GOP income tax cut may be well-targeted, but Noah Williams can't convince me it's a good idea

Wanted to take a few moments to discuss the latest "analysis" from Koched-up UW Professor Noah Williams. And I’m sure this will shock you, but Noah thinks that the Wisconsin GOP's income tax cut is a good idea.

Much of the paper reiterates what the Legislative Fiscal Bureau said in its summary of the GOP's tax cut bill – that the income tax cut would give a little bit more of refund to Wisconsinites in the working and middle classes, while phasing out entirely for the upper 10-15% of incomes.

Williams' opinion of the tax cuts is typical Koched-up BS, and I won't relay that here. The more intriguing part of the paper is where he goes into this analysis of Marginal Tax Rates (MTR), showing what an additional dollar of income is really taxed at in Wisconsin. And because of variety of changes in the standard deduction, EITC and other tax credits, and regular income tax rates, Williams says the MTR can be very different based on your income level.

While this is flattened under the GOP's income tax plan, rhere still are notable differences.

How is there a larger MTR for people making lower incomes than richer ones, even with a state that has a progressive income tax structure? Williams says it’s because incentives change at varying levels of Wisconsin Adjusted Gross Income (WAGI).

For WAGI between $31,367 and $36,576, the effective MTR is about 5.74%. The statutory rate of 3.86% is finally effective. The phase-out of the standard deduction raises the rate to about 4.62%. The phase-in of the married couple credit brings it down to about 3.42%. Finally, the phase-out of state EITC raises it to 5.74%.

For WAGI between $36,576 and $40,000, the effective MTR is about 7.16%. Relative to the previous phase, the statutory rate increases from 3.86% to 5.04%. The phase-out of the standard deduction raises the rate to about 6.04%. The phase-in of the married couple credit brings it down to about 4.84%. Finally, the phase-out of state EITC raises it to about 7.16%.

For WAGI between $40,000 and $49,934, the effective MTR is about 8.36%, 1.2 percentage points higher than the last phase because the married couple credit is now flat. Specifically, the statutory rate is still 5.04%. The phase-out of the standard deduction raises the rate to about 6.04%, and the phase-out of state EITC raises it further to about 8.36%.

For WAGI between $49,934 and $53,330, the effective MTR reaches its highest level of about 9.83%. Relative to the last phase, the statutory rate increases to 6.27%. The phaseout of the standard deduction raises the rate to about 7.51%, and the phase-out of state EITC raises it further to about 9.83%.

Which perhaps can lead a discussion on general income tax reform in Wisconsin, where we look at the incentives and the bracket changes and various deductions, and see if there's a way to have it be more cohesive. So there is a use for this analysis, just not in the way that WisGOP wants it to be.

And just because the data is interesting, it still doesn't mean that the WisGOP tax package is a better way to use our one-time shot of extra money. We still don't know how much the income tax cuts in the current state budget will reduce revenues by, because that money isn't being recouped until Wisconsinites file their taxes. So it seems quite risky to pile on another one without letting the first one take effect.

In addition, the reduction of personal property taxes on businesses is absurd, particularly because it will raise the property taxes of homeowners. Conversely, Evers wants to reduce property taxes that homeowners would pay for schools, and as Tamarine Cornelius of the Wisconsin Budget Project notes, Evers' bill had more in property tax cuts than he had in extra money that schools could spend.

Here's an explanation that doesn't double count the education money, from @WiBudgetProject. pic.twitter.com/koncfs7oRO

— Tamarine Cornelius (@Tamarine608) February 22, 2020

You'd think Republicans would want a property tax cut that doesn't allow K-12 schools to spend the money....and if Scott Walker had proposed it, they probably would be OK with it. (Pathetic)

I'm hoping Evers sets this GOP tax package on fire and orders them back to the Capitol for another Special Session in a couple of months. When he does, you can bet Noah Williams will be tasked to create something that tries to make the GOP's BS seems sensible. And hey, it's gotten Noah a lot of money and attention, so who needs intellectual balance when you can do that!