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June 15, 2019

5/21/2019 7:30:00 AM
Tax law changes net state revenue windfall
But most of increased revenue will be one-time

Richard Moore
Investigative Reporter


The state Legislative Fiscal Bureau has released revised fiscal estimates that project the state will bring in $753 million more than what was projected in January, primarily due to strong individual and corporate income tax collections.

According to the state Department of Revenue, the bounty is mostly due to one-time federal corporate tax policy changes.

Republican leaders, including Northwoods state Rep. Mary Felzkowski (R-Irma), hailed the new revenue projection as ratification of Republican policies over the last eight years, while Democrats focused their attention on what to do with the money, which they said should be used to fix "Republican messes."

But Felzkowski said Republicans had made sound, fiscally responsible reforms over the past eight years.

"Wisconsin's economy is strong," Felzkowski said. "We have more people working in the state now than any time before. Unemployment is at a historic low. Companies are moving their operations here because of our pro-business climate and resilient workforce. Wisconsinites all across our state will reap those benefits."

Senate majority leader Scott Fitzgerald (R-Juneau) said the numbers have positioned the state to be able to continue make needed investments without raising taxes.

"Wisconsin is seeing a return on our responsible fiscal management over the last eight years," Fitzgerald said. "As a result, we find ourselves in a great position to cut taxes, make smart investments in infrastructure, and maintain a strong closing balance."

Assembly speaker Robin Vos (R-Rochester) was more cautious, saying the state should use the revenue to grow its budget stabilization, or rainy day, fund and to pay down debt, a call echoed in part by Democratic Gov. Tony Evers. Vos also homed in on the one-time aspect of the windfall.

"Assembly Republicans are announcing our intentions to put these dollars toward providing tax relief, growing the rainy day fund and paying down debt," Vos said. "Now is not the time to go on a spending spree with one-time revenues. We refuse to spend in a way that we can't afford."

Vos said the state was in better position to protect taxpayers.

"The citizens of Wisconsin should be confident that we'll continue to be good stewards of their tax dollars," he said. "Moving forward in the budget process, we're committed to making the right priorities without raising income or sales taxes and expanding welfare."



Cleaning up the debt mess

Assembly Democratic leader Gordon Hintz (D- Oshkosh) said Evers was prepared to use the money to clean up what he called the "Republican debt mess."

Evers has announced his administration will make an additional payment on state debt which would pay off $56 million with an estimated savings on future debt service payments of close to $70 million, Hintz said.

But Hintz said he also supported Evers' intention to use some of the money for worker training and investment in the Wisconsin Technical Colleges System.

"After eight years of fiscal recklessness by Wisconsin Republicans, it's refreshing to see a governor act in the long-term best interest of our state," Hintz said. "During the second longest period of economic growth in our nation's history, Republicans chose to rack up debt on the state's credit card and favor corporate tax breaks over investing in the people of Wisconsin. Gov. Evers is continuing his commitment to put Wisconsinites first by making this significant debt payment."

Hintz said Republican propensity for accumulating debt and deferring payments was well-documented, citing a January Legislative Fiscal Bureau memo that between 2011 and 2016, former Gov. Scott Walker and legislative Republicans deferred payments of principal due by $767.3 million.

That delay will have cost taxpayers an estimated $88.7 million when it is paid off in the future, Hintz said.

"Since 2011, Republicans have been willing to undermine our future prosperity in order to give away billions of dollars in no-strings-attached cash payments to wealthy corporations at the expense of our public schools, tech schools, and UW System," he said. "Gov. Evers's plan is to put money toward our current and future workforce in addition to paying down Republican debts. Democrats are committed to fixing the fiscal mistakes of the past eight years and returning our state to sound financial footing."

But the co-chairpersons of the Joint Committee on Finance, Rep. John Nygren (R-Marinette) and Sen. Alberta Darling (R-River Hills), said some money will be ongoing.

"Contrary to the negativity coming from Democrats, Wisconsin is on solid economic ground," they said in a statement. "New data released by the non-partisan Legislative Fiscal Bureau shows we can expect nearly $150 million in ongoing revenue available for the next biennium on top of the $1.8 billion previously estimated. This is even more proof that there is no need to raise taxes on the people of Wisconsin."

The new estimates prove GOP reforms are working, the lawmakers said, adding the state is spending less on regulations while holding the line on taxes.

"We know there is more work to be done," they said. "As we continue our work on the 2019-21 state budget process, we will continue on the same path and employ responsible fiscal planning to ensure Wisconsin continues to prosper and succeed."

According to the LFB memo, general fund taxes are expected to be higher than previous estimates by $592 million in 2018-19, $68 million higher in 2019-20, and $93 million higher in 2020-21.

That makes the three-year increase $753 million, or 1.5%. As Nygren and Darling pointed out, the latter two year increases would represent ongoing revenue increases beyond the one-year spike in 2018-19.

Over the three-year forecast period, the memo stated, individual income tax estimates have been increased by $460 million, corporate income/franchise tax estimates, by $610 million, and taxes on insurance companies, by $25 million.

Those increases are partially offset by reduced estimates for sales and use taxes ($280 million), cigarette taxes ($37 million), and public utility taxes ($25 million).

Richard Moore is the author of the forthcoming "Storyfinding: From the Journey to the Story" and can be reached at richardmoorebooks.com.





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