Wisconsin budget committee approves tax code changes, exemptions
By Jessie Opoien Sep 7, 2017
Lawmakers on Wisconsin's budget-writing committee voted on Wednesday to scrap Gov. Scott Walker's planned income tax cuts, sales tax holiday and adjustments to the Earned Income Tax Credit.
The tax plan approved by the Republican-led Joint Finance Committee also eliminates the state's alternative minimum tax, which hits some of the state's highest earners.
Walker's proposed income tax cuts would have cost about $203 million, and saved most taxpayers $44 this year. His plan called for cutting rates for the two lowest brackets by one-tenth of a percentage point. The committee's co-chairs, Sen. Alberta Darling, R-River Hills, and Rep. John Nygren, R-Marinette, said the proposal didn't deliver enough bang for the buck.
The governor had also proposed about $20 million per year to increase the state's Earned Income Tax Credit for an estimated 130,000 families — a move rejected by the committee on Wednesday. The credit benefits low- to moderate-income working families, and Walker's plan would have primarily benefited qualifying parents with one child and newly married, dual-income couples. The credit was cut in the 2011-13 budget by about $24 million per year.
The tax package also eliminates the state's Working Families Tax Credit. According to the nonpartisan Legislative Fiscal Bureau, 725 people making about $9,000 per year received the credit in 2015, each receiving about $275. Eliminating the credit will bring in an estimated $400,000 over the course of the budget.
"You’re giving tax breaks to millionaires and you’re kicking working families while they’re down," said Rep. Katrina Shankland, D-Stevens Point.
Eliminating the alternative minimum tax, or AMT, is expected to bring tax revenues down by $1.75 million in 2018-19 and $7 million per year in the following years. The 6.5 percent tax is charged to filers with a large amount of deductions, the majority of whom earn between $150,000 and $1 million per year.
Rep. Dale Kooyenga, R-Brookfield, has long been a proponent of eliminating the AMT and implementing sweeping changes to the state's tax code. Kooyenga noted that both the working families tax credit and the AMT apply to a significantly small percentage of filers in the state, arguing both moves are designed to simplify the state's tax code.
"What we’ve seen over the last couple budgets are incremental gains, progress. Every single budget, we’re making our tax code a little less complicated, a little fairer," Kooyenga said.
Lawmakers also abandoned a Walker proposal to limit the state's Historic Rehabilitation Tax Credit, used to finance the restoration and maintenance of historic properties, at $10 million per year. Instead, each project would be capped at $5 million in credits. The changes are estimated to cost about $17 million in revenue over the course of the biennium.
The package approved on Wednesday also included the following items:
- Winners of Olympic, Paralympic and Special Olympics medals would not be required to pay state income taxes on the medal or prize money.
- Eliminate the governor's proposed "back to school" sales tax holiday.
- Create a sales and use tax exemption for tournament or league entrance fees that fund prize money.
- Create a sales and use tax exemption for materials used for beekeeping, resulting in a tax break of about $131,000 over the course of the budget.
- Exempt sales of farm-raised fish to a fish farm from the state's sales and use tax, resulting in a tax break of about $98,000 over the biennium.
- Create a sales tax exemption for broadcast equipment.
- Exempt some video and electronic games used as amusement devices from the sales tax.
- Increase the cigarette tax stamp discount for manufacturers and distributors from 0.7 percent to 0.8 percent. This would result in a tax break of about $900,000 over the course of the budget.
- No longer impose the state sales tax on internet access services, in compliance with a change in federal law.
In a separate vote on Wednesday, the committee voted to eliminate a portion of the personal property tax applying to machinery, tools and patterns not used for manufacturing. The state would make payments to local governments to replace the revenue lost from the tax — an estimated $74.4 million per year.