Sunday, July 23, 2023

Wis Policy Forum reminds us that there are big tax cuts in Wis budget, and more funds to play with

Republicans have spent the last 3 weeks complaining about vetoes by Governor Evers that they claimed would ultimately raise taxes. Which is why this headline from last week give me a grin.

Wisconsin taxpayers are set to receive over $1 billion in state and local tax relief over the next two years from the latest state budget, according to a new report from the Wisconsin Policy Forum. The report, released early Thursday morning, found the $99 billion two-year state budget signed into law by Gov. Tony Evers earlier this month delivered historic aid increases to local governments and raised state spending by the highest rate this century while simultaneously cutting state and local taxes and preserving much of the state's rainy day reserves. "State officials used an unprecedented nearly $7 billion surplus to do in the 2023-25 budget what once would have seemed impossible: combine the largest increase in funding for public services in three decades with a relatively substantial package of tax cuts," researchers wrote in the report.
Oh! You mean WisGOPs aren't really telling the full story here? OK, Wisconsin Policy Forum. Tell me more, starting with the biggest source of tax relief in the budget.
Under the budget, funding for the school levy credit would rise by $255 million, or 27.1%, in year one and an additional $80 million, or 6.7%, in year two for a total increase in funding of $590 million over the two years. The year one percentage increase is the largest rise in the credit in a single year since 1997. Despite the credit’s name, it is used to lower property tax levies and does not provide additional funding for schools….

In his budget bill, Evers proposed increasing the amount that schools can raise from general state aid and the property tax by $350 per pupil in 2024, and then again by $650 in 2025, tying increases to inflation in the years following. Both would have been the largest increases seen since per-pupil revenue limits were instituted. However, the Joint Finance Committee lowered those amounts to $325 increases in both years – less than Evers sought but still the largest since the limits were put in place. As of this past school year, the state counted about 800,000 pupils for the purpose of revenue limits; an additional $325 would therefore equate to about $260 million each year between the two largest sources of school funding.

When considering the combined impact of these increases in the per-pupil revenue limit and the additional general aid increase of $137.9 million in the first year of the budget and $362.8 million in the second, by themselves these two changes would likely mean some increase in authority to raise property taxes in year one of the budget and a potential decrease in year two. However, separate legislation (2023 Wisconsin Act 11) also raised the “low revenue limit ceiling” – the confusingly named minimum revenue amount for school districts – from $10,000 to $11,000. That would increase the revenue limit authority for districts collectively by roughly $350 million in each year. However, not all of this amount would be in addition to the $325 per-pupil revenue limit increases and so the total increase would be less than the two added together.
Combine that with the big increases in state funding being sent to local communities and other changes from the shared revenue bill [which became Wisconsin Act 12], and homeowners shouldn't see much of a difference in their property tax bill at all over the next 2 years.
The Legislature left in place the existing state caps on local property taxes, effectively limiting the increase in operating levies for municipalities, counties, and technical colleges to the growth in net new construction. As noted earlier, the legislation also increases shared revenue and local transportation aids and provides new sales tax authority to Milwaukee and Milwaukee County. All of these provisions could help to slow the growth of local property tax levies.

The budget and Act 12 also eliminated the personal property tax, estimated to lower total statewide levies on December 2024 bills by $173.8 million. The budget also provides GPR funding to increase the state lottery credit by $31.7 million over the two years, which is also used to lower the net statewide property tax levy.
And with Governor Evers' veto of income tax cuts, the Policy Forum reminds us that this leaves plenty of funds available for further tax cuts or initiatives. And those can be asked for some time during this current budget, or in the next one that Governor Evers will submit to a (ungerrymandered?) Legislature in 18 months.
...Under the final version of the budget with Evers’ vetoes, the general fund balance would drop from an estimated $6.88 billion on June 30 of 2023 to a projected $4.07 billion on that same date in 2025 (see Figure 2).

The state would still retain roughly $1.8 billion in its rainy day fund, leaving it with nearly $5.9 billion in total reserves. That would amount to 25.5% of spending (or net appropriations) for fiscal year 2025, which would be well above the levels typically seen in both Wisconsin and among state governments on average over the past two decades.

I'll also add that those bank accounts earn interest at the Fed's jacked-up rates until they get used or depleted in some other way. But I would recommend that Governor Evers demand for more in the coming months, such as renewing calls for working-class and middle-class income tax relief (which were in his original budget, and then removed by Republicans) and offering more financial support for child care and other needed community services, to make sure large amounts of Wisconsinites aren't left behind.

These are things that the people want and need, and we have the fiscal ability to do it. If Republicans don't want to get on board with this, and keep trying to give everything away to ultra-rich donors that take much more than they contribute, then let the WisGOPs explain it to the voters in 2024. New, fairer maps are coming in a state where Dems have been consistently winning statewide, and arguing in favor of the Walker-imposed status quo that has failed a lot of Sconnies doesn't seem like a WisGOP winner to me.

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