MADISON, Wis. — Gov. Scott Walker’s “Reform Dividend” budget proposal pays back taxpayers with a bevy of tax cuts.
Overall tax relief in the biennial budget approaches $600 million.
But the 2017-19 spending plan raises some serious “rainy day” concerns with a Wisconsin taxpayers advocate.
The Republican governor promises to hold the line again on property taxes. His budget plan does away with the state portion of the property tax levy, eliminating one source of ongoing property tax increases.
“This tax, which had gone up each time a property’s value increased, will no longer be imposed on Wisconsin property owners,” states a Department of Administration budget analysis.
To accomplish this tax exorcism, Walker’s plan provides more than $180 million in fiscal years 2017-18 and 2018-19 to ensure continued state funding for forestry programs covered by local property taxpayers. The administration says the state forestry account in the conservation fund will be unaffected through this “tax relief action.”
“Ending the state-levied property tax will save the median value homeowner approximately $27 per year in the near term and more in the future as home values increase,” the DOA document states.
Walker has pledged to keep property taxes below the previous year’s level during his two terms in office. His budget plan asserts it will accomplish that by increasing the state’s commitment to the School Levy Tax Credit by $87 million in fiscal year 2018-19 to pay for credit distributions in the 2017-18 property tax year. This, combined with an increase in school equalization aids of $72.75 million and continued controls on property tax levies, “will ensure the Governor’s promise of continued property tax relief is achieved,” the budget summary states.
The tax bill for the median value home in December 2018 is projected to be $139 lower than the December 2010 tax bill, according to Walker’s office.
Despite the sustained efforts to trim Wisconsin’s tax burden, the Badger State boasts one of the higher property taxes in the nation. In 2015, Wisconsin recorded the highest property taxes in the Midwest, with Milwaukee County claiming the 32nd highest property tax rate among all counties in the country, according to census data compiled by the Tax Foundation.
Walker’s budget plan calls for modest reductions in income taxes. The proposal would trim more than $104 million in the first fiscal year, and more than $99 million in the second. It does so by reducing, for all taxpayers, the tax imposed on the first $37,450 of taxable income for married-joint filers and the first $28,090 for single filers. That’s a projected savings of $69 in 2017 for a median income family of four, according to the Department of Administration.
“This income tax reduction is part of a continuing trend to reduce the tax burden on Wisconsin residents and is the third income tax rate reduction since the enactment of the 2013-15 biennial budget bill,” the budget summary states.
By tax year 2018, the median-income family of four is projected to save $1,542 in overall tax reductions.
Democrats assert the Walker-led tax cuts have mostly benefited the wealthy. According to the budget summary, the reduction in tax liabilities for those with incomes greater than $100,000 has been 4.9 percent. For those with incomes below $50,000, the average reduction has been over 12 percent.
By tax year 2017, Walker boasts, the combined impact of the three income tax-rate reductions will amount to a total taxpayer savings of $545 million — with 53 percent of the tax relief delivered to taxpayers with incomes below $100,000.
“The Governor’s proposed tax reductions in this budget are especially aimed at the middle class, with almost 69 percent of the benefits going to those with incomes below $100,000,” the budget document states.
Walker says the state can deliver the tax cuts thanks to what he calls the “Reform Dividend,” a nod to the Republican-led government reforms like Act 10 that reportedly have saved local and state governments billions of dollars over the past five-plus years. Walker insists the reforms and a much-improved economy have led to better-than-expected revenue projections.
“At a time when we have significant new revenues, we need to lower the overall tax burden on the hard-working people of Wisconsin. Reinvesting in you — the taxpayers — will ensure that our economy continues to grow,” Walker said in this month’s budget address.
“So let me be clear. Now is not the time to raise taxes,” he said.
But it is apparently the time to spend significantly more in areas such as K-12 public education, a total of $11.5 billion over the coming two fiscal years. That’s a nearly $650 million increase in state aid.
Walker has received kudos from the likes of state Superintendent of Public Instruction Tony Evers, while raising grave concerns from his fiscal hawk friends.
State Sen. David Craig, R-Town of Vernon, said he is encouraged by the nearly $600 million in tax and fee reductions contained in Walker’s plan, as well as the “substantive welfare reforms, the repeal of prevailing wage requirements for state projects, and regulatory relief like the REINS Act.”
“However, I am deeply concerned by the dramatic spending increases within the Governor’s budget which further expand government and increase the fiscal commitment of taxpayers going forward,” Craig said in a statement.
More worrisome to fiscal watchers is what’s left in reserve under the Walker budget proposal.
While the governor boasts that Wisconsin’s so-called “rainy day” fun is the largest in state history — 165 times bigger than when he took office — budget watchers say the projected ending position of the Walker budget plan doesn’t leave much of an umbrella.
The proposal projects $81.7 million in reserve in 2019, enough for about a day and a half of state operations, according to David Callender, communications director for the Wisconsin Taxpayers Alliance.
Wisconsin continues to rank at or near the bottom of states in reserve funds, according to WISTAX.
“Just a few miscalculations by a couple percentage points and we could end in the kind of sudden reductions or sudden revenue increases [taxes] we’ve seen in previous budgets,” Callender said. “We don’t want to see a pattern of the sort of boom and bust budgetary policies.”