Evers touts new tax relief plan ahead of expected bigger budget surplus forecast

With a road show that took him across the state, Gov. Tony Evers unveiled a new proposal Tuesday for Wisconsin’s budget surplus, now projected to be even larger than previous forecasts.

Evers’ proposal includes provisions to cut taxes, with a focus on low- and middle-income households. It also has measures to boost child care access and cut prices for gas as well as for insulin. 

“Our state is in a strong fiscal position, and there is no reason these dollars should sit in state coffers when families need help now,” Evers said Tuesday. “We can help lower out-of-pocket costs for Wisconsinites today while providing long-term tax relief and still making sure we have readily available state resources to invest in our priorities in the next state budget.”

Evers announced the plan at press conferences in Milwaukee, Wausau and Eau Claire.

Republicans were quick to pooh-pooh the proposals as an election year gimmick. The Legislature’s GOP leaders have adjourned both the Assembly and the Senate for the year.

But Jon Peacock, an advocate for children and families, said that Evers’ proposal coincides with the end of the most recent fiscal year, June 30, amid indications “that the state surplus will be increased substantially compared to previous estimates.” 

“Whenever that happens there’s always people on all sides of the issue putting out their arguments about how to use the surplus,” said Peacock, policy director for Kids Forward, which advocates for policies to benefit children and families, especially in lower-income households. “I think this is just a foreshadowing of that.”

Evers’ new proposal follows preliminary estimates that the state’s surplus at the end of the current fiscal biennium, June 30, 2023, will balloon to more than $5 billion. The forecast is based on revenue through the fiscal year ending this June 30, 2022.  

In January, the Legislative Fiscal Bureau projected a surplus for the biennium of $3.8 billion — four times what the nonpartisan agency had forecast six months earlier when the 2021-23 state budget was enacted. Evers put out a plan based on the January numbers that included a $150 refund to every state resident. Republican leaders of the Legislature spurned that proposal, too.

While that plan included provisions for spending more on education, the plan Evers unveiled Tuesday is more narrowly tailored. The administration said it offers a total of $600 million in tax relief. 

The proposal includes:

• A tax credit that the administration says would amount to a 10% income tax cut for single filers with an adjusted gross income of $100,000 or less and married people who file jointly with incomes of $150,000 or less. The administration says the credit will cut taxes by $375 for a median-income family of four and $221 for the average individual.
• Reinstating an inflation adjustment for the state Homestead Credit and boosting its income limit to $35,000 from the current $24,680. The credit is a long-standing tax relief measure for low-income seniors and people with disabilities, and was indexed to inflation until 2011, when the Legislature and then-Gov. Scott Walker ended indexing.
• Expanding a property tax credit for veterans and surviving spouses. Currently the tax credit is based on a veteran having a 100% disability rating; the Evers plan lowers eligibility to at least a 70% disability rating.
• Repealing the state’s minimum markup requirement for motor fuel. The law — originally intended to prevent large service station chains with deep pockets from underpricing independent and locally owned stations and driving them out of business — is adding as much as 18 to 30 cents a gallon to the cost of gasoline, according to the governor’s office.
• Capping the cost of patient co-payments for insulin at $35. A proposal for such a cap was part of Evers’ 2021-23 budget proposal but removed by the Republican majority on the state Legislature’s budget committee.
• Providing a tax credit for family caregivers who pay certain expenses as part of the care they are providing. The credit, worth up to $500 depending on the caregiver’s income and filing status, was another Evers proposal dropped from the final budget.
• Expanding the child and dependent care credit that was instituted in the 2021-23 budget to 100% of the federal credit from the current 50%.

With the expected increase in the surplus balance, it would leave the previously estimated $3.8 billion “completely untouched, leaving readily available state resources to respond to pressing state needs in the next biennial budget as well,” the governor’s office stated in its outline of the plan. 

“I’m pleased that the governor is recommending using part of the state’s growing surplus to help people who are suffering now,” said Peacock. At Kids Forward, “we particularly want to see a portion of that surplus used for low-income families who are being left behind by the economy,” Peacock said. “There are parts of this proposal that clearly do that.”

One of those is increasing the homestead tax credit and restoring the inflation adjustment. “The failure of the state to do that really discriminates against low-income families,” Peacock said. 

The proposal to boost the child and dependent care tax credit would help parents who need child care so they can go to work themselves, he added.

In a statement to the Associated Press, Republicans Assembly Speaker Robin Vos and Senate Majority Leader Devin LeMahieu dismissed Evers’ proposal. “We’re not going to jeopardize future budgets in the midst of a recession to fund a tax gimmick,” the statement said. “If the projected surplus materializes, we will cut taxes for everyone. We will not pick winners and losers like Tony Evers does with this vote-buying ploy.”

The GOP’s state spokesperson issued a one-sentence statement mocking it: “Election-year tax cuts won’t distract Wisconsinites from the fact that Tony Evers spent the majority of his time in office attempting to raise their taxes or costing them locally by ignoring rioters who caused millions in damage in Kenosha.”

In an analysis of Evers’ original budget proposal in February 2021, however, the Wisconsin Budget Project found that the governor’s draft would have cut taxes for low-income taxpayers by expanding the state’s Earned Income Tax Credit as well as through provisions such as the caregiver tax credit. The budget proposal’s higher taxes, that analysis concluded, were largely focused on the wealthy and corporations. The Wisconsin Budget Project is affiliated with Kids Forward.

The original proposal called for ending the state’s lower capital gains tax rate for investment income, reducing a tax break for manufacturers, setting an income limit for taxpayers to qualify for a tax break on private school tuition, and legalizing and taxing marijuana. All of those provisions, along with the reductions for lower-income taxpayers, were stripped from the budget by the GOP majority on the Legislature’s Joint Finance Committee.  

“Republicans raised taxes on low-income families back in 2011 when they reduced the eligibility for the homestead tax credit and stopped adjusting it for inflation, and then cut the earned income tax credit,” Peacock said. “And over the subsequent decade, as they repeatedly cut taxes for corporations and high-income Wisconsinites, they never did so for low-income families.”