policies that intended to meet the needs of ALL Wisconsinites? What a weird concept!