Saturday, September 9, 2023

WisGOP tax cut might not "bankrupt" us. But Gov is right that it's too much, and needs more work.

After originally saying some nice words about possible compromise after the GOP Legislature released a tax cut package, Governor Evers gave a "no-sale" to the bill this week.

Evers made those comments after the Legislative Fiscal Bureau released their analysis of the GOP's tax plan. So let's take a look at it, and the numbers their report had in it.

To start, the LFB estimates the GOP's tax cut would reduce over $3 billion from the state's projected $4 billion surplus over the next 2 years.

That would open a hole in revenues for this year that is a little less than the one that would have occured with the original GOP tax cut plan during budget deliberations this Spring. And interestingly, LFB says that the budget hole for Fiscal Year 2025 would be even larger than what was projected with the GOP's first tax cut scheme.

Not sure why that is, unless the LFB anticipates that retirees will take extra advantage in 2024 and 2025 from the new tax cut's plan to write off all income for older, richer Wisconsinites.

And not surprisingly, that lack of revenue gets rid of most of the $4 billion cushion the state currently has, as spending outpaces the lower amount of revenues.

But where Evers gives his concerns about "bankruptcy" comes from the LFB's analysis of what happens in the next state budget for 2025-27.
....[F]or 2025-26, the general fund would have an estimated imbalance of -$651 million after meeting commitments under Act 19 and AB 386. In 2026-27, an imbalance of -$1,612 million would occur, resulting in a cumulative balance of -$2,263 million.

It is important to note that the amounts shown...represent commitments under Act 19 and AB 386. No assumptions are made regarding revenue modifications in 2025-27 due to such unknowns as future law changes or economic factors. Likewise, no assumptions are made to appropriations regarding changes in caseloads, population estimates, enrollments, employee compensation, or inflation.

Given that revenues could grow and/or there could continue to be help from DC to fund some items, I wouldn't quite call this structural deficit "a path to bankruptcy" for the state. But it would likely cause budget cuts to be imposed on people who can least afford the lack of support, and doing that in order to give a significant tax cut to people making 6 figures in this state doesn't seem like a winning strategy to me.

But as I've mentioned before, there is room for a solution and compromise here. The GOP has come up with some innovation with the tax cut for seniors, but given that we already exempt Social Security benefits from state income taxes, we can lower the amount of additional income to be written off to something like $50,000/$75,000 instead of the $100K/$150K.

Likewise, we could go along with the part of the GOP's tax cut of the 5.3% income tax bracket to the 4.4% bracket, but we don't need it to include Wisconsinites that make $300K to $400K. Cut that in half as well, or even limit it to real middle-class/upper middle-class Wisconsin families that make $125,000 or less. Which is in line with what Evers wanted to do in his original budget proposal back in February.

Sure, it would make for a bit of imbalance for the future. But it would give tax relief to the people that need it, while stil allowing for a cushion that doesn't leave the state in an unfavorable fiscal situation if the economy flatlines and/or declines some time in the next 2 years. That would be a logical move for both sides.

But given that today Wisconsin GOP is more willing to play games than actually try to get anything done to help everyday Wisconsinites, I'm not counting on much getting modified when the gerrymandered Legislature takes up these tax cut bills next week. And they'll probably force Evers to choose "all of nothing", and we end up with "nothing". Till we start it all over in 2024...maybe.

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