Republican tax cut bill takes a step forward in the Wisconsin Senate
Rep. Terry Katsma (R-Oostburg) said the tax cut bill would be necessary to help Wisconsin compete with other states. (Screenshot via WisEye)
A Republican bill that would further flatten Wisconsin’s state income tax and eliminate taxes for retirees up to a certain income advanced during two legislative meetings on Tuesday, despite facing a likely veto from Gov. Tony Evers.
The Joint Finance Committee voted 11-4 along party lines to advance the bill that would cut taxes in Wisconsin by $2.9 billion, and the Senate Universities and Revenue committee took public testimony on the bill on Tuesday morning.
“The state government in Madison has stockpiled billions of dollars that belong to the people of our state, it’s time that money goes back into the pockets of the folks who worked tooth and nail for it,” bill co-author Sen. Rachael Cabral-Guevara (R-Appleton) said in a statement about the committee hearing on Tuesday. “I’m happy to see this proposal continuing through the process.”
The bill — AB 386 — would compress Wisconsin’s current tax system from four to three brackets by lowering that tax rate on the state’s third income tax bracket — which includes single filers making between $27,630 and $304,170 and joint filers making $36,840 to $405,550 — from 5.3% to 4.4%. It would also eliminate the state income tax for retirees in Wisconsin for single filers with up to $150,000 for joint filers and $100,000 for single filers.
The bill passed the Assembly last month on a party line vote, however, if it passes the Senate, it faces a likely veto from Gov. Tony Evers. He previously vowed to veto the bill saying that he wouldn’t sign “an irresponsible Republican tax cut that jeopardizes our state’s financial stability well into the future and the investments we need to be making today to address the real, pressing challenges facing our state.”
Evers has said that any tax cuts need to be targeted towards the middle class, and proposed a 10% middle-class tax cut during budget negotiations early this year. However, Republicans have rejected it in favor of their own plan, which was mostly vetoed by Evers.
Democrats on the finance committee criticized Republicans’ tax cut proposal, saying it would hurt the state’s financial future rather than help.
During the Assembly public hearing on the bill last month, LFB analysts said the tax cut would leave the state with a structural deficit of $2.3 billion without any tax revenue growth, but that projected increases in revenue from income taxes, sales taxes and other sources could potentially make up the difference.
Rep. Deb Andraca (D-Whitefish Bay) pointed out that Wisconsin’s retirement-aged population is expected to rise from 0.9 million to 1.54 million residents — a 57% increase — in the coming years.
“We all know the demographic time bomb that is projected for this state,” Andraca said. “We’re going to have more and more seniors and less and less taxpayers paying into the pool.”
Andraca emphasized that the state’s surplus is largely one-time money, and that if Wisconsin is going to keep taxes low in a sustainable way, then lawmakers should be doing everything they can to make sure there are people paying into the state’s revenues. She said lawmakers should focus on policies — like child care and the education system — that will attract and keep young residents and families in the state to make sure that the state has people paying into its revenues.
Wisconsin is projected to end the fiscal year with a $4 billion budget surplus and an additional $1.8 billion in its “rainy day fund.” According to a Legislative Fiscal Bureau (LFB) estimate, Republicans’ bill is expected to reduce income tax collections by $1.55 billion in the 2023-24 fiscal year and by $1.4 billion in the 2024-25 fiscal year.
Sen. Kelda Roys (D-Madison) said the tax cut would not help the people in the state who are struggling the most and called it “counterproductive” because it would “blow a permanent hole in our budget.”
“If what we want to do is grow our economy — make Wisconsin a place where young people want to grow their families and have their careers and lives — this does the opposite,” Roys said. “It deprives the state of funds, not just now, but into the future. It throws away our one-time surplus on people who do not need the money and it does not deliver real tax relief that’s meaningful for people who could actually use it and who are actually struggling.”
Rep. Terry Katsma (R-Oostburg) said it was disappointing that Evers vetoed Republicans’ first proposal during budget negotiations, but said they have since tried to find a compromise with the new bill.
“This tax cut does not touch the top bracket,” Katsma said. “We listened to the governor. We heard him.”
Katsma urged lawmakers to support the tax cut, saying it’s necessary to help Wisconsin compete with states like Florida and Tennessee that don’t have an income tax and with surrounding states — including Illinois and Minnesota — that have lower tax rates than Wisconsin.
Sen. LaTonya Johnson (D-Milwaukee) said that Republicans’ proposal isn’t going to help attract people from Florida and pointed out that the state relies largely on sales tax revenue from visitors and summer residents, something Wisconsin could not necessarily replicate.
“We talk about Florida here all the time. How wonderful Florida is and the fact that Florida, you know, doesn’t have an income tax, which is true,” Johnson said. “But the one thing that we never talk about is it’s a vacation state with its warm weather, it’s wonderful opportunities. They rely heavily on sales tax. They have so many tourists coming into that state.”
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