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Fight looming in state over ‘middle class’ tax cuts

In Washington, the nation’s leaders fight on over whether taxes should be raised on those with taxable incomes of $250,000 or more.

In Madison, the fight looming may be just as intense, but over a tax-cut question: Should Wisconsin residents with taxable incomes of up to $200,000 get a tax cut when they file their 2013 income taxes?

Yes, says Assembly Speaker-elect Robin Vos.

The Republican leader said in a WisconsinEye interview that he wants a tax cut for those with taxable incomes of between $20,000 and $200,000 in the next state budget.

“We’re not a good place to be middle income,” said Vos, co-chairman of the Legislature’s budget committee for the last two years. “The group in the middle are the ones that are the hardest hit.”

No, say Democrats.

Rep. Cory Mason, D-Racine, said taxpayers with annual incomes of up to $200,000 a year make four times Wisconsin’s median household income. “You’re in the Top 2 percent in Wisconsin. That’s hardly ‘middle class.’”

Vos’ plan for tax breaks to those with taxable incomes of up to $200,000 “tells me he hasn’t learned the lessons from the last election,” added Rep. Jon Richards, D-Milwaukee. By re-electing President Obama, voters rejected the don’t-tax-the-wealthy philosophy of Republicans, Richards said.

It’s a preview of the looming fight over how to spend part of state government’s budget surplus—a surplus that’s a stark contrast to the $3 billion budget deficit Walker and Republican legislators faced two years ago.

This time, Republican Gov. Scott Walker and Vos are developing a tax cut that would help taxpayers when they file their 2013 taxes months before Walker seeks re-election.

Vos wants a tax cut that won’t help the poorest and richest Wisconsin residents.

For those with taxable incomes of $20,000 or less, Vos explained, Wisconsin “is a really good place to be poor, nationally. Wisconsin is very generous.”

And for those with taxable incomes of more than $200,000 a year, Wisconsin taxes are “not the worst,” Vos added.

In his Nov. 16 political pilgrimage to the Ronald Reagan library in California, Walker promised that “massive” tax reform would be a part of his proposed budget.

Last week, in another WisconsinEye interview, Walker said Vos has a “good idea” to target a tax break on middle-class residents.

“A lot of people don’t know this, but if you look at the current tax code—not where we’d like to be, but where we’re at—the disproportionate amount of the burden is on the middle [class],” Walker added.

But Walker isn’t saying exactly how his tax cut would work. Those details won’t come until February, when the governor gives legislators his proposed state budget.

Democrats such as Mason and Richards say a middle-class tax break should not help those making $200,000 a year.

“They are certainly not ‘middle class,’” said Richards, who wants to make sure any tax-code changes help those making much less than $200,000 a year. For example, deductions for health care and Social Security benefits must be maintained, he added.

Mason said taxpayers with incomes of $20,000 or less are “the same group that was hit pretty hard last time.”

Then, the working poor were hurt when Walker, Vos and Republicans limited Wisconsin’s Earned Income Tax Credit. Most of those cuts were offset by anti-poverty funds, according to the Legislative Fiscal Bureau.

Rather than giving a tax break to those making $200,000 a year, a better choice would be restoring earned income benefits, Mason said.

The Vos tax-cut plan tells lowest-income taxpayers “you’re not a priority,” Mason added.

Here are numbers to consider as the tax-break controversy develops. In the 2010 tax year, according to the state Revenue Department:

--Thirty-nine percent of tax filers had taxable incomes of $20,000 or less. They paid 1 percent of the $6.07 billion in income taxes collected that year.

--Fifty-eight percent of all tax filers, or 1.67 million taxpayers, had taxable incomes between $20,000 and $200,000. About 97 percent of them paid a total of $4.3 billion in income taxes, or 71 percent of all income taxes collected.

--The 53,523 taxpayers with taxable incomes of more than $200,000 paid $1.6 billion in taxes, an average of $31,450 per taxpayer. They paid 27 percent of all income taxes.

Steven Walters is a senior producer for the nonprofit public affairs channel WisconsinEye. This column reflects his personal perspective. Email stevenscwalters@gmail.com.