Wisconsin lawmakers juggle surplus, budget choices

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Matt Pommer
Sunday, February 9, 2014

Every Wisconsin family faces financial choices similar to those being examined by the Republican-controlled Legislature.

It sounds easy. State government has collected more money than was anticipated last year. In family finance it’s like getting a pay raise or unexpected overtime. But every family knows that more cash brings debate on whether to spend it or save it.

Do we spend it for a new car or truck? Do we put it aside to send a son or daughter to college? Or do we save it so we can retire? Do we save it in case one of our jobs disappears before we reach retirement age?

At the state level, Gov. Scott Walker has proposed a $542 million program aimed largely at reducing taxes. “What do you do with a surplus—give it back to people who earned. It’s their money,” Walker says. Indeed, most states are enjoying higher-than-unexpected revenues as the American economy rebounds.

The responses of governors to their surpluses varies over party lines. Twenty-three governors want to put the bulk of their new money into so-called “rainy-day funds.” The most eloquent plea in this area came from California Gov. Jerry Brown, who referred to the Book of Genesis.

“Boom and bust is our lot, and we must follow the ancient advice that Joseph gave to the Pharaoh: Put away your surplus during the years of great plenty so you will be ready for the lean years which are sure to follow,” Brown said in his State of the State message to the California Legislature.

In Wisconsin, Republicans will make the decisions. The Assembly GOP majority sounded like it was ready to give fast approval to Walker’s return-the-surplus idea. The Senate Republican caucus took a more cautious approach—perhaps because many of its members have been in office longer than the average Assembly Republican. They remember days of economic downturn.

Much of Walker’s plan goes to curbing property taxes. The nonpartisan Legislative Fiscal Bureau estimates the governor’s plan would reduce property taxes on a $151,000 home by $100 with the state treasury paying more of the cost of the vocational and technical colleges.

Cutting property taxes doesn’t put any more money into the hands of renters; it flows to the owners of property, including apartment and duplex residential buildings. More “relief” flows to the owners of property with higher values—be it residential, industrial or commercial structures.

In the past, Wisconsin has assisted renters through a refundable credit in the personal income-tax system. That has been championed in past years by Democrats concerned about low- and middle-income seniors.

But complaints about property taxes rarely come from those who rent. Criticism of the property tax often comes from senior citizens. Their incomes are lower, and Social Security payments are exempt from Wisconsin’s personal income tax. The property tax is their big tax burden.

Walker has sought to head off criticism that Republicans are more interested in the wealthy than the average citizen. His proposal for surplus funds includes decreasing the bottom income-tax rate from 4.4 percent to 4 percent. That would help all those who actually face income tax liabilities. And then there are low-earning, part-time workers such as students who file returns to get refunds of money withheld from paychecks but owe nothing in the end.

The Fiscal Bureau estimates that 71 percent of those filing income tax returns will benefit if the bottom rate is reduced as Walker suggests. A married couple filing jointly could see a $55 tax break, according to the analysis.

The governor’s plan could increase the state’s structural deficit—anticipated expenditures over projected revenues—to $807 million by mid-2017. That’s $100 million more than anticipated at the start of 2014.

The increase in the structural deficit would be offset by a $117 million increase in the state’s rainy-day fund, pushing it to nearly $400 million by the end of this biennium.

The governor’s proposals include a truckload of new numbers—the details of which will be largely ignored by the public. But what will attract attention is Walker’s directive to the Department of Revenue to reduce the amount of state income taxes withheld on paychecks to Wisconsin workers.

That will mean higher take-home pay in 2014 but lower income-tax refunds in the spring of 2015. That’s super-Republican politics for the gubernatorial and legislative elections this November.

Matt Pommer writes this Wisconsin Newspaper Association weekly state government newsletter. He is dean of the state Capitol correspondents, having covered government action in Madison for 36 years. Readers can contact Pommer at mpommer@sbcglobal.net.

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