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Evers, Legislature Propose Tax Reform

The most important piece of legislation state officials will work on during their two-year session is the state budget, and deliberations kick off immediately. In fact, the various executive agencies have been working on crafting their budgets since last Fall, and Governor Evers will introduce his final proposal in February.

With a projected $6 billion surplus, both the governor and legislators have a lot of ideas of how to spend that money, and both would allocate a significant chunk of those dollars to tax cuts. Of course, both sides have their own views of the best way to send money back to you.

 

Where do we stand now?

Income tax rates in Wisconsin are currently split into four brackets based on income level:

• $0 to $12,760 is taxed at 3.54%.
• $12,760 to $25,520 is taxed at 4.65%.
• $25,520 to $280,950 is taxed at 5.3%. 
• More than $280,950 is taxed at 7.65%.

Wisconsin has a 5% state sales tax with a county option to add 0.5% on top for generating local revenue.

Corporations are taxed at 7.9% on their income.

Of course there are a variety of other taxes, but those are the big three.

 

Governor Evers Plan

Evers announced his tax cut plan during his re-election campaign last year. This was prior to the projected surplus increasing even further, so his plans could change by the time he rolls out his budget plan in February. However it will likely look similar to what he originally proposed:

• Provide a 10 percent income tax cut for single filers at or below $100,000 in annual adjusted gross income and married-joint filers at or below $150,000.
• Provide tax relief for low-income seniors on fixed incomes by increasing the income limit for the Homestead Credit and restoring indexing for inflation to preserve the credit’s value.
• Expand eligibility for the Veterans and Surviving Spouses Property Tax Credit to support veterans and their families to include those with a disability rating of at least 70 percent instead of the current law of 100 percent. 
• Repeal the state’s minimum markup law for motor fuel, which requires gas to be marked up from cost. With changes under the governor’s plan, gas stations could immediately drop prices by removing this markup, which the latest estimates put at nearly 30 cents. 
• Create a caregiver tax credit for qualified expenses incurred by a family caregiver while caring for their loved one.
• Expand the newly created Child and Dependent Care Credit from 50 percent of the federal credit to 100 percent.

 

The Republican Legislature Plan

Meanwhile in the legislature, Republican leaders have announced their intention of putting the state on a path towards a flat income tax. A flat tax is just what it sounds like: one income tax rate for everyone. While the full details still need to be released including what deductions would look like, the broad plan would see Wisconsin go to a flat 3.54% rate to match the current bottom tax bracket.

Additionally, the legislature is also going to vote to finally eliminate the final provisions of the personal property tax.

Nine states currently have a flat tax including Colorado, Illinois, Indiana, Kentucky, Massachusetts, Michigan, North Carolina, Pennsylvania, and Utah. Iowa recently passed legislation to institute a flat tax. Illinois attempted to move to a progressive tax system like Wisconsin currently has, but it was defeated by the voters in 2020.

An additional nine states have no income tax at all, including Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.

The current fiscal year ends June 30, and debate will really heat up after the governor introduces his budget in February, but both sides have staked out their initial positions in public and now the negotiations – if any take place – can begin.

Original source can be found here.