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Assembly passes latest Republican tax package with few Democrats’ votes

by Erik Gunn, Wisconsin Examiner
February 14, 2024

The Wisconsin Assembly passed four Republican tax cut proposals Tuesday, two of them along party lines.

The centerpiece of the Republican package would expand the 4.4% state income tax bracket, the second-lowest, to up to $150,000 of income.

A second bill would exempt from the state income tax the first $75,000 in retirement income for single filers and the first $150,000 for married couples filing jointly. A third bill increases the state income tax credit for married couples.

On a fourth bill, increasing the state’s child and dependent care tax credit, all but four Democrats joined the Republicans in voting Yes. At the same time, Democrats emphasized that without substantial direct state support for child care providers, that measure would be inadequate to bolster Wisconsin’s struggling child care sector.

Republicans cited Gov. Tony Evers’ past statements that he wanted a tax bill tailored to the middle class and characterized their package as meeting that requirement.

The 4.4% bracket currently applies to incomes from $14,320 to $28,640 for single filers and $19,090 to $38,190 for married couples filing jointly. AB-1020 would raise the ceiling to $112,500 for single filers and $150,000 for joint filers.

“We have a surplus here in Wisconsin,” said Rep. Dave Murphy (R-Greenfield) on the Assembly floor. “We collect taxes to be able to have enough money to provide services. And we have more than that. The taxpayers deserve that money back.”

Assembly Democrats focused their criticism on the tax bracket change as well as on the package as a whole, arguing that it would put the state in a fiscally precarious position.

“Taking the surplus and turning it into a substantial, deadly deficit would threaten the financial future of Wisconsin, threaten our ability to provide the services that a government should be providing,” said Rep. Tip McGuire (D-Kenosha).

Previous tax cuts vetoed

In drafting the state’s 2023-25 state budget in June, Republicans had tried to expand the 4.4% bracket to incomes up to $315,310 for single filers and $420,420 for joint filers — eliminating the 5.3% tax bracket, the state’s second highest.

Evers vetoed that change when he signed the budget in July. He also vetoed the same cut in another form this past fall. Evers said in the second veto message that he wanted a tax cut that would focus on “working families.”

Rep. Terry Katsma (R-Oostburg), the lead Assembly author of the new income tax cut bill, said it “targets tax relief to the middle class,” benefitting 49% of all Wisconsinites who file for the state income tax and 69% of all Wisconsin taxpayers who owe taxes.

“This results in an average tax cut of $454 per filer — an average of 15.4% decrease,” Katsma said. “Those not receiving a tax decrease will be [filers] with no tax liability or individuals whose income exceeds that second tax bracket.”

A Legislative Fiscal Bureau analysis, however, contradicts the second part of that claim.

While the 4.4% bracket tops out at $112,500 or $150,000 under the bill, higher-paid taxpayers also will see their taxes reduced. For those taxpayers, the 5.3% tax rate would take effect on incomes above the new ceiling, instead of where it takes effect now.

According to the fiscal bureau, taxpayers with incomes of $150,000 or more would, on average, save more than $900 per year on their income taxes. Taxpayers with an adjusted gross annual income of $100,000 or more — just over 40% of all filers — would get 73.6% of the total tax savings, the fiscal bureau has calculated.

Democrats argued that the state was shortchanging public education and other services while Republicans insisted that they had crafted adequate and responsible budgets after throwing out numerous measures that Evers and Democrats had sought. After more than half an hour of speeches, the bill passed 62-34 with only Republican votes.

Retirement tax examption, marriage tax credit

Republicans said the bill to partially exempt retirement income, AB-1021, would help keep more Wisconsin residents over 65 in the state at least half the year.

“We are losing way too many of our senior citizens to other states that have no income tax,” said Rep. Joel Kitchens (R-Sturgeon Bay). “I hear constantly that, ‘Well, yeah, I’m here in Door County in the summer, but then I go off to Florida,’ and it’s almost always because of the tax rates. And you know, it’s not just rich people.”

According to the fiscal bureau, taxpayers with incomes under $100,000 would account for 78.3% of the beneficiaries of the proposed exemption, receiving about 51.8% of the savings, an average of $1,047. Taxpayers with incomes of $100,000 or more would get 48.2% of the savings, an average of $3,508

Democrats made no comments on the retirement income bill, and on the 64-32 vote, two joined the unanimous Republican majority: Rep. Katrina Shankland (D-Stevens Point) and Rep. LaKeshia Myers (D-Milwaukee).

AB-1022 increases the state income tax credit for married couples from a maximum of $480 to $870. The credit is applied to 3% of the annual income for the lower-paid spouse in a two-income household. The bill will “update the current married couples tax credit, which hasn’t seen an update since 2001,” said the author, Rep. Ellen Schutt (R-Clinton).

The fiscal bureau estimated that 21% of filers whose tax bill would be reduced have incomes less than $100,000 and save $257 on average. Taxpayers with incomes of $100,000 or more would account for nearly 79% of filers who benefit, saving $359.

The bill was the second of the four to pass without votes from Democrats.

Democrats get behind child care tax credit

The fourth bill, AB-1023, will increase the child and dependent care tax credit on the state income tax, currently 50% of the federal credit, to 100% of the federal credit. It also increases the total child care expenses that can be used to qualify for the credit to $10,000 for one child and $20,000 for two or more children.

The credit itself is applied to a percentage of child care expenses, which decreases as income increases. According to the fiscal bureau, 34.2% of taxpayers who would benefit have incomes under $100,000 and would save, on average, $453. Taxpayers with incomes of $100,000 or more would account for 65.8% of the beneficiaries and save on average $762.

In her opening floor session speech Assembly Minority Leader Rep. Greta Neubauer (D-Racine) signaled that Democrats would support the bill, in contrast to the others.

“I’m glad that the majority party has finally joined us in realizing the importance of affordable, accessible child care in Wisconsin,” Neubauer said. While supporting the measure, she added, “However, this proposal will not solve our child care industry’s looming challenges. Only by making critical investments in programs like Child Care Counts” — the pandemic-era ongoing direct support for child care providers in Wisconsin — “can we stabilize access and affordability for child care in our state.”

Providers, Democratic lawmakers and outside experts have said that only with additional outside funding can child care services be both affordable for parents and able to hire and keep qualified employees.

“If we continue to ignore successful programs like Child Care Counts, and continue to deny funding that program, which gets to the root of the issue of access to child care, we will never be able to fully solve that crisis,” said Rep. Alex Joers (D-Middleton) during debate on the bill Tuesday.

Rep. Mike Bare (D-Verona) said that while he supported the bill, the tax credit should be made refundable. That would enable a family with a tax liability that is less than what the credit would cover to collect the remaining value of the credit as cash from the state, “so that the distribution of the credit is even more beneficial, more helpful to those with middle and low incomes,” he said.

The Republican author of the tax credit bill dismissed the idea of ongoing state support. “I didn’t have children with the intent that my community had to raise them,” said Rep. Amy Binsfeld (R-Sheboygan). “I had them so I could raise them. They’re my responsibility.”

The bill passed 92-4. Reps. Ryan Clancy (D-Milwaukee), Francesca Hong (D-Madison), Darrin Madison (D-Milwaukee) and Supreme Moore Omokunde (D-Milwaukee) cast the only no votes.

All four pieces of legislation now go to the state Senate.

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Wisconsin Examiner is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Wisconsin Examiner maintains editorial independence. Contact Editor Ruth Conniff for questions: info@wisconsinexaminer.com. Follow Wisconsin Examiner on Facebook and Twitter.

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