Saturday, June 19, 2021

Are WisGOP's tax cuts regressive? Sure they are! Is it worth vetoing the budget over? No

Here are a few items that jumped out to me in the wake of Thursday's budget wrap-up at the Joint Finance Committee.

To begin with, let's talk about the billions in income tax cuts that the WisGOPs on JFC gave out. The Legislative Fiscal Bureau gave this chart that showed who would benefit from the tax cuts, and by how much.

That’s a whole lot to upper incomes (74% of the total tax cut goes to filers that make at least $100,000), and not a whole lot to the working poor. Good thing the Biden stimulus (and especially its child tax credit) is going to help reduce poverty, because this tax cut isn’t likely to.

It also carries a sizable price tag, at $1.37 billion in the next fiscal year, and over $994 million in the next one. That’s fine when you have the billions we have to play with for this budget, but those declines in revenues will continue past 2023 (it’s a permanent drop in rates). So the next budget could get tricky if things eventually slow down from the strong recovery that we’re currently having.

In addition, the GOP measure goes along with Evers’ proposal to adjust the income tax withholding tables next January 1. Not only will that boost Wisconsinites’ take-home pay by catching up to inflation over the last 8 years, but it’s a one-time expense of $331 million in a time when there’s money to use. Win-win situation for 2022, but not so great when you file taxes in 2023 and find out that your refund have gone down. (Conveniently, that's after the November 2022 elections)

But don’t worry, GOPs say that your property taxes will be much less by then! And it’s done in a way that I predicted, and have called for during this entire budget, by bumping up state spending for education and making property taxes less important in funding for at least the next 2 years.

So here’s what they’re going to add

K-12 Education
$110 mil next year
$298 mil in 2022-23

Tech College System
$29 mil next year
$43 mil in 2022-23

The catch is that not one dime of that money can actually go into the schools, because the revenue limits aren’t changing at all. It’s just a shifting of what type of tax dollars pay for it. I’ll use the projections of property tax levies that LFB sent out at the start of this budget, and compare them to what the state-local resources would look like under the WisGOP budget.

This isn't perfect by any means and it'll change based on how much new construction actually happens, but it'll give you a good idea how it'll work out over the next two years.

Now what the WisGOPs will tell you is that the stimulus funds will take care of any make-up costs for the COVID year of 2020-21 and the added costs that might happen over the next 2 years. But that still keeps low revenue limits in place for the next two years, and if you're a low-poverty/high property value district that isn't getting that much in stimulus, it might not help you all that much.

But I do like the general trend of spending more state aid on schools vs property taxes. If you've been reading this blog and my tweets, I think this is something Evers can present as a "reform" that should continue in his second term, particularly as more middle-class and upper-middle class Wisconsinites can't write off their property taxes at the federal level due to the GOP Tax Scam.

And as I've also said in the past, it wouldn't be a GOP tax cut if it didn't have some kind of giveaway to the WMC folks.

I'm no fan of this, because machines and other possesions are a part of a building's value, and now businesses get more write-offs that will inevitably throw more of the burden onto residential homeowners. But this is typical WMC-style tax shifting, and not surprising in itself.

But the two-part process that WisGOP chose to have this personal property tax repeal take place is odd.

In fact, the $202.4 mil in makeup payments to Wisconsin communities is held up in the JFC's supplemental appropriation, so they basically hold those make-up funds hostage until the actual repeal bill goes through the Legislature and Evers signs it.

If not, then the $202.4 mil doesn't get spent at all, and if I'm Evers, I'm strongly considering letting that happen. God knows businesses have plenty of other tax breaks to lean back on in this state, so why give another and spend more money if we don't have to? Given that the separate business property tax repeal bill will go through committees in the next week, I suppose we'll find out soon enough.

I don't think the tax provisions and lack of state/local resources for schools is a great thing, but I also don't think Evers can give a full veto to the budget. If that happens, WisGOPs will laugh, teabag the entire budget, and hold up billions in stimulus that is badly needed. And the fact that WisGOPs got caught shortchanging K-12 and higher education, and had to pull these tricks to get the stimulus funds, shows that the public caught onto them, and that Evers has the upper hand with the public.

Sure, I'd like a more progressive budget reach Evers' desk, but until the Legislature changes and/or we get fairer maps, that's not going to happen. So I'd use the veto pen to line-item/adjust a few things, take a lot of the rest, get the stimulus/stabilization funds out the door, and keep working on making things better for the next 18 months.

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