Background:

If an asset you own appreciates in value, the difference between the sale price and purchase price is capital gain.  To encourage people to invest to create jobs and wealth in our communities, Wisconsin taxes individuals on only 40 percent of their capital gains.

Two different proposals to increase the tax were debated during the budget process:

• Assembly budget – Increase capital gains tax by 50 percent, from 40 percent to 60 percent of total capital gains earned (a $170 million tax increase). 
• Senate budget – Increase capital gains tax by 150 percent, from 40 percent to 100 percent of capital gains earned (a $485 million tax increase).

Outcome:

The Democrat leadership in the Senate and Assembly compromised on their respective plans to increase the capital gains tax. Their final budget will tax 70 percent of a capital gain (up from current law 40 percent). Individual income tax collections are expected to increase by $242,500,000 in the next two tax years. Supporters say this revenue is needed to avoid cuts to state programs or an increase in the income or sales tax. Opponents say increasing the tax will make it harder for start-up companies to get off the ground by shutting off investment in the state. I agree with the opponents and would add that this tax increase will impact more than just wealthy investors because of the direct tie to job creation and our overall economic development climate.