Wisconsin legislators proposes $3.4 billion in tax cuts
All the right moves to attract bipartisan support
INSIGHT ARTICLE |
On June 17, 2021, the Wisconsin legislature’s Joint Finance Committee inserted more than $3 billion in tax cuts into the state’s 2021-2023 biennial budget bill. The tax cuts include a $2.7 billion reduction in the personal income tax, stemming from 6.27 percent to 5.3 percent rate reduction for the third bracket in the state’s progressive income tax schedule. For 2020, the third bracket applies to income between $31,910 and 351,310 for married taxpayers filing jointly. The proposal would also repeal the Wisconsin’s tax on business personal property, reduce local property taxes by $650 million with the state replacing the lost local revenue, and increase the refundable portion of the state’s research and development credit.
RSM state and local tax policy experts offer their views.
David Brunori: The tax cut proposals continue. Historically, when states run surpluses, there is a strong bias toward cutting taxes. From a policy perspective, I think reducing personal income taxes is sound provided the state can afford it. I believe that people and businesses will spend their money more effectively and efficiently than the government. In this case, Wisconsin can afford the cuts; it is running a $4.4 billion surplus. And, the cuts are aimed squarely at the middle - the "third" bracket. That will make it harder for the governor to oppose.
But the best part of the proposal is the repeal of what is left of the business personal property tax. Business personal property taxes represent terrible policy. They discourage business investment and purchasing. Every state should want businesses to spend money on machinery and equipment. More spending and investment mean more jobs.
Brian Kirkell: Spending a $4.4 billion surplus without any meaningful tax relief is not going to happen. And, this is tax relief that should be able to draw bipartisan support. It cuts personal income taxes on the all-too-often ignored third bracket; people who pay a substantial portion of the state’s personal income tax, own homes, spend a good deal of any extra money they have, and vote in large numbers. It reduces property tax without defunding schools, eliminates the business personal property tax, and increases the usable tax benefit for businesses doing research and development activities within the state. This is a set of tax cuts clearly designed to encourage growth, attract individuals and businesses to stay and invest in the state, and reduce the burdens of people in the middle in a time of plenty.
The proposal goes to Wisconsin’s Senate and House for consideration. Governor Tony Evers has not indicated whether he supports the measure, but has vetoed tax cut legislation in the past. Businesses and individuals should watch this legislation closely, as it may have a significant impact on their decision-making in the post-pandemic, highly-mobile environment.