Thursday, January 24, 2019

Wisconsin's credit card surplus shouldn't be blown on unfunded tax cuts

Republicans in the State Legislature have been claiming that Wisconsin’s finances are great due to decisions made by Scott Walker and the Wisconsin GOP over the last 8 years, and now they want to use extra funds to cut taxes further. Assembly Dem Leader Gordon Hintz gave a proper reminder of where that money came from, and while it's through GOP choices, it's on what they chose NOT to pay for.
“More than 60% of this touted $588.5 million “surplus” my Republican colleagues are talking about is a result of borrowing and raiding money from veterans nursing homes. The reality is that Republicans have spent the second longest economic expansion in U.S. history cutting funding from K12 education and the UW System to pay for tax cuts for the wealthiest in our state.

“Wisconsin’s economy has only grown at half the national rate over the past eight years. There has been no economic miracle in Wisconsin that generated massive surplus revenue. Only borrowing money from future taxpayers and raiding money from veterans’ nursing homes.”

In addition, a January 17, 2019 [Legislative Fiscal Bureau] memo shows that Governor Scott Walker and Legislative Republicans took $48 million from the state’s veterans nursing homes to pay for services instead of using general purpose fund revenue.

$362.3 million of the $588.5 million Republican “surplus” is the result of deferred payments and fund raids.

Now that’s the way you say it, folks. And Rep. Hintz’s statement has the added benefit of being true. Here’s the LFB memo on the debt refinancings that were done from 2011-2016, which avoided payments on more than $314 million that would have otherwise happened in those years. That money will have to be paid off in the coming years.

And the memo on the transfers of extra money from the state’s Veterans Homes updates a multi-year shell game played by the Walker Administration without oversight from the GOP-controlled Legislature. This includes $14.5 million to fill the hole in the Veterans Trust Fund for this Fiscal Year.

WisGOP could have chosen to use tax dollars to pay our debts when they came due, and to put money into long-neglected nursing homes instead of to fill budget holes in other areas. Now, maybe some of that was smart from the perspective of causing the least disruption possible at the time, and as long as the money’s there for the later costs of debt and veterans’ services, it works out.

But let’s not pretend that this mound of cash that we currently have is solely due to fiscal prudence. There’s been a whole lot of credit-card financing and shell games going on as well, and if the musical chairs stop at some point, that money could go away in a hurry, with the debt handcuffing the state for the future.

We should be especially concerned about the party ending after looking at the latest revenue figures from Wisconsin as well as other states. Wisconsin’s income tax revenues fell by nearly 20% in December 2018 compared to December 2017, and as Governing Magazine noted (today), we are far from the only state that saw this type of decline.
State tax collections took a dive in December compared to the same month a year ago. Observers are worried the dip could indicate more uncertain economic times ahead.

Lower income tax collections is the culprit, according to data compiled by Governing of the top 10 most populous states with an income tax and with recent data available. Every state except Indiana saw a December drop compared with a year ago, ranging from -3.4 percent in Ohio to -41 percent in California…

To a large degree, the dive was expected. Thanks to changes to income taxes and deductions under last year's federal tax overhaul, thousands of taxpayers rushed to file income and property taxes in December 2017, creating an abnormal boost in revenue
But the declines of this year were steeper than last year's gains, says Lucy Dadayan, a senior research associate at the Urban Institute. “We might continue seeing weak growth in income tax revenues, particularly in these higher tax states, for the rest of the fiscal year.”
You may remember the rush at the end of 2017 due to the GOP’s Tax Scam, which encouraged pre-payments of state and local taxes because that deduction would be limited for 2018, to the point that there is no reason for many people in Wisconsin and other states to write off those income and property taxes when they file in the next 3 months (you’ve been warned).

With that in mind, and because this will likely lead many Wisconsinites to be writing surprise checks to the IRS, maybe it makes sense to have some of that $588 million lying around to cushion the shock that will hit the state’s finances and economy in the months after that.

The other option would be to invest this available cash in services, quality of life and infrastructure instead of the WisGOP way of blowing it all on an unfunded tax cut and kicking the can down the road. After 7 straight years of bottom-half job growth and a declining labor force in 2018, a new approach beyond “trickle-down hope-and-pray” seems to be in order for Wisconsin.

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