The new proposal again seeks to reduce the second-highest rate from 5.3% to 4.4%, lowering taxes for individuals earning [taable incomes] between $27,630 and $304,170 and for married couples earning between $36,840 and $405,550 per year. It would also remove taxes on retirement income of up to $100,000 per year for individuals and $150,000 per year for joint filers. “We know there is no way that we can compete with the winter weather in the southern states where a lot of people choose to go for a few months in the wintertime," Vos said. "But I would say our goal is to keep people in Wisconsin six months and a day, or hopefully longer, so that we have them contributing to our economy, making sure they stay near their kids, and most importantly, have them as part of our society, as part of our state," Vos saidYeah, I don't think that "tax-free income" is really a reason the overwhelming majority of older Wisconsinites might not want to stay here. Especially when Social Security and $5,000 in additional IRA/401k-type income is already exempted from state income taxes. But it would be a heck of a write-off for rich Boomers like Diane Hendricks and the Uihleins! The Evers Administration says that there could be an additional snag with that tax cut plan. If it is too big, the state could risk being slapped with a big bill from Uncle Sam, as part of the deal with the state getting billions in assistance from the Feds in 2020 and 2021.
[Monday], state Budget Director Brian Pahnke wrote a new memo for the guv and DOA Secretary Kathy Blumenfeld projecting the state could reduce taxes in 2023-24 by $113 million and by $319 million in 2024-25 before having to possibly pay back federal COVID-19 dollars. Under the American Rescue Plan Act, states may not use the funds to directly or indirectly offset a reduction in net tax revenue. States that violate the requirement must repay money that was earmarked for state and local governments in an amount equal to the reduction in net tax revenue. Pahnke wrote in the memo the administration believes the U.S. Treasury’s rules don’t allow the state to include its current $4 billion surplus in calculating how much it can cut taxes before triggering the recoupment provisions.What the Treasury does is compare a state’s tax revenue at the end of a state’s 2019 Fiscal Year, and then adjust that total for inflation between June 30, 2019 (in Wisconsin’s case) and the end of the fiscal year in question. Then, as the Legislative Fiscal Bureau described in June, Treasury looks at the actual tax revenues raised in that fiscal year, take into account changes in tax laws, and see if a state has less or more tax revenue as a result.
First, each reporting year, the state identifies all covered changes assessed to have had or predicted to have the effect of reducing tax revenue relative to current law and estimates their aggregate impact. Covered change means a change in law, regulation, or administrative interpretation. A change in law includes any final legislative or regulatory action, a new or changed administrative interpretation, and the phase-in or taking effect of any statute or rule if the phase-in or taking effect was not prescribed prior to the start of the covered period. States may not use dynamic scoring to incorporate the macroeconomic impact of the changes (e.g., a tax cut could result in additional economic activity which would increase revenue collections to partially offset the revenue loss)…. ARPA sets out that the amount subject to recoupment is the lesser of the amount of the applicable reduction to net tax revenues attributable to the violation and the amount of funds received under the SFRF (or transferred under the local fiscal recovery fund). The Treasury final rule further clarifies a revenue reduction cap such that, if found in violation of the offset provision, the amount used in violation is equal to the lesser of: (a) the difference between the baseline and actual revenue as of the end of the reporting year; and (b) the aggregate amount of reductions in tax revenues caused by covered changes, minus the sum of (i) reductions in spending compared to the inflation-adjusted 2018-19 baseline (net of SFRF funds); and (ii) increases in revenue from other covered changes in law. As a result, net revenue growth since 2018-19 effectively offsets the cost of the revenue reduction.Between Fiscal Years 2019 and 2022, Wisconsin had a sizable increase in state tax revenues, which allowed state lawmakers to make cumulative tax cuts of well over $1 billion a year since then without having to pay back any of the COVID aids. But as was confirmed today, Wisconsin's revenue growth leveled off in 2023.
Preliminary information regarding general fund tax collections for the 2022-23 fiscal year is now available. According to the Department of Revenue (DOR), collections totaled $20,974.0 million in 2022-23, which was 2.1% higher than the previous year. This office's final estimate of 2022-23 tax collections (projected on May 15) was $20,988.1 million. Actual collections were $14.1 million, or [less than] 0.1%, below the estimated amount.The 2.1% growth in tax revenues is barely half of the 3.8% increase in the GDP price deflator from June 2022 to June 2023, and it was the second straight year that inflation outpaced the increase in Wisconsin revenues.