By Ryan Ekvall | Wisconsin Reporter
MADISON — A Republican proposal for tax cuts, should it survive, could translate into an effectual pay raise for state workers.
Rep. Dale Kooyenga, R-Brookfield, on Tuesday introduced a nearly $790 million tax reform package that would reduce income tax rates for all working Wisconsinites and close some loopholes in state tax law.
Kooyenga says his plan would deliver a savings of about $300 a year for a family with a taxable income of $55,000.
For the average family in Wisconsin, income tax rates would move from the current 6.5 percent to 6.27 percent next year, and to 5.94 percent in 2015 and beyond.
The proposal would also eliminate nearly 20 business tax credits as part of what Kooyenga called a “compost pile” written into the tax law for special interests, including film production credits, jobs tax credits and post-secondary education credits.
He said tax reform in Wisconsin is years in the making and pledged more reform for a “fairer and more just tax code.”
“We are using the growth from our economy to plow into tax cuts for everyone in Wisconsin,” Kooyenga told reporters during a news conference Tuesday in the Capitol.
His plan would deepen the $300 million in tax cuts that Gov. Scott Walker proposed in January, before the Legislative Fiscal Bureau projected the state on pace to collect nearly $550 million more in revenue for the upcoming biennium.
“We understand when we have this money on the table, we have two choices. Do we use this money to increase the size of government or do we use this money to increase the private sector and support Wisconsin working families that are among the highest taxed in the entire country?” Kooyenga said.
According to the nonpartisan Tax Foundation, Wisconsin ranked 14th highest in the nation, at $1,020, in income taxes collected per person. Wisconsin ranked 11th in total state and local tax burden.
Under the bill, state income and franchise tax collections would decrease by $131 million in 2013-14 and $278 million in 2014-15, according to the Legislative Fiscal Bureau.
The cuts deepen the following two years, by $443 million in 2015-16 and $471 million in 2016-17.
Under Kooyenga’s proposal, most Wisconsin workers will pay 5.94 percent or less in income taxes.
“This is the new reality in Wisconsin,” Kooyenga told Wisconsin Reporter.
Democrats, however, criticized the proposal for its timing and the top-heavy cuts toward the wealthy.
“He’s taking Walker’s tax cut for the wealthy and made it even more regressive, where even more of the benefits go to the higher end,” said Rep. Jon Richards, D-Milwaukee, who, like Kooyenga, is a member of the Legislature’s powerful Joint Finance Committee.
Walker proposed to cut tax rates for the bottom three brackets in Wisconsin, covering incomes up to $217,630. Kooyenga’s plan further reduces the rates for people earning more than $217,630. It also reduces the number of income tax brackets in Wisconsin from five to three.
Richards said the money should instead go back into K-12 education after cuts made in the previous budget, with room for a small tax break.
“It was said that the plan was fiscally responsible, but it costs us $914 million in the next budget, money that could be used for our schools, for health care, even for targeted tax breaks for people that need the help,” Richards said.
The cost Richards refers to is money the state would otherwise take from Wisconsin taxpayers.
MMAC said the proposal “goes right to the heart” of some of the biggest impediments to economic growth: Wisconsin’s business tax climate.
“The real hidden gem in this package for business owners is the simplification of their compliance burden,” Tim Sheehy, president of the Milwaukee organization, said in a statement. “By reducing the number of tax brackets and eliminating many of the existing inconsistencies between state and federal tax treatment, this package frees up entrepreneurs to spend more of their time growing their business and creating jobs and less on navigating their way through an overly complex tax code.”
Kooyenga said the changes should lead to revenue growth.
“I’m optimistic when this goes through that it will lead to more economic activity, a larger tax base, and additional revenues,” he said.
Kooyenga’s plan would have to pass first through the Joint Finance Committee, which has only a few more budget meetings scheduled.
Contact Ryan Ekvall at [email protected]