Tuesday, June 28, 2022

Massive Wisconsin surplus likely to grow larger.

You know how Wisconsin is set to have $3.8 billion in the bank when this current budget cycle ends in 12 months?m It looks like that surplus is going to be even larger.
Tax collections for the fiscal year that ends this month are running ahead of projections, putting the state in line for another boost to the general fund.

The Department of Revenue last week reported general fund tax collections through the end of May were up 5.2 percent compared to the same period a year earlier. The Legislative Fiscal Bureau had projected general fund tax collections would drop by 3.2 percent for the fiscal year that ends June 30.

LFB Director Bob Lang yesterday noted corporations make their estimated tax payments largely in four months, including June. Through the end of May, the state had collected $2.4 billion in corporate taxes. That matches what LFB projected in January the state would take in for the full 12-month period.
Income taxes are also going well, The LFB estimated back in January that those collections would be down by more than $1 billion, after tax cuts went into effect for the 2021 tax filing season, then "doubled up" with lower withholdings for 2022.

But with 1 month to go in the fiscal year, FY 2022 still had higher income tax revenues than FY 2021 did at this point.

Yes, most of the $562.3 million gap between the two fiscal years that was there in December has been mostly erased. But I’m not thinking that there will be a $1 billion decline in June elections, so that should be several hundred millions of dollars above estimates right there.

Then note that growth in both corporate taxes and sales taxes is also running well beyond what LFB thought we'd see back in January.

If we get the same amount of June corporate revenues that we got in June 2021 (technically a decline, since it would be lower than inflation), we’d still beat LFB estimates by $433 million there. And we only need a sales tax increase of $3.0% for June to match the LFB's estimates, which would be a jump well below the 8%+ increase in prices that we have seen in the last 12 months.

Add those better-than-estimated numbers to the $3.8 billion surplus that the LFB estimated for the 2021-23 budget, and I would guess that we would be somewhere around $4.5 billion to $5 billion available. But naturally, the GOP chairs of the Joint Finance Committee don’t want to do anything with all this money before the November elections.

Rep. Mark Born, R-Beaver Dam, said taxes on businesses and consumers are higher due to inflation. Meanwhile, Sen. Howard Marklein, R-Spring Green, also stressed that sales tax collections are strong, in part, because prices are higher due to inflation.
There's some truth there, especially with sales tax collections and higher corporate profits, and some expenses will likely have to be adjusted in the 2023 Fiscal Year and the 2023-25 budget to deal with the cost side of inflation.

Of course, a recession would make things not-so-easy from a fiscal side, and that’s the excuse Marklein is giving for not doing anything with all of this extra money.
[Marklein] warned there are “lots of clouds on the horizon” with the possibility of an economic slowdown.

“I think we need to be cautious about spending it,” Marklein said. “I think a year from now when we’re wrapping up our budget, I think we’re going to be glad that we’ve got the resources.”
I am skeptical we will be in much of a recession at all, let alone anything that puts a significant dent into a $4.5 billion-$5 billion surplus. And if Born and Marklein are so concerned about paying for permanent increases in spending, then why not approve of one-time moves such as Evers' plan to give a $150 rebate to each Wisconsinite (which could be paid for by the amount of revenues above the LFB's estimates), or filling in the revenue loss from a gas tax holiday, which would allow road repairs to continue at an elevated rate?

We have no excuses to not give one-time relief to Wisconsinites that may be getting stressed due to inflation, whether that's targeted to the gas pump, or just in giving them check to pay off some of those higher costs. But then that would make Evers look good and have Wisconsinites not have to be as worried about making ends meet, which is definitely something WisGOPs DON'T want. So we'll see several billions of dollars languish in the bank for the last half of 2022, no matter how much it would help.

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