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JFC Approves GOP Tax Package
By Wisconsin School Administrators Alliance staff | February 18, 2020
From WisPolitics.com …
The Joint Finance Committee voted along party lines to sign off on a $392.4 million package that would cut income taxes, provide local governments more state aid to cover an expanded property tax break for businesses and pay down debt.
Republicans yesterday hailed the proposal to use a projected surplus as a win for lower- and middle-class earners with the bulk of the cut going to an income tax reduction. Joint Finance Co-chair John Nygren, R-Marinette, slammed Dems for preferring a proposal from Gov. Tony Evers he said would’ve provided tax relief that skewed more toward the wealthy.
“The contrast here is pretty clear,” Nygren said.
But Dems accused their GOP colleagues of favoring corporations over education for rejecting Evers’ $251.9 million plan for the surplus. He wanted to put $130 million into school aids, which would result in a corresponding reduction in the property taxes that districts can collect in the 2020-21 school year. The rest of the package included provisions such as investing more money into mental health services and aid for small, rural school districts.
Rep. Chris Taylor, D-Madison, noted GOP lawmakers, including Assembly Speaker Robin Vos, R-Rochester, have previously voiced support for restoring the state’s commitment to fund two-thirds of education. Evers’ proposal would’ve restored the commitment. She said Republicans have often fallen short of that mark, adding the state didn’t have the money.
“You made a promise to our kids,” Taylor said. “You didn’t do it, and you’re not going to do it … when you have another chance. And you can no longer use the excuse that we don’t have the money.”
The Legislative Fiscal Bureau currently projects the state will have a surplus of $451.9 million by mid-2021, largely due to a boost in corporate tax collections. The state also could have more money in its main checking account, because Foxconn is expected to fall short of qualifying for the $212 million in tax credits budgeted for in the current biennium. LFB instead projects the manufacturer to qualify for $50 million to $75 million in credits.
The biggest component of the GOP package is a $247.7 million reduction in income taxes achieved by increasing the maximum deduction.
The maximum deduction for married joint filers is $20,470 for those with an adjusted gross income of less than $23,000. It then drops on a sliding scale as income rises until it zeroes out for those reporting more than $126,499.
Under the bill, that deduction would increase to $23,170 for those with an adjusted gross income of $25,610. It would then zero out for those reporting more than $144,669.
The proposal would result in an average tax cut of $106 for tax year 2020, according to the Legislative Fiscal Bureau.
The next largest piece is taking $100 million of the projected surplus to pay down state debt.
The package also would send $44.7 million to local governments to offset lost property tax collections for the expanded break for businesses. Current law exempts manufacturing machinery and computers from the property tax assessed by local governments. The bill would add to the exempt list machinery, tools and pattern used by manufacturers. The additional state aid would go to replace the lost revenue.
The bill also would change future deposits into the rainy day fund. Now, half of any surplus in tax collections is deposited into the account at the end of a fiscal year. Under the bill, excess tax revenues would instead be used to pay down debt if the balance in the account amounted to 5 percent of the estimated expenses during a fiscal year.
The change wouldn’t impact the expected transfers to the rainy day fund during this biennium. The fund is currently expected to grow to $845 million at the end of 2019-20, about 4.4 percent of budgeted expenses for 2020-21.
See Wisconsin State Journal Coverage here.
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