Evers drops vetoes on GOP tax scheme. Now he needs to stick to it

I was hoping our fair Governor would veto WisGOP’s latest tax scheme, and sure enough, he did on Wednesday. Thank you, Tony.

As he vetoed the GOP’s bill, Governor Evers also indicated he was willing to go along with some of what the GOP had in their multi-part bill, as long as they included his provisions for K-12 education.

Along with upping state aid to schools, Evers’ plan would’ve resulted in a $130 million reduction in property taxes. In vetoing the GOP bill during a ceremony in suburban Milwaukee, Evers said he was willing to work on a compromise with Republican lawmakers.

Evers said he would support legislation with an income tax cut and larger rainy day fund payment, but it must include a property tax cut and increased school funding.

“It’s time for the Republicans to put politics aside so we can do what’s right for our kids, our schools, and of course, our property tax payers,” Evers said. “I’m ready to work across the aisle to get this done, and I’m willing to come to a compromise that works for everyone.”

GOP legislative leaders didn’t immediately respond to a request for comment….

The GOP package, which passed largely along party lines, included reducing income taxes by $247.7 million, paying off $100 million in state debt and sending $44.7 million to local governments to offset lost revenue from an expanded property tax break for businesses.

It’s worth noting that there might be enough money available for both items, because if you look at January’s revenue report, the state is still seeing strong growth.

Revenues, Jan 2019 vs Jan 2020
Income tax (adjusted) +4.9%
Sales and Use tax +7.5%
Corporate tax +168.8% (+$48.7 million)
Excise taxes +11.1%
ADJUSTED TAXES +8.7%

That increase in corporate taxes continues the impressive jump that we’ve seen for over a year now, which the Legislative Fiscal Bureau indicates is due to many businesses becoming “corporations” in order to take advantage of the GOP’s Tax Scam at the federal level. Corporate tax revenues are now up nearly $246 million for Fiscal Year-To-Date 2020 vs FYTD 2019 (+71.3%), and are a main driver behind overall revenues being up 7.5%.

(Side note – if Wisconsin corporations are paying $246 million in additional state taxes, can you imagine what kind of windfall they are pulling from the tax cuts at the Federal level due to redefining their business?)

Then add in the fact that there is likely to be at least $137 million available because Foxconn won’t create the jobs or construction that was promised, and the funding should be there for a $600 million package that would include Evers' K-12 spending and property tax cut, along with some kind of income tax cut.

Now, the obvious risk with any kind of income tax cut is that the economy tanks over the next 18 months, the projected revenue growth fails to materialize, and a budget deficit opens up. I’ll also note that we don’t even know how much Wisconsinites will get from the income tax cuts associated with the state budget, which was signed into law by Governor Evers this Summer. That won't be determined until Wisconsinites file taxes over the next 2 months, as the tax cuts show up in the form of larger refunds vs anything extra in the paycheck (unless you’re enough of a dork to know to adjust your withholdings when Evers signed those tax cuts).

With that it mind, it makes sense for Evers to stick to his guns, and sign nothing unless it includes the K-12 assistance and associated property tax cut. Evers can wait it out until the next session while WisGOPs have to explain to voters why they thought was more important to give a property tax break to businesses instead of to homeowners (which raises property taxes for homeowners), and to continue to throw more money at voucher schools but not to public schools.

Hey WisGOP, why are you playing this game?

It also opens the door for Evers to allow Wisconsinites to get more money into their pockets without having to deal with the gerrymandered WisGOP Legislature. How? Evers can order the Wisconsin Department of Revenue to adjust the withholding tables for Wisconsin income tax to reflect the tax cuts from 2019. It's the same thing Scott Walker pulled in 2014 and if Evers does this in early 2021 when the new Legislature is in session, then Wisconsinites will more money coming in at that time in two forms. One is higher refunds in 2021, and the other is through the adjustment in the withholding tables meaning less is taken out whenever people get paid.

The best part about the "do nothing and adjust withholding tables" option is that Evers doesn’t have to give in to the WisGOP Legislature to do this, but still can appear to be a tax-cutter without tying the hands of the pre-election 2021-23 budget. The advice is worth what you paid it, but given today's veto and the fact that extra money may be solidified after Tax Season ends in the next 3 months, it’s worth gaming out the next steps once that happens.