LeMahieu pushes for flat tax plan at committee hearing

Wisconsin’s top Senate Republican continued his push on Tuesday to rid the state of its 112-year-old progressive tax structure, testifying to a Senate committee about his flat tax plan. 

Majority Leader Devin LeMahieu’s plan would phase in a 3.25% rate for all taxpayers over four years. Wisconsin’s current progressive tax structure consists of four brackets with rates that range from 3.54% to 7.65%, depending on marital status and income level. 

The plan is unlikely to become law with Gov. Tony Evers saying he would veto a flat tax proposal and Republican leaders casting doubt on its inclusion in the budget. Despite this, LeMahieu said there is support among both Republican caucuses to reduce taxes for all Wisconsin taxpayers, and he thinks there is enough support to pass the first two years of his plan in concurrence with the budget.

“That’s affordable. It makes great progress and we’ll see that it actually spurs the economy, and then we can revisit it in two years,” LeMahieu told reporters after addressing the committee. 

During those two years, the state would lose around $5 billion in revenue as the tax rate would drop incrementally. For example, Wisconsin’s highest bracket would see a drop in its tax rate from 7.65% to 6.55% in tax year 2023. That rate would drop to 5.45% in 2024. If LeMahieu’s full proposal were adopted, the rate would fall to 4.35% in 2025 before leveling off to 3.25% in 2026. 

During a Senate Universities & Revenue committee hearing, LeMahieu said the plan would simplify the tax code, while helping small businesses and making Wisconsin more competitive with other states that already implement a flat tax. 

“We have a once-in-a-lifetime opportunity to lead Wisconsin forward and deliver generational tax reform,” LeMahieu told the committee. 

Democrats on the committee pushed back on the idea that implementing a flat tax would benefit all Wisconsinites, especially low-to-middle income earners, as a loss in state revenue could impact what services the state is able to provide. 

“The idea that somehow the lowest income people are going to receive the trickle down benefit of the wealthiest getting a huge tax cut, meanwhile the government — that we all rely on, that we’re all a part of — will not have basic funding to meet their needs, things like public education, our great public university, transit, health care … it just beggars belief,” Sen. Kelda Roys (D-Madison) said during the hearing. 

According to a Legislative Fiscal Bureau memo, the plan would cost the state an estimated $4.31 billion in the third year and $5.06 billion in 2026 and every year after. 

LeMahieu acknowledged the criticism of lost revenue during his testimony, saying he appreciates the concerns, but Republicans will not “throw caution to the wind.” He told reporters after addressing the committee that he is “confident in our economy growing.”

“We have a 12-year track record of providing tax cuts and the economy continues to grow and continue to invest in core priorities and that’s what we’re going to be moving forward,” LeMahieu told reporters. 

While Wisconsin leaders — Republicans and Democrats alike —  agree tax cuts should be included in the budget, in part due to the estimated $7 billion budget surplus, many expressed skepticism of LeMahieu’s tax plan on Tuesday. Democrats are starkly opposed to any flat tax, while Assembly Speaker Robin Vos (R-Rochester) said during a Tuesday press conference that his caucus does not have a specific tax reform plan that they’re supporting yet. 

“An awful lot of us want to take the time to listen first, which is why we have not necessarily said that the flat tax is the premiere way we’re going to adopt a tax reform,” Vos said. “We haven’t ruled it out either. I think it certainly is a long-term goal that all of us agree with, but I want to have a plan that can actually become law.” 

Vos added that one possibility could be a plan that continues the trend of flattening Wisconsin’s tax structure, rather than adopting a flat tax in “one fell swoop.” 

Another tax plan recently introduced by several Assembly Republicans would drastically change Wisconsin’s tax structure over a five year period, bringing the state down to just two tax brackets. Under this plan by 2028, those making $7,500 or less would pay 0% in taxes and all other earners would pay a 4.5% tax rate. 

Evers and the Republican-led Legislature passed more than $2 billion in income tax cuts during the last budget cycle. This included the lowering of the third income tax bracket from 6.27% to 5.30%. Those cuts helped bring Wisconsin’s tax burden to an all-time low, according to a Wisconsin Policy Forum report.

Evers proposed his own tax plan in his executive budget. It focuses on providing tax relief to Wisconsin’s low-to-middle income earners. Under his plan, individuals making $100,000 or less could expect to see their taxes cut by 10%.

At a Tuesday press conference, Assembly Minority Leader Greta Neubauer (D-Racine) said Democrats will not support a flat tax proposal.

“Our caucus believes that we should be cutting taxes for the people who are looking at their budgets and struggling to figure out how they are going to make ends meet, not people who are millionaires and billionaires, so we do not support a flat tax. We believe that our tax cuts need to benefit working and middle class families.” Neubauer said the caucus is excited about Evers’ proposal.