Due to positive economic conditions and stronger than expected tax collections, the state of Wisconsin will once again see a significant surplus. That means that after passing the recent budget that invested billions more into our schools, infrastructure, and health care systems – the state will have an additional $800 million sitting in the checkbook.
Current law requires half of any new surplus to be deposited into the rainy day fund, which will bring our total to nearly $1 billion. After much debate and discussion within both the Assembly and Senate, the legislature proposed a tax cut and debt reduction package, AB 910 and SB 821.
Unfortunately, Gov. Tony Evers vetoed the bills last week. Let’s break down what was in the proposal.
The biggest chunk, $214 million, would be given back to the taxpayers in the form of income tax relief. If passed, this bill would raise the standard deduction for Wisconsin filers. Most taxpayers in WI take the standard deduction and would have seen an average savings of $106 per filer, or over $200 for a married couple. I know some will say that is not enough to make a huge difference, but if we only waited to cut taxes until we could provide a HUGE cut, it would never happen.
Additionally, the tax package also takes a bite out of the personal property tax. For those of you that do not know, the personal property tax is something that our local businesses, large and small, continue to pay year after year on their equipment. Can you imagine going out and buying new furniture and kitchen appliances and having to pay the sales tax on it EVERY YEAR you own it? That is basically what the personal property tax does. The tax is outdated, it is unfair, and it certainly doesn’t make any sense, so this tax package takes a bite out of the personal property tax by further exempting machinery, tools, and patterns assessed of manufacturers. We are one of the few remaining states that has a personal property tax.
The part of the package that I support the most is using $100 million to make an advanced payment on our state debt. Under the bill, the Building Commission was directed to use $100 million of general funds to reduce the outstanding amount of general purpose revenue (GPR) supported general obligation debt. But not only does it make a payment on our debt, it would require our state to use half of any new surplus to continue paying down debt once the rainy day fund reaches 5% of the size of our general fund. This would be a transformational change that would put WI on a path to reducing our bonding in the short and long term. The federal government should take a few pointers from Wisconsin.
After reducing income taxes, reducing the personal property tax, and paying down debt - there would still be over $300 million left in the general fund checkbook as we head into the next budget season. Although the Governor vetoed what I believed to be a thoughtful proposal, I will continue to push my colleagues to look at the long term, fiscal stability of our state as we start discussing the next biennial state budget.