Taxes and Fiscal Policy MI ReSEARCH

June 13, 2019 | By Ola Lisowski

Finance Committee Passes $536 Million Tax Cut Package, Finishing Its Work on 2019-21 Budget

Republicans on the Joint Finance Committee (JFC) voted to cut taxes by more than $530 million Thursday, finishing their work on the 2019-21 budget and passing the document out of committee. The vote follows more than a month of JFC meetings on Gov. Tony Evers’ budget proposal.

In the end, the JFC budget spends at least $1.7 billion over prior levels of spending, and bonds at least $1.88 billion more. Evers had proposed a budget totaling $84.2 billion for the biennium. That amounted to an actual dollar spending increase of $7 billion over the last budget, with more than $1.3 billion in tax, fee, and revenue increases to partially pay for the plan.

Under the Republican package, the average tax filer will see more than $200 in tax relief in the next two years, with the bulk of the tax relief coming through income tax rate reductions. The second income tax bracket, currently at 5.84 percent, will fall to 4.93 percent in 2020. The bottom-most bracket will fall from 4.0 percent to 3.76 percent in 2020.

Immediately after the budget vote, JFC passed a separate bill authored by Sen. Dale Kooyenga (R-Brookfield) and Rep. Jessie Rodriguez (R-Oak Creek). Assembly Bill 251 (AB 251) sends new revenue from remote sales tax collections (out-of-state online sales) into income tax reductions for the bottom-most rate. The budget motion and AB 251 together bring tax relief over the biennium to more than $530 million.

Currently, filers earning less than $11,230 pay a 4 percent income tax rate, one of the highest bottom-most income tax rates in the country. The next bracket applies to income up to $22,470, under current law.

Manufacturers would have seen the Manufacturing and Agriculture Tax Credit limited under Evers’ budget, raising taxes by $517 million. A long-term capital gains exclusion would have been eliminated, raising taxes on retirees by $505 million.

Both sets of tax increases are now gone, thanks to JFC Republicans. Rep. John Nygren (R-Marinette), co-chair of the Finance Committee, repeatedly highlighted the tax cut Republicans would provide for the middle-income earners, “without raising taxes on the people of the state of Wisconsin. Without raising taxes on manufacturers who are fueling our economy.”

As the committee finished its work, members on both sides of the aisle rehashed arguments for the budget as a whole. Most Democrats focused on the removal of Medicaid expansion from the budget, achieved in the first JFC session last month.

“You pull that Medicaid expansion string, the entire budget comes apart,” Sen. Jon Erpenbach (D-Middleton) said. “And it did. Gov. Evers’ budget started and ended with Medicaid. His budget ended the day Republicans took that expansion out.”

For her part, JFC co-chair Sen. Alberta Darling (R-River Hills) focused on one major question: “Are we better off right now than we were eight years ago? And the answer is a definite yes. We are better off,” Darling said. “The director of the Fiscal Bureau has said that we are getting almost $753 million more than we estimated. It shows our economy is doing well, and our tax cuts are working.”

In his closing comments, Nygren focused on the differences between the JFC budget and Evers’ proposal, asking where the governor’s budget would have taken the state.

“LFB estimated that Gov. Evers’ budget, despite all the tax increases, would leave us with a structural deficit of nearly $2 billion,” Nygren said, contrasting that with the estimated $1 billion structural deficit under the Republican-led plan.

He also acknowledged that Republicans picked up many of Evers’ proposals, spending beyond Evers’ funding levels at times.

“We probably spent more than we would have liked,” Nygren said. “That’s part of the compromise of legislating in split government.”

Nygren also noted that property taxes under Evers’ budget would increase by 3.6 percent, the largest in a decade. One provision in the Republican tax package establishes $59 million in property tax relief through the lottery tax credit. Speaking to the media before the voting session, Republican legislative leaders said they wanted to make sure property tax levels for the median home would be lower than in Evers’ package.

Some tax increases were included in the package, including an excise tax of 5 cents per milliliter on vapor products used for e-cigarettes. Evers had proposed extending cigarette taxes to vaping products, which would have raised $36.4 million. Instead, Republicans raised $5.5 million in taxes on the increasingly popular products.

Now, the question is whether the tax cuts will be enough to sway fiscal hawks in the Senate to vote for the budget as a whole. In the last month, JFC agreed to spend $500 million more on K-12 education, $484 million more on transportation (all funds), and $588 million more on health services in General Purpose Revenue (GPR). They also approved borrowing $1.88 billion for building projects across the state.

After JFC passed a transportation plan that more than doubled title fees, fiscal conservatives raised concerns that the spending increases didn’t come with nearly enough reforms to justify sending the troubled department more money. For that reason, while JFC deliberated on Thursday, the Assembly Committee on Transportation met in another part of the Capitol to pass a package of transportation reform bills. The committee passed four of six reform measures along party-lines. A bill that would require referenda for cities proposing new or expanded wheel taxes was removed from the agenda, likely to be brought back at a later date. The package is likely to be crucial to the Legislature passing the budget as a whole.

The Assembly and the Senate are expected to take up the budget in its entirety during the last week in June.

In the coming weeks, the MacIver Institute will publish a comprehensive analysis of the JFC budget. Follow us @MacIverWisc and @NewsMacIver for updates.

June 11, 2019 | By Ola Lisowski

ChartSmart: Taxes, Bonding, and the Building Program

Welcome back to ChartSmart. This week is likely to be the Joint Finance Committee’s last week of voting on the 2019-21 state budget. Today’s vote will include taxes, the building program, and quite a bit of state bonding. Check out the charts below to learn more. As always, make sure to follow us on @MacIverWisc and @NewsMacIver for live coverage.

April 29, 2019 | By Matt Kittle

‘It’s Very Real’: Tax Cuts Of 2017 Still Fueling Economic Boom Of 2019

MADISON, Wis. — The booming economy of 2019 continues to be fueled in large part by the GOP Tax Cuts and Jobs Act of 2017.

And Badger State companies and their employees continue to reap the rewards of tax relief.

U.S. gross domestic product (GDP), according to initial reports from the U.S. Commerce Department, grew by a whopping 3.2 percent in the first quarter, crushing estimates and soothing worries of a looming economic slowdown.

Companies like Pewaukee-based Trico Corp. have much to do with the U.S. economy’s impressive expansion. Bob Jung, CEO of the century-old industrial lubricants business, will tell you that the $1.5 billion tax relief package passed by the Republican-controlled Congress and signed into law by President Trump continues to benefit businesses like his — and Trico’s employees.

A year ago, Jung confirmed that, thanks to the tax cuts, Trico would provide $650 bonuses to its workforce, and the employer planned to increase contributions to employee 401(k) accounts. The company also expected to hire more full-time workers. Jung said Trico paid out those additional benefits earlier this year.

The lower tax rates for S corporations like Trico have made a big difference to the bottom line. But the reform package also included beneficial accounting changes. Jung’s company was able to change from accrual to cash accounting, allowing Trico to recognize revenue and expenses only when money changes hands, not when revenue is earned and expenses are billed (but not paid) under accrual accounting.

Jung said the tax cuts have helped the company expand products and services to customers. Trico sales are up 10 percent on the year, he said.

“Also, what may not be as immediate is (the tax savings) have allowed us to bank some cash,” the CEO said. “It’s a fact that there are going to be funds there for us to be able to put toward capital expenditures when the time is right, perhaps in the fourth quarter.”

Such sentiment bodes well for economic expansion ahead.

Economists’ consensus had pegged GDP growth at about 2.5 percent to start the year. Many are upping their full-year estimates following the latest numbers on top of a healthy 2.9 percent growth rate in 2018. On average, the U.S. economy has added 180,000 jobs in the first three months of the year, while the major markets continue to break records.

Grover Norquist, president and founder of Americans for Tax Reform, said the GOP tax reforms were designed to ramp up economic growth over the next three to four years. When you cut corporate income tax rates from 35 percent to 21 percent, however, that frees up a lot of capital to reinvest, Norquist said. And U.S. companies have done just that.

Corporate America brought back nearly $670 billion in offshore profits to the U.S. last year, according to the U.S. Commerce Department. That’s a considerable amount, even as Bloomberg and other media outlets chortled that it was a far cry from the $4 trillion President Trump predicted would return post-tax reform.

“We saw the growth immediately from the first year, so imagine what will happen over the next two, three, four or five, six years (with) the most powerful, pro-growth, pro-wage increase” tax reform law, Norquist told MacIver News Service in a recent edition of the MacIver NewsMakers podcast.

U.S. businesses continue to pass along their tax savings to employees, to consumers, and to their communities.

Americans for Tax Reform has tracked some 800 examples of new hires, pay raises, benefit increases, bonuses, facilities expansions, and utility rate reductions directly related to the tax cut package. This incomplete list, which only notes firms that have made public announcements, includes the largest corporations to the smallest shops — including dozens of Badger State companies, like Trico.

And Madison-based Musicnotes, Inc.

Last year, the worldwide leader in digital sheet music, announced it was giving 3 percent salary increases to its 55 employees, thanks to the corporate tax cuts. Tim Reiland, the company’s executive chairman, said Musicnotes intended to expand its workforce.

It has done that and more.

“This is a really positive story for us and it continues,” Reiland told MacIver News last week. “We definitely benefitted from the tax reform and we have passed some of that along and continue to do that.”

Musicnotes has added six positions, boosted salaries by an average of 10 percent, and expanded office space by about 15 percent since the beginning of 2018, Reiland said. He calls it the “virtuous circle.”

A lot of the company’s growth has to do with its products and the people behind them, Reiland said, but a significantly lower corporate tax rate certainly helps.

“It’s very real. It’s cash flow. That’s what you need to grow a business,” he said. “It has been a significant benefit to us, and we’ve shared, we’ve rewarded, we’ve plowed back and we continue to do that.”

Beyond business expansion and employee bonuses, a lot of companies have used a portion of their tax savings to benefit their communities. Case in point, CUNA Mutual Group. The Madison-based mutual insurance provider was able to make the largest contribution ever — $20 million — to its philanthropic foundation, thanks in part to tax reform.

“The reform benefit is helping us,” said CUNA Mutual spokesman Phil Tschudy. “The reason we did this is so we could ensure that our foundation is funded for years to come, regardless of economic situations.” The foundation turned 50 this year.

Consumers, too, continue to benefit from the 2017 tax reform law.

State regulators announced last year that WE Energies’ electric customers would receive a one-time credit in July and a slight decrease in rates “from a portion of the savings from the company’s lower federal corporate tax rate.” The Milwaukee utility’s customers received a combined $374 million in refunds, through bill credits, in 2018, according to WE Energies spokesman Brendan Conway.

“We have also lowered the amount of debt customers would have had to repay us $47.2 million,” he said in an email.

On top of that, the utility’s recent filing with the state Public Service Commission proposes to use an additional $111.3 million in tax savings to lower customer costs in 2020 and 2021.

Democrats, led by Speaker of the House Nancy Pelosi and Senate Minority Leader Chuck Schumer called the benefits delivered by the tax cuts “crumbs.” But employers and workers nationwide have been able to keep a lot more bread — and impressive economic growth shows the power unleashed when taxpayers are freed from the burdens of taxation.

April 18, 2019 | By Ola Lisowski

Wisconsin's Tax Freedom Day Is April 19th

The measure of the state’s average tax burden did not change between 2018 and 2019, according to a new report

Wisconsinites will be a little freer as of tomorrow, April 19th. The Badger State’s Tax Freedom Day is April 19th this year, according to the Tax Foundation.

Tax Freedom Day is the day in each year when taxpayers will have earned enough money to pay off their tax bills. Wisconsin’s Tax Freedom Day is three days after the national Tax Freedom Day, which occurred on April 16th this year.

Both the national and Wisconsin measures stayed on the same day compared to last year after jumping significantly earlier in the prior year, thanks in large part to the sweeping Tax Cuts and Jobs Act.

The Tax Foundation calculates the annual measure to remind the public just how much we spend on various government services every year. In 2019, Americans will spend more money on taxes than on housing, food, and clothing combined.

If future taxes owed are included, the fiscal picture is even more bleak. National Tax Freedom Day would occur on May 8, 22 days after the current date, if federal borrowing was included.

In the race between states, Wisconsin is behind the pack. The Badger State’s Tax Freedom Day is ranked 35th among the states. Alaska’s tax burden is the smallest, with taxpayers there earning their average tax bill by March 25. New York and Washington, DC are tied for last place at May 3.

The latest-ever tax Freedom Day was on May 1, 2000, according to the Tax Foundation. Americans paid 33 percent of their total income in taxes.

As the largest share of the average tax burden, income taxes take the longest to pay off, on average. Wisconsin has among the highest individual income tax burdens in the country.

If passed in its current form, Gov. Tony Evers’ 2019-21 biennial budget would increase taxes and fees by more than $2 billion. That would, without a doubt, push back Tax Freedom Day even later.

For their part, legislative Republicans reiterated their commitment to keeping taxes low this week.

“We’ve cut taxes by more than $8 billion and created a pro-business tax environment so that companies pick Wisconsin to grow — and all the while state revenues have been on the rise,” Senate Majority Leader Scott Fitzgerald (R-Juneau) said in a statement Monday. “We have Wisconsin headed in the right direction.”

On Twitter, Joint Finance Committee co-chair Sen. Alberta Darling (R-River Hills) reminded taxpayers of the massive tax cuts achieved through eight years of the Walker administration.

April 8, 2019 | By Matt Kittle

Manufacturers Warn Evers’ Tax Hike Could Force Companies To Make Moving Choices

JANESVILLE, Wis. — It’s about choices.

In an increasingly competitive global marketplace, businesses have lots of choices. Ultimately, business owners go where it makes most sense to do business.

That’s something tax-and-spend liberals never seem to get.

It’s a point Mitch Benson tried to drive home Friday afternoon at a day-long public hearing on Wisconsin’s yet-to-be-finalized 2019-21 budget.

Benson, senior vice president of Manufacturing Services for Janesville-based Prent Corp., urged members of the Legislature’s Joint Finance Committee to reject Gov. Tony Evers’ proposed cap on the state’s Manufacturing and Agriculture Tax Credit.

Evers, a Democrat, wants to roll back the successful tax break that his Republican predecessor, former Gov. Scott Walker, and the Republican-controlled Legislature crafted in Walker’s first term.

Evers’ plan limits the credit for manufacturers to the first $300,000 of qualified income. Why? To help pay for his middle-class tax cut plan. In other words, the governor raises taxes on a bedrock sector to pay for his tax relief package. The tax hike would raise a projected $516.7 million in tax revenue over the biennium.

That’s a nonstarter for Republicans, who continue to hold strong majorities in both houses of the Legislature. It is, at least for now. A lot can happen in the political horse-trading of divided government.

Manufacturers like Prent want to make sure lawmakers understand how important the tax credit has been to growing their businesses — and Wisconsin’s economy.

“The main focus we have is we need to maintain a competitive edge,” Benson told MacIver News Service after testifying before the powerful budget-writing committee. “We are constantly trying to find ways to optimize our production and find new innovative technologies to set us apart from our competition … so having a tax credit like this basically allows us to explore and employ new technologies that are out there…”

Prent, the world’s leading designer and manufacturer of custom plastic for the medical, electronics, and consumer industries, is one of Rock County’s largest employers, with a work force of approximately 550 people. Benson said the manufacturer has doubled its payroll since the tax credit took effect in 2013.

The credit, according to a 2017 University of Wisconsin-Madison study, created some 42,000 jobs by September 2016.

It’s a big reason, economic analysts assert, for the resurgence of Wisconsin’s manufacturing sector, which boasted a $59.1 billion economic output in 2017. More so, the tax credit has meant a lot to the people employed in manufacturing, which in 2017 accounted for 16.4 percent of the Badger State workforce, second-highest nationally. The average manufacturing job in Wisconsin paid nearly $57,000 a year, compared to the annual statewide wage of $47,250, according to the Wisconsin Policy Forum.

Tax and regulation relief over the past eight years has put Wisconsin’s economy back on track after the dour days of the Great Recession. Evers’ budget plan calls for $1.3 billion in tax hikes, including the rollback on the manufacturing tax credit. He has described the increase as “small,” and Democrats say capping the tax credit will only impact Wisconsin’s wealthiest.

Critics say the governor has a flawed definition of the word “small,” and the tax credit cap would hit a lot of pass-through businesses, smaller manufacturers that certainly could not be described as “wealthy.”

The Joint Finance Committee heard from hundreds of people on Friday in Janesville, the first stop on a four-city tour of public budget hearings this month. Many of those in attendance were affiliated with one liberal special interest group or another – from the ACLU to public employee unions to social justice groups. They all asked for more money for one government program or another. Not many taxpayers asking the budget-writing committee to rein in spending, urging lawmakers to check Evers’ massive $84 billion biennial budget plan that grows government by more than $6 billion.

Policymakers will have plenty of tough decisions to make.

Benson reminded them that manufacturers like Prent have choices, too. Capping the manufacturing tax credit could force businesses to rethink operating in Wisconsin.

“It goes back to you have choices, and we would have to look at where we would like to continue to invest,” he said.

It’s not a threat; it’s a reality of the increasingly competitive global marketplace. Need proof. Look to Wisconsin’s neighbor to the south. Illinois, thanks to the heavy hand of taxation and regulation, lost a breath-taking 97,000 manufacturing jobs in the decade since the beginning of the recession in 2007, according to Bureau of Labor Statistics figures. Many of those jobs have come north to Wisconsin.

“The state of Wisconsin has put tens-of-millions of dollars into an effort to try to attract Illinoisans across the border into Wisconsin,” Illinois Manufacturers’ Association president Mark Denzler recently told Illinois News Network.

Liberals like to say manufacturers ought to pay their fair share, that the tax break “strips resources from public priorities.” But Wisconsin manufacturers employ some 476,600 workers who are critical in feeding government’s insatiable hunger for tax revenue. Over-tax and over-regulate manufacturers like the days of Gov. Jim Doyle’s tenure in the 2000s, when chief executives ranked Wisconsin one of the worst states for business, and they will leave. And those high-paying jobs and their tax revenue will go with them.

“It’s a judgement call. We like states that are friendly to manufacturing,” said Benson of Prent, which has manufacturing facilities in Arizona, Malaysia, China, Costa Rica, Puerto Rico and Denmark, according to its website. “We take a look at what the environment is. Some states don’t have a friendly hand in manufacturing, and would never be considered.”

Will Wisconsin become one of those states again?

It’s all about choices.

April 8, 2019 | By MacIver News Service

In the spring 2019 election, voters across 48 districts approved 44 referenda amounting to $768 million in tax increases. Of the proposed $1.2 billion up for a vote, voters approved 64 percent, a significant decrease in referendum passage rates.

Last November, voters approved $1.37 billion in property tax increases via referendum questions, passing 94 percent of the measures on the ballot. In the April 2018 elections, voters passed 83 percent of proposed referendum questions, approving $563 million.

With just 64 percent of referendum questions passing in the most recent election, it appears taxpayers may be growing wearing of constantly increasing property taxes.

Of the 26 districts requesting to issue debt, 16 referendum questions passed, approving $661 million in new debt. Voters approved 65 percent of the total amount in new debt that school districts proposed. Last fall, voters approved 97 percent of total new debt proposed by school districts. Out of any shift in votes, this was the most stunning decrease.

Taxpayers also approved six of the seven recurring increases on spending caps, worth $10 million, and 22 of the 26 one time non-recurring increases, costing taxpayers $97 million.

School districts have state-imposed revenue limits that protect Wisconsinites from constantly-increasing property taxes. However, districts can still ask voters for more by coming to them with referenda during regularly-scheduled primary and general elections. Even if voters do not have a referendum question on their own ballot, referenda increase the statewide property tax base, affecting taxpayers across the state.

In the past, districts could propose referenda during special elections and could repeatedly propose the same project in consecutive elections. Former Gov. Scott Walker and the Republican-led Legislature have shared a commitment to lowering property tax burdens, spurring referendum reforms to ensure more voters have a say in matters of large tax hikes.

Gov. Tony Evers’ 2019-21 biennial budget proposal would roll back some of those protections on property tax increases, allowing school districts to offer up referendum questions during any election, not just regularly-scheduled elections.

Voters in Neenah rejected the second largest referenda request, a proposed new middle school and various building upgrades that would have raised taxes by $129,580,000. The Freedom Area District was denied a request for $55,680,000 to build a new high school along with a recurring $625,000 for operating expenses. In West Bend, voters refused a new elementary school which would have cost $47,000,000. Voters also denied requests for new gymnasiums, an athletic track, and building renovations across the state.

In the Sun Prairie School District, voters approved two separate measures. They approved $164,000,000 for a new high school. In order to operate the new high school, taxpayers approved a recurring $5,000,000. All in all, Sun Prairie was the biggest spender, making up 14 percent of the statewide requests, and over a fifth of the approved tax increases.

April 1, 2019 | By Ola Lisowski

Tuesday’s spring election will have voters considering nearly $1.2 billion in property tax increases, thanks to school district referenda. Forty-eight districts across the state are asking voters to approve projects ranging from brand new schools, to operating costs, and security upgrades.

A vast majority of the money that school districts are asking for would issue debt to property owners in the districts. This debt would be paid for by increasing local property taxes. Across the state, 26 districts are asking for more than $1.1 billion total in new debt.

According to the Department of Public Instruction (DPI), 85 percent of the referenda up for vote will issue debt directly to the taxpayers. Of the remaining 15 percent remaining, 14 percent are non-recurring or “one-time” increases on spending caps for the districts. Recurring increases on spending caps make up the remaining 1 percent of the amount up for vote.

Of the districts asking to issue new debt, the largest spender is Sun Prairie School District, which is asking for $164 million to build a new high school. Neenah School District is asking for voters to consider $129 million in debt to construct a new middle school, renovate several other buildings, and increase school security district wide.

Seven districts are requesting a recurring increase, which has no end date, and will continue to roll over year after year. Most of the recurring costs provisions would increase staff salaries or expand after-school programs. Sun Prairie has a ballot measure requesting $5 million a year to staff the new high school. DeForest Area is requesting a recurring $2.5 million for operational costs and district programming.

A non-recurring referendum allows districts to exceed their current spending for a set number of years before returning to original levels after the measure expires. Twenty-six districts have non-recurring referenda on the ballot, totaling $172 million.

Kettle Moraine School District is voting on a non-recurring referendum that would pay for operating expenses, requesting $5,975,000 a year for five years. This would increase the property tax burden of those in that district by $29,875,000 by the time it expires.

Several districts have multiple referenda on the ballot. For example, Sun Prairie is asking voters for $169 million in two referenda, one to build a new high school, the other for staff for the high school. The DeForest Area District is requesting $127,500,000 in total for construction and staffing.

Statewide, the $1.2 billion districts are requesting is nearly double the amount on the ballots last April, despite fewer referenda questions. In November, voters approved $1.37 billion in new property taxes when they passed 77 of the 82 referenda up for votes.

Some districts are using referenda as an opportunity to improve buildings and educational services for students., However, others such as Gale-Ettrick-Trempealeau are using these measures to create a new performing arts center.

Even for voters in districts that do not have referenda coming up in the spring elections, these spending increases raise the average level of property taxes statewide. At a time with record-high spending in schools, districts are continuing to ask for more than the levels set by the state.

April 17, 2018 | By M.D. Kittle

'Tax Freedom' Arrives Earlier Thanks to Tax Cuts

Today – two days later than usual – is Tax Day, when we Americans are reminded that in many ways we are indentured servants to a bloated government saddled by an ever-growing national debt.

By one measure, however, Wisconsin taxpayers are eight days freer than they were this time last year.

Tax Freedom Day,” the day on which taxpayers have earned enough money to pay their total tax bill for the year, arrives on Thursday (April 19) for Badger State taxpayers, according to the Tax Foundation – Keeper of Tax Freedom Day.

Last year, Wisconsin taxpayers didn’t break their government obligation chains until April 27, according to the Tax Foundation’s calculations.

New York’s tax burden is the heaviest; the Empire State’s Tax Freedom Day arrives on May 14. Residents of Alaska and Louisiana tied for the earliest Tax Freedom Day, April 4.

National Tax Freedom Day also is Thursday, three days earlier than last year. The tax burden easing is thanks in large part to last year’s tax reform package pushed by President Trump and passed by the Republican-controlled congress.

The Tax Cuts and Jobs Act didn’t just slash the corporate rate (and it did, from a top level of 35 percent to 21 percent), it significantly cut tax rates for individual taxpayers. The tax code reform, the first of its kind in a generation, is expected to cut taxes on average by $1,600, according to the left-leaning Tax Policy Center.

Those “crumbs,” as Democratic Party leadership likes to derisively describe the tax breaks, represent a wage increase for taxpayers who are keeping more of their hard-earned money in their paychecks.

And millions of taxpayers have seen raises, bonuses, expanded benefits and other compensation increases from their employers who have benefited from a substantial reduction of one of the heaviest corporate tax burdens in the world.

In Wisconsin, Associated Bank announced it would boost its minimum wage to $15, and pay employees one-time bonuses. American Family Insurance said it would pay out $1,000 bonuses to 11,000 workers. Company officials did not return a request for comment Monday.

Cincinnati-based supermarket chain Kroger Co., on Monday announced it will use proceeds from the tax cuts to provide enhanced benefits to its employees – including higher wages and a more generous 401(k) benefit. Kroger’s Roundy’s division is headquartered in Milwaukee.

“The Tax Cuts and Jobs Act is a catalyst that is enabling us to accelerate investments in Restock Kroger, our plan to serve America through food inspiration and uplift,” Rodney McMullen, Kroger chairman and CEO, said in a statement. “We intend to make significant investments in our associates, to continue redefining the customer experience, and return value to our shareholders – sharing the benefit with all of our stakeholders in a balanced way.”

Smaller businesses are doing the same.

In December, Stevens Point-based Copperleaf Assisted Living announced it would give its 175 employees bonuses of up to $600, a direct result of the tax reform package.

“It’s really to bring awareness to what’s going on in our country and how it impacts them … And that businesses and corporations do want to do the right thing,” Krista Mendyke, Copperleaf’s co-owner, told the Stevens Point Journal, after the tax cut legislation passed. Mendyke did not return a request for comment.

While the tax burden may be lighter this year than last, it’s still a heavy load. And it’s not like the size of government is shrinking with lower tax revenue; the federal government continues to borrow at an alarming rate to pay for government programs, sticking subsequent generations with the bill.

Tax Freedom Day takes all federal, state, and local taxes and divides them by the nation’s income, according to the Tax Foundation.

“In 2018, Americans will pay $3.39 trillion in federal taxes and $1.8 trillion in state and local taxes, for a total tax of $5.19 trillion, or 30 percent of national income,” the Tax Foundation notes.

Wisconsin taxpayers have seen an easing of their tax burden over the past seven-plus years. Gov. Scott Walker, backed by the Republican-controlled Legislature, has delivered north of $8 billion in tax cuts. The state’s property tax burden has declined by nearly 20 percent, according to economist Stephen Moore. And Walker has led several rounds of income tax cuts, although the state’s progressive tax system continues to diminish some of its tax relief gains.

Still, Wisconsin is faring better than some of its Midwest neighbors.

Illinois and its massive public pension debt won’t celebrate Tax Freedom Day until April 29. Minnesota taxpayers are free, so to speak, on April 27, while the day arrives on April 24 in Michigan. Tax Freedom Day is April 18 in Iowa, and April 10 in Indiana.

March 28, 2018 | By Abby Streu and Ola Lisowski

School Districts Want to Raise Taxes $667 Million on April 3rd

Across Wisconsin on April 3, 66 Wisconsin school districts will hold referenda asking local voters to raise property taxes. Voters will have to decide if they want to increase taxes by up to $667 million outside of regular revenue limits.

In the past, school districts could hold referenda during any election, and could repeatedly put the same project up for a vote in consecutive elections. Now, referenda can only be held on regularly scheduled general and primary elections.

Data obtained from the Wheeler Report shows the extent of the financial burden that could be caused by these referenda if passed. The majority of the referenda would issue debt to taxpayers totaling $535.9 million. About 40 percent of the referenda up for votes would raise taxes on a one-time basis, totaling $126.7 million. Six others would raise taxes on an ongoing basis, adding up to $4.75 million per year.

School district spending projects would increase property taxes for the construction of new schools, gymnasiums, performance arts centers, weightlifting facilities, and other facilities upgrades. Others would raise money for general operations, education programming, and salary increases.

Some projects would raise funds for basic safety measures, including one at Montello School District that would issue $3.75 million in debt to remove asbestos, replace parts of the roof and air conditioning systems, and bring the fire alarm system up to code.

Area families will need to choose whether or not to increase taxes to fuel spending for local school districts – but the increased tax base will also affect the rest of the state. Issuing additional financial strains in one area of Wisconsin raises the overall tax levy statewide.

Wisconsin lawmakers have worked to reform the referendum process to alleviate the burden on taxpayers. That goal has the support of Gov. Scott Walker, who has committed to lowering the average statewide property tax levy.

In the past, school districts could hold referenda during any election, and could repeatedly put the same project up for a vote in consecutive elections.

Now, referenda can only be held on regularly scheduled general and primary elections. The 2017-2019 Wisconsin State Budget further reformed referenda, limiting votes to regular general and primary elections to ensure more voters would have a say in local spending increases.

Thirty-five referenda totaling $535.9 million would issue debt to taxpayers. Chippewa Falls School District is seeking $65 million – the biggest potential tax increase out of any one referenda up for a vote Tuesday. That money would build a new elementary school, update the middle school and add a new laboratory onto the high school.

DC Everest School District is seeking nearly $60 million for a district-wide school building and improvement program. In Plymouth, voters will consider $32 million in debt for a wide range of facilities and security upgrades, including a gymnasium, cafeteria, and academic additions, remodeling, roof replacement, and HVAC upgrades.

Beloit Turner is asking voters to approve $27 million in debt to construct a new elementary school and make additions and renovations to FJ Turner High School.

Twenty-five school districts, or 38 percent of the referenda up for consideration Tuesday, seek to exceed revenue limits on a one-time basis totaling $126.7 million.

The largest amount asked for is $29,250,000 by Howard-Suamico School District to reduce class sizes and increase employee compensation. The school district would raise taxes over revenue limits for five years, from the 2018-19 school year to 2022-23, by $5.85 million every year.

The La Crosse School District is asking voters to raise taxes by almost $21 million over five years. That additional money would go toward maintaining academic programming, facilities, and upgrading technology.

Last April, 65 referenda were put to a vote across the state. In the end, 40 passed, costing Wisconsin taxpayers nearly $700 million.

Six referenda will ask voters to raise taxes on a recurring basis. The lowest amount being sought on a recurring basis is $25,000 per year for Alma School District.

The highest is $3,000,000 per year in Darien-Delavan School District to maintain education programming. The school district is asking voters to approve two separate referenda on the same ballot. The other ballot question seeks $1.5 million in one-time spending for a new football and soccer turf field, improvements to the stadium, and new academic and vocational programming at the high school.

Last April, 65 referenda were put to a vote across the state. In the end, 40 passed, costing Wisconsin taxpayers nearly $700 million. The MacIver Institute compiled the data here.

Two-hundred-eleven referenda were brought to the ballot box between October 2013 and November 2015, according to Wisconsin’s Department of Public Instruction. Voters approved 142 of them. In April 2017, the Journal Sentinel reported that school districts in Wisconsin have passed $12 billion-worth of referenda since 1990. More than half of these referenda have occurred in the last decade.

Stay tuned for updates on referenda results on Twitter at @newsmaciver and @maciverwisc.

Referendum data was provided by The Wheeler Report.

March 26, 2018 | By M. D. Kittle

Tax Conformity Brings Quiet Tax Relief

Call it the quiet tax cut.

While it didn’t get much press (and probably won’t), a “conformity” bill headed to Gov. Scott Walker’s desk is expected to quietly deliver tax relief in the millions of dollars.

Republican leadership balked at the tax cut again, but ultimately came to terms on a conformity package that mostly aligns Wisconsin’s tax code with the federal changes.

Last week, the Senate approved a measure that lines up Wisconsin’s tax code with the myriad changes made in the federal Tax Cuts and Jobs Act. Doing so will create less confusion for filers and the government and, in many cases, relieve the tax burden, if ever so slightly. It also will cut compliance costs for tax filers.

Some of the most prominent changes in the act do not affect Wisconsin tax law, but many other provisions are “relevant to Wisconsin’s state income and franchise taxes,” a Legislative Fiscal Bureau memo states.

There are offsets to the savings, but adopting the federal itemized deduction changes, for instance, would save taxpayers a combined $10.9 million in the 2018-19 fiscal year, according to the memo.

While the conformity tax breaks may not be significant to most taxpayers, they are representative of a conservative agenda led by Republican Gov. Scott Walker that has delivered some $8 billion in tax relief over the past seven-plus years.

Rep. Dale Kooyenga (R-Brookfied) and Sen. Howard Marklein (R-Spring Green), both CPAs, put together the tax conformity package, in flux until recently. A tie-in to the original version included bringing back Gov. Scott Walker’s $200 million state income tax cut proposal, which was scrapped by the Legislature in last year’s budget-writing process.

Republican leadership balked at the tax cut again, but ultimately came to terms on a conformity package that mostly aligns Wisconsin’s tax code with the federal changes.

Kooyenga said the federal tax code is still a mess, but Republicans in Congress made it better – and more beneficial to a majority of taxpayers – in the first overhaul of the U.S. tax code in 30 years. Many of those changes, upon the governor’s signature, will be reflected in Wisconsin.

“We’re not trying to mirror the federal code because it’s some perfect Cato Institute tax policy. I wish it was,” he said. “This made it a lot less bad. At the state level we took as many provisions as we could afford at this time to save taxpayers money.”

Some federal provisions were simply too costly to adopt, however. The federal deduction formula for pass-through business owners, for instance, would have cost the state $242 million in annual revenue.

“There’s no way we could get support for $242 million in tax cuts,” Kooyenga said.

The federal tax reform package opened up a new deduction on income for limited liability, S corporations, partnerships and others in an attempt to balance a cornerstone of the law – trimming the top corporate rate from 35 percent to 21 percent.

Wisconsin’s top individual and corporate tax rates are very close, so the tax savings of alignment would not be that pronounced, so there was not the same urgency to adopt the provision, Kooyenga said.

The federal tax reform law allows taxpayers to use investments in Edvest College Savings plans for K-12 education, in parental choice programs, or with other education-related expenses. Wisconsin taxpayers will be able to do the same at the state level, thanks to conformity.

Aligning the codes also brings Wisconsin into a new federal provision that allows families who have saved money in 529 higher education savings accounts the ability to roll over up to $15,000 each year from the college education savings accounts to an Achieving a Better Life Experience (ABLE) account. Congress in 2014 created the savings plans, allowing people with disabilities and their families to save for disability-related expenses without cutting off eligibility for Medicaid and other public benefits programs.

“Let’s say you have an 18-year-old who just graduated and had a horrific accident. Instead of going off to college, they are homebound. The provision allows you to take that money you put into an EdVest account and roll it over into an ABLE account without penalty,” Kooyenga said.

The conformity measure also aligns Wisconsin’s tax code with a federal change that allows victims of federally declared natural disasters to use some of their retirement account savings without financial penalties.

Some of the changes will cost taxpayers.

Taxpayers will no longer be able to exclude employer reimbursement of moving expenses from gross income. That tax break will be gone on the state and federal tax returns, and the state’s coffers are expected to be $6.4 million richer, according to the Fiscal Bureau memo.

And bicycle commuters can’t exclude their $20 monthly employer reimbursements from their income for tax purposes.

March 26, 2018 | By M. D. Kittle

Tax Reforms Remove Long-Standing ‘Expenses’ Tax Deduction For Congress

Members of congress will no longer get a sweet deduction on “living expenses” under the Republican-led Tax Cuts and Jobs Act.

Kooyenga credits Speaker Ryan and other key congressional Republicans who insisted that the days of special treatment for congress – at least on the deduction front – come to an end.

But before you shed too many tears for John Q. Congressman or Congresswoman, know that senators and representatives are entitled to all kinds of benefits that the average John Q. Citizen can only dream of.

The first major reform of the U.S. tax code in 30 years comes with the elimination of a provision that allowed members of congress to deduct up to $3,000 on living expenses incurred while doing the “people’s business” in Washington, D.C.

“That would be like you deducting your home and living expenses to work at your job,” said state Rep. Dale Kooyenga (R-Brookfield).

A tax conformity measure, authored by Kooyenga and state Sen. Howard Marklein (R-Spring Green), would mostly bring Wisconsin’s tax code in line with the changes at the federal level. That means the 10 members of Wisconsin’s congressional delegation can no longer deduct D.C. living expenses on their state tax forms, either.

Kooyenga credits Speaker of the House Paul Ryan (R-Janesville) and other key congressional Republicans who insisted that the days of special treatment for congress – at least on the deduction front – come to an end.

“He should be applauded for that,” Kooyenga said of Ryan. “Nobody has reported that.”

U.S. Sen. Joni Ernst (R-Iowa), a champion of the change, pushed a separate bill late last year aimed at killing the deduction.

The Stop Questionable, Unnecessary, and Excessive Allowances for Legislators Act, or the SQUEAL Act, was rolled out to “cut perks for elected officials and make Washington squeal,” Ernst wrote in a press release.

“To achieve the ultimate goal of lowering tax rates for hardworking families and businesses, Congress is going to have to eliminate various loopholes and deductions in our outdated tax code. Congress should lead by example and offer up its own unnecessary tax break,” Ernst added.

The total deduction amount is a drop in the proverbial bucket of the massive federal government budget, amounting to about $500,000 worth of aggregate tax savings per year for members of congress, according to Jared Walczak, senior policy analyst for the Tax Foundation. But it’s the thought that counts.

And fiscal hawks for years have been thinking of ways to eliminate or at least trim benefits that the bosses of congressional members – average taxpayers – don’t get.

The battle goes back to 1982, when an “urgent” supplemental bill limited to $3,000 a year business-related tax deductions that could be claimed by members of congress for D.C. living expenses, according to CQ Almanac.

“A more generous tax deduction had been approved on the last day of the session in 1981,” a measure aimed at enabling members to “deduct from their income taxes more of the expenses they incurred while in Washington,” the publication notes.

These more generous provisions, approved in January 1982, allowed members to deduct $75 per day for each “congressional day” in a given year, according to the U.S. Treasury Department. They could do so without having to substantiate expenses with receipts or even be in Washington on those days.

The new regulations provided a deduction of at least $19,200 for senators and $19,650 for House members. The numbers were different for the two chambers because the House met more days in 1981, CQ Almanac notes.

“The more generous tax rules provoked a raft of unfavorable publicity for members of Congress as taxpayers flooded Capitol Hill and the Internal Revenue Service (IRS) with angry letters and phone calls protesting the members’ tax treatment,” the publication states.

A campaign by taxpayer champions like Wisconsin’s Sen. William Proxmire ultimately killed the hefty deductions. But the Democrat, famous for his tongue-in-cheek “Golden Fleece” awards exposing the government’s squandering of public money, authored an amendment that ultimately restored the $3,000 deduction cap.

Some members of congress have complained the deduction isn’t enough for lawmakers living in one of the most expensive cities in the nation.

Former U.S. Rep. Jason Chaffetz (R-Utah) told the Hill last year that a $2,500 monthly housing allowance “would be appropriate and a real help to have at least a decent quality of life in Washington if you’re going to expect to spend hundreds of nights a year here.”

In short, to hell with $3,000 in annual deductions. Chaffetz says $30,000 more per year in living expenses is the way to go. The congressman’s ultimate argument, it seems, is that …”[Y]ou shouldn’t have to be among the wealthiest of Americans to serve properly in Congress.”

But the congressional salary – and the suite of benefits that comes with the job – puts representatives and senators at least in a doing-a-far-sight-better-than-many-other-Americans class.

Besides the $174,000 annual salary for rank and file members, congressional membership comes with truly platinum health and pension benefits, largely subsidized air travel, and one sweet gym.

Chaffetz shouldn’t expect much sympathy from the speaker, by the way. Paul Ryan has been known to sleep in his D.C. office.

“I live in Janesville, Wis.,” Ryan told CNN in 2015. “I commute back and forth every week. I just work here. I don’t live here. I get up very early in the morning. I work out. I work until about 11:30 at night. I go to bed, and I do the same thing the next day.”

March 22, 2018 | By M. D. Kittle

Assembly Passes Expanded Background Checks, Tax Relief In ‘Extraordinary’ Session

MADISON, Wis. – Between heated debates on school safety and last-minute amendments expanding firearm background checks, the state Assembly in “extraordinary session” Thursday passed some key conservative reforms and tax breaks for Wisconsin families and shoppers.

Shoppers and parents of dependent children will see some tax savings later this year after the Assembly passed a Senate-tweaked tax relief bill.

But the Assembly put the ball back in the Senate’s court in crafting a controversial measure tied to a school safety package that would expand background checks for rifles and shotguns. Thursday was supposed to be a final floor day for the Republican-controlled Legislature, but the Senate would have to come back one more time if the background check bill has a chance at getting to Republican Gov. Scott Walker’s desk.

A spokesman for Senate Majority Leader Scott Fitzgerald (R-Juneau) did not return an email seeking comment about the Senate’s intentions.

The Assembly, with Democrats joining, did pass the key elements of Walker’s school security plan, including the creation of an Office of School Safety led by the Department of Justice, which would administer $100 million in state grants to beef up security at Wisconsin’s schools. The safety initiatives passed more than a month after a student gunman fatally shot 17 people at a Florida high school.

Democrats called for more gun control measures, including gun bans.

Speaker Robin Vos (R-Rochester) and Assembly Republicans offered a bill that Vos says would do in Wisconsin what Congress appears poised to do nationally: tap into a federal database to expand background checks to long guns. Information would be shared through the National Instant Criminal Background System Section (NICS) managed by the FBI.

Vos, who coyly told reporters Thursday at a pre-floor session presser they would have to wait and see whether a background check bill was in the offing, later said the bill is about enhancing the state system already in place.

“Nothing in this proposal will do anything to ban a person lawfully allowed to own a firearm,” the speaker said.

The legislation also ties background checks to state court records.

“We will have our people who purchase a rifle also ran through our handgun hotline in the state of Wisconsin,” said Rep. Mary Felzkowski (R-Irma), referring to the backround check tool run by the state Department of Justice. “We are doing this so anyone who should not have a weapon, a criminal-type person, will not get a weapon.”

But conservative lawmakers who spoke to MacIver News Service, some in the Assembly, some in the Senate, expressed concerns about the scope of the legislation.

Groundbreaking Tort Reform

The Assembly – again – passed two key conservative reform measures during its “extraordinary session.”

On a party-line vote, the Republican majority approved an amended Senate version of a tort reform bill that proponents say will reduce litigation expenses and bring common sense back to the legal process. Assembly Bill 773 now heads to the governor’s desk.

Civil justice reformers celebrated the legislation’s passage.

“AB 773 is a major victory for small to large Wisconsin businesses and will greatly reduce the cost of litigation. The legislation brings Wisconsin in line with the vast majority of other states when it comes to its discovery procedures and class action rules,” Bill G. Smith, president of the Wisconsin Civil Justice Council and state director for National Federation of Independent Business-Wisconsin, said in a statement.

The bill would make Wisconsin one of the first states in the nation to bring transparency to litigation financing.

Among other reforms, the bill takes on the escalating costs of discovery, or the pre-trial, evidence-gathering process. The legislation updates and brings Wisconsin in line with federal civil code on discovery, disclosure, and class actions.

The bill would make Wisconsin one of the first states in the nation to bring transparency to litigation financing. These big bets on big litigation payouts are done in the shadows by law firms and investors who provide plaintiffs upfront cash in return for pushing potentially hefty-settlement lawsuits.

Assembly Bill 773 requires such “fishing” litigation agreements be disclosed to the parties, unless stipulated or ordered by the court. Unlike discovery law, the federal government would be playing catch-up to Wisconsin on litigation finance disclosure.

“At the urging of U.S. Chamber of Commerce, the arm of the federal judiciary that oversees procedural rules recently decided to examine whether the court system should require all civil litigants to reveal financing deals with outsiders who have wagered on legal outcomes,” the Wall Street Journal noted in a piece this week headlined, “Lawsuit Funding, Long Hidden in the Shadows, Faces Calls for More Sunlight.”

The story notes that the U.S. Senate Judiciary Committee is considering legislation that would demand class-action plaintiffs to disclose such funding sources. The bill previously passed in the House amid heavy objections from trial lawyers who claim the disclosure campaign would stifle legal action under the guise of transparency.

Consistent Employment Law

On yet another party-line vote, the Assembly passed legislation aimed at bringing statewide uniformity to employment law.

The lower house originally passed the measure late last month, on what was supposed to be the Assembly’s final day of session. But an amendment tacked on to the bill that would have exempted tech giant Foxconn from portions of the reforms was sacked earlier this week by the Senate, which sent the clean bill back to the Assembly.

Proponents say the measure would end the ‘patchwork’ of employment laws that create confusion, kill competition and drive up business costs based on the whims of local government.

Proponents say the measure would end the ‘patchwork’ of employment laws that create confusion, kill competition and drive up business costs based on the whims of local government.

Democrats, unions, community organizers and other opponents claim Assembly Bill 748 is an assault on Wisconsin’s tradition of home rule. “The party of local control no more,” said Sen. Dave Hansen (D-Green Bay), castigating Republicans and the bill during Senate floor debate.

Sen. Chris Kapenga (R-Delafield), the bill’s co-author, said Republicans are indeed the party of local control, but employment law is a statewide concern.

“People view Wisconsin both internally and externally based on how uniform we are in employment law,” he told MacIver News last week on the Vicki McKenna Show. “When it comes to employment law and mandates on employers, we want to have uniformity throughout the state because it just makes it easier to do business here.”

Local governments could no longer create policy on labor agreements, “living wages,” rules on worker scheduling and a long list of other employment law that are more stringent or burdensome than state statute.

Tax Relief Passes

Shoppers and parents of dependent children will see some tax savings later this year after the Assembly passed a Senate-tweaked tax relief bill.

The legislation provides a $100 per-child tax rebate, and a smaller sales tax holiday on certain items set for the first week in August. Assembly leadership had sought a broader $50 million sales tax holiday plan, but the Senate, lukewarm at best on the tax relief proposal, significantly trimmed the final version, to approximately $12 million.

Democrats blasted the $122 million tax rebate for families of dependent children 18 and under as an election year gimmick. In a theme reminiscent of congressional Democrats, Assembly liberals see the tax break as mere crumbs.

State Rep. Dale Kooyenga (R-Brookfield), who is leaving the Assembly in his pursuit of a Senate seat, accused his colleagues on the left of exhibiting little empathy for low-income residents living on the margins.

“A couple hundred bucks may be the difference between finding your stuff on the curb or having one more month” of rent, Kooyenga said. While the fiscal conservative said the plan wasn’t his idea of a “tax utopia,” he agreed with fellow Republicans who said Wisconsin’s tax revenue surplus doesn’t belong to the government, it belongs to the taxpayers.

“Many would have liked to see this money stay in Madison to be spent on the government’s priorities. Thankfully, that’s not going to happen. It’s going to be returned to the hardworking taxpayers, so they can spend it on their priorities,” Walker said in a statement, thanking his fellow Republicans in the Legislature for passing his proposal.

Unanimous Support

And the Assembly sent to the governor’s desk a package of juvenile corrections reform bills that will, among other things, lead to the closure of the troubled Lincoln Hills youth corrections center. The bi-partisan bill passed unanimously, 90-0.

“We aren’t just closing Lincoln Hills,” said Michael Schraa (R-Oshkosh), co-author of the legislation, in a statement. “We’re establishing a new way to deal with troubled youth. Juvenile offenders will be placed at state or county facilities based on the severity of their offense. The vision is to keep these youth closer to home, tied to community, and engaged in building positive life skills.”

The pricey plan, which would tap into hundreds of millions of dollars in bonding, would create regional youth facilities around the state, among other programming initiatives.

“Incarcerated youth will now have access to the services and rehabilitation they need while accomplishing these goals closer to their home and families,” Rep. Evan Goyke (D- Milwaukee), said in the statement. “This is a proven model in other States and we can now establish and implement ‘The Wisconsin Model.’”

March 20, 2018 | By M. D. Kittle and Chris Rochester

UPDATED: Senate Passes Tax Breaks, Juvenile Corrections Reform After Last-Minute Deals

MADISON, Wis. – A trio of last-minute deals Tuesday between bickering GOP Senate and Assembly leadership secured passage of key parts of Gov. Scott Walker’s agenda during the Senate’s last floor period of the legislative session.

In the end, there was enough détente among top Republicans to come to terms on election year tax breaks and to forge a compromise on a juvenile justice reform package.

Failing to pass muster in the Senate was a proposal to extend the same tax incentives given to Foxconn to struggling paper manufacturer Kimberly-Clark.

“I’m proud of the many bi-partisan bills we passed today,” Sen. Alberta Darling (R-River Hills), co-chair of the Legislature’s powerful budget-writing committee, said in a statement. “I believe this session, my colleagues and I were able to work together to tackle real issues and find solutions.”

Some key conservative measures won passage, while other liberty legislation died at the Senate doors.

Meanwhile, the Assembly Committee on Education held a lengthy hearing on a $100 million package of school safety bills that Walker asked the Legislature to pass in special session. The full Assembly is set to vote on a compromise package during an “extraordinary session” on Thursday.

With a few changes, the Senate passed Walker’s proposals, which will put more school resource officers in schools and deliver safety training for teachers. It also creates an Office of School Safety in the state Department of Justice to administer the grant process and provide security guidance to districts

Senator Darling says she is pleased how quickly the Legislature acted on the Governor’s proposal.

Democrats complained such programs should be handled at the Department of Public Instruction, run by their fellow Democrat and candidate for governor, Tony Evers.

Stop with the politics and get on with securing our schools, state Rep. John Jagler (R-Watertown) told his Assembly colleagues during Tuesday’s hearing.

“It should be noted as we’ve sat here there’s been another school shooting, this time in Maryland. A student shooter was taken down by a school resource officer with a gun,” Jagler said.

The lawmaker was referring to an incident Tuesday morning in which a 17-year old male student who shot two other students at Great Mills High School was engaged and shot dead by a school resource officer.

Tax Breaks

Also caught in the gridlock between the two houses was Walker’s proposal to return $172 million to taxpayers. While a $100 per child tax rebate, totaling $122 million, enjoyed wide support in both houses, a broad $50 million sales tax holiday for the first week in August faced Senate headwinds. As part of a deal to secure passage of the entire package, the Senate reduced the price tag of the sales tax holiday to approximately $12 million by limiting the number of items that qualify.

A tax conformity package tacked on to another bill won final approval in the Senate Tuesday. The bill moves to the governor’s desk.

That measure, authored by Rep. Dale Kooyenga (R-Brookfield), lines up Wisconsin’s tax code with the many changes made in the federal tax reform law. Doing so will create less confusion for filers and the government, and is expected to result in millions of dollars in tax savings for a wide range of taxpayers.

Federal tax changes, for instance, allow taxpayers to use investments in Edvest College Savings plans for K-12 education, in parental choice programs, or with other education-related expenses. Wisconsin taxpayers would miss out on that benefit if the state fails to conform to the federal change.

“This is really necessary maintenance,” Kooyenga told MacIver News Service last month.

Juvenile Justice Deal

The Senate unanimously passed a tweaked version of the proposal to reform the state’s youth prisons and shut down the troubled Lincoln Hills and Copper Lake juvenile corrections facilities. The Senate’s version adds a provision giving the Joint Finance Committee the final sign-off on future decisions under the plan.

Senate Majority Leader Scott Fitzgerald (R-Juneau) previously said passage of a package that passed in the Assembly late last month would be a “heavy lift.”

Following passage of the Senate bill Tuesday, Sen. Van Wanggaard (R-Racine), said Fitzgerald was right.

“While I, and others, had been working on this issue for a while, many had not. This is not a ‘lock them up and throw away the key’ issue,” Wanggaard said in a statement. “We are dealing with lives and families, and the future of our state. It was appropriate that the state Senate have time to review the bill and educate themselves about its potential impact.”

Lincoln Hills, to be replaced by smaller, regional juvenile detention facilities, is now slated to close by the end of 2020.

‘Patchwork Bill’ Passage

The Senate on a party-line vote passed legislation aimed at bringing statewide uniformity to employment law.

But the “preemption” bill, which passed in the Assembly last month (also along party lines), must go back to the lower house.

Proponents say the measure would end the ‘patchwork’ of employment laws that create confusion, kill competition and drive up business costs based on the whims of local government.

Democrats, unions, community organizers and other opponents claim Assembly Bill 748 is an assault on Wisconsin’s tradition of home rule. “The party of local control no more,” said Sen. Dave Hansen (D-Green Bay), castigating Republicans and the bill during floor debate.

Sen. Chris Kapenga (R-Delafield), the bill’s co-author, said Republicans are indeed the party of local control, but employment law is a statewide concern.

“People view Wisconsin both internally and externally based on how uniform we are in employment law,” he told MacIver News last week on the Vicki McKenna Show. “When it comes to employment law and mandates on employers, we want to have uniformity throughout the state because it just makes it easier to do business here.”

Local governments could no longer create policy on labor agreements, “living wages,” rules on worker scheduling and a long list of other employment law that are more stringent or burdensome than state statute.

Pricey Rural Spending Bill Dies

One bill pushed by Gov. Walker that would’ve spent an additional $50 million per year on rural economic development also died at the Senate doors. Assembly Bill 912, authored by Rep. Travis Tranel (R-Cuba City) would’ve directed the Wisconsin Economic Development Corporation to distribute grants to economic development projects in counties with less than 155 people per square mile.

Opponents on the right were concerned about the steep $50 million new annual price tag, while Democrats said the bill didn’t spend enough.

The bill passed the Joint Finance Committee and the Assembly unanimously earlier this year, but was never scheduled for a vote on the Senate floor.

Kimberly-Clark Pay-to-Stay Proposal Dies

Also failing to pass muster in the Senate was a proposal to extend the same tax incentives given to Foxconn to struggling paper manufacturer Kimberly-Clark, which announced plans earlier this year to shut down two Wisconsin plants and lay off 600 workers.

The plan was an attempt to convince the company to retain its Wisconsin operations by giving it a 17 percent tax credit for existing jobs paying at least $30,000-$100,000 and a 15 percent capital investment credit. That’s the same deal given to electronics manufacturer Foxconn, which is in the process of building a new $10 billion manufacturing campus in southeastern Wisconsin.

The unsolicited offer, derided by free market groups including the MacIver Institute as a short-sighted bailout of a struggling private company, was not taken up by the Senate on Tuesday. The bill passed the Assembly 56-37 in February.

Missed Opportunities

A bill codifying Direct Primary Care, a free-market solution to the mess Obamacare has left, also died at the Senate doors.

Direct Primary Care is a free-market method of delivering health care in which patients pay their primary care doctors directly via a monthly fee, bypassing traditional health insurance that can obscure the actual costs of procedures. The innovative arrangement is often compared to a gym membership – doctors are paid a fixed monthly fee for a set menu of services, and waiting to see your doctor is virtually eliminated. It’s health care, not health insurance, but sources say the Association of Health Plans worked feverishly behind the scenes to kill the bill. Mission accomplished.

State Sen. Dave Craig (R-Town of Vernon), a vocal supporter of the bill, called Direct Primary Care the “single best tool we can use to decrease the cost of health care.”

The legislation will have to wait until next session.

March 19, 2018 | Guest Perspective By Brad Schimel and Ken Paxton

Without the Individual Mandate’s Tax, Obamacare Should Fall Apart in Court

The following column originally appeared in The Daily Signal.

When Congress enacted President Donald Trump’s landmark tax reform plan in December, one media outlet proclaimed: “The GOP Tax Bill Kills Obamacare’s Individual Mandate.”

Turns out, the headline was wrong. The individual mandate—the unconstitutional requirement that most Americans buy health insurance—remains in the law.

The headline should have proclaimed that the tax bill repealed the tax penalty associated with the mandate, thereby rendering every single word of Obamacare unconstitutional under the Supreme Court’s reasoning.

Back in 2012, the Supreme Court narrowly upheld the constitutionality of Obamacare in a 5-4 decision. Although the five justices in the majority searched the entire Constitution, the deciding vote—Chief Justice John Roberts—found only one basis for Congress’ authority to enact the individual mandate: the power to levy taxes.

Last year, Congress repealed the individual mandate tax penalty, rendering the individual mandate unconstitutional under Roberts’ reasoning. And without the mandate, the rest of the law falls.

In his opinion, Roberts said that while Obamacare’s mandate is best read as an unconstitutional requirement on Americans—which Congress has no authority to enact—its constitutionality could be salvaged as a “tax” because the mandate’s associated tax penalties raise “at least some revenue.” Roberts cited this raising of “some revenue” as being “the essential feature of any tax.”

Last year, Congress repealed the individual mandate tax penalty, leaving only the unconstitutional mandate. This change rendered the individual mandate unconstitutional under Roberts’ reasoning. After all, the mandate no longer raises “some revenue.”

And without the mandate, the rest of the law falls.

President Barack Obama and the leaders of Congress made it very clear at the time that the individual mandate is the core of Obamacare. Without it, Obamacare cannot function as Congress and the Obama administration intended.

The Obama administration even told the Supreme Court that key parts of Obamacare would be invalid without the mandate. In other words, you cannot constitutionally separate the mandate from Obamacare’s structure. If the individual mandate is now unconstitutional, the entire law must be struck down.

Texas and Wisconsin, joined by 20 states, filed a lawsuit in federal court earlier this month asking the federal courts to obey what the Supreme Court has already recognized and hold all of Obamacare unconstitutional.

Since its passage in 2009, Obamacare has been a colossal failure. It has not lowered premiums for most Americans, and it has not brought down the cost of health care. It has succeeded in imposing billions of dollars in costs on individuals and endangered America itself by far overstepping the bounds of the federal power set by our Constitution.

Everyone except many of the politicians in Washington, D.C., understands that the powers of the federal government are, as James Madison famously put it, “few and defined.” Plainly and simply, the federal government’s authority is strictly limited to the matters spelled out in the text of the Constitution.

The 10th Amendment reserves the authority to do anything and everything else exclusively to the states or to the American people. The Founders did not build our Constitution around federalism for the benefit of law professors and D.C. politicians. They build it to be a castle wall guarding the liberty of all Americans.

We bring this challenge to Obamacare because, as state attorneys general, we took an oath of office to uphold the rule of law and protect the rights of Americans from the unconstitutional, ever-expanding intrusion of the federal government.

Through our multi-state lawsuit, we hope to restore the rule of law to our health care markets. Then the president and Congress can pursue the health care reform it actually has the authority to enact.

Brad Schimel and Ken Paxton are the Attorneys General of Wisconsin and Texas, respectively.

March 19, 2018 | By Ola Lisowski

Over $460 million in income Leaves Wisconsin Every Year

Tax migration has hit the Badger State hard. It’s time for the state to step up and take the battle for population growth seriously.

Thousands of Wisconsinites leave the Badger State every year, taking millions of dollars with them – a bleak trend highlighted by recent Internal Revenue Service data. An average of $463 million left the state annually from 2011 to 2016, according to tax records.

Between 2015 and 2016 alone, 5,185 fewer households filed tax returns in Wisconsin. Total adjusted gross income – all the income that Wisconsinites reported – fell by a shocking $461 million in that year alone. Wisconsinites are leaving in droves, and they’re taking their nest eggs with them.

From 2011 to 2016, more than $2.3 billion left the state of Wisconsin. A net 35,788 people have left in that time, an average of 7,158 fewer Wisconsin tax filers every year.

If Wisconsin is to succeed in the 21st Century, it must step up its game to become both a regional and a national beacon for new residents and businesses. What Wisconsin lacks in physical warmth, it should make up in the welcoming warmth of our people. We need new ideas to keep our young people here, to attract new talent for our unfulfilled job openings and to keep our retirees from moving south permanently. We new strategies that make it clear that everyone – yes, even those pesky Chicagoans – should move here.

But instead of welcoming new residents, those who are already here are packing up and leaving year after year. Even though the state’s total population is still slowly growing, thousands make the tough decision to pack up “home” one cardboard box at a time and move out of the state. They move out in the hopes of finding a better life and lower taxes elsewhere. It’s not a new trend – Americans have been leaving the Midwest and East for the South and West for some time. We should not, however, accept it as inevitable.

The Walker administration recently passed a $6.8 million initiative to attract young people and veterans to Wisconsin, touting its low cost of living. Clearly, the administration knows that we need new talent in the state to stay competitive and keep growing. With unemployment at record lows, the problem is no longer Wisconsinites finding good-paying jobs, it’s finding talented workers to fill the jobs we have. One way to attract those workers is by continuing to treat them better by lowering the overall tax burden.

Texas, which has no income tax, has been a beacon in this regard. The Lone Star State attracts more domestic migrants than any other state, with an average of 519 incoming residents every single day in 2017. From 1992 to 2016, Texas gained almost $47 billion in adjusted gross income. Wisconsin, on the other hand, lost $4.82 billion in wealth.

Census Bureau statistics show where Wisconsinites go when they leave, and where new Wisconsinites came from when they arrive. Overwhelmingly, Badgers are moving to Florida, Arizona, Texas, and Colorado, all states with lower tax burdens than Wisconsin. New Wisconsinites – including yours truly – often hail from Illinois, which has the worst fiscal rating in the nation.

The numbers in Texas show a similar story. The majority of new residents are coming from high-tax states with poor fiscal health such as California, Louisiana, Illinois, New York, and New Jersey.

The tax burden isn’t the only reason why people choose to move, but it cannot be ignored. Capital flows to where it is treated best. To welcome new residents to Wisconsin and keep our economy flowing, the state should consider lowering taxes across the board.

February 16, 2018 | By M. D. Kittle

Republican Lawmakers Proposing $200 Million Tax Cut, Bringing Back Walker Plan

MADISON, Wis. – Republicans are working on a $200 million tax cut plan – the same income-tax relief package scrapped from Gov. Scott Walker’s budget proposal last year.

“The way to think about the whole thing is there were changes at the federal level, and we have a buffet in front of us on what do we want to adopt at the state level,” Kooyenga said.

The plan, proposed by state Rep. Dale Kooyenga (R-Brookfield) would be mostly paid for by a “buffet approach” to conforming with the federal tax reform law approved late last year.

“The way to think about the whole thing is there were changes at the federal level, and we have a buffet in front of us on what do we want to adopt at the state level,” Kooyenga told MacIver News Service Friday.

Walker’s plan included cutting Wisconsin’s two lowest income tax rates slightly – by a tenth of a percentage point – to 3.9 percent and 5.74 percent. A median income family of four earning about $86,000 annually would save about $139 over the biennium.

The Legislature jettisoned Walker’s proposal, which would have saved taxpayers a combined $203 million over two years. Kooyenga’s plan basically picks up Walker’s.

Kooyenga and Sen. Howard Marklein (R-Spring Green), both CPAs, have been working on a tax conformity package that would line up Wisconsin’s tax code with the many changes made in the federal tax reform law. Doing so will create less confusion for filers and the government, the lawmakers say.

But arriving at the tax cut will take a little picking and choosing on the conformity buffet.

The plan calls for adopting all of the federal tax changes, with the exception of four.

While popular, the state cannot afford adding the federal deduction for pass-through business income, Kooyenga said. Not conforming with the federal change will pump in $242.5 million more in revenue this year and $161.8 million next year than would have been the case had the state conformed to the federal change, according to a Legislative Fiscal Bureau memo.

Kooyenga’s plan also would not include adoption of the federal bonus deduction change, which would mean $241.1 million more for the state coffers this year and $110 million in 2019.

Correspondingly, the tax revenue gain for the state is a tax loss for businesses, which would experience a tax cut if the state conforms to the federal change.

On the flip side, filers would save $78 million in the first year, $69 million in the next, by Wisconsin not conforming to the federal change limiting interest deductions to 30 percent of adjusted taxable income. It’s a highly unpopular measure in the federal tax reform package, Kooyenga said.

Kooyenga gets to a net $90 million or so in revenue each year after factoring in revenue gained and lost in conforming – and not conforming in certain instances – to the federal tax changes. It’s admittedly complicated, but at the end of the day the state is estimated to take a combined $180 million more in tax revenue, which Republicans would then send back to taxpayers in the form of tax cuts.

“If you were a Democrat, you would take that money and spend it on a bunch of stupid stuff…We say, why not take that $90 million and adopt the governor’s tax cut idea that we ditched,” Kooyenga said.

The state would chip in an additional $10 million per year to get to the $200 million tax cut number over the biennium. And the reduction would remain in place – at the will of the Legislature.

Kooyenga said the tax package, as it stands now, would be combined with Walker’s proposed child tax credit – rebate checks that would be sent out later this year – and a proposed sales tax holiday in August. Walker proposes a $100-per-child tax credit for parents with children under 18 who live at home.

A spokeswoman from the governor’s office said the administration is reviewing the plan.

“We thank these legislators for developing the proposal,” said Walker spokeswoman Amy Hasenberg.

Above all, Kooyenga said, state tax conformity with the federal changes is critical. If the state doesn’t act, Wisconsin filers will have to deal with twice the tax requirements, creating confusion and additional preparation costs.

Some of the existing tax breaks may seem absurd to the average taxpayer.

For instance, one of the federal changes ends the practice of taxpayers being able to write off things like the cost of Milwaukee Bucks tickets. Beyond the question of tax breaks for watching NBA games, is paperwork problems created if the state doesn’t adopt the federal change. Of course, the same complexity issues arguably will arise in the pass-through and Bonus Depreciation changes, if not adopted by the state.

The federal tax reform law allows taxpayers to use investments in Edvest College Savings plans for K-12 education, in parental choice programs, or with other education-related expenses. Wisconsin taxpayers would miss out on that benefit if the state doesn’t conform to the federal change.

“This is really necessary maintenance,” Kooyenga said

Listen here to Kooyenga’s interview Friday with MacIver News Service on the Dan O’Donnell Show on NewsTalk 1130 WISN.

February 13, 2018 | By Bill Osmulski

#JustFixIt Campaign in Washington County Funds Roads Without A Gas Tax Increase

[West Bend, Wisc…] Washington County thinks it can fund all its highway improvements over the next 32 years without an increase in the gas tax or raising other taxes and fees. The plan is simple: make transportation infrastructure a top priority in its budget.

Washington County’s “just fix it” road initiative makes road repairs a priority – not making higher taxes the priority.

That is the cornerstone of the county’s 2050 Transportation Network Sustainability Plan, which officials are promoting through the #JustFixIt campaign.

Rather than just complain about the amount of federal or state government funding for local roads, the county is proactively moving forward “to achieve a financially sustainable transportation network for Washington County.”

“Washington County is leading the way to #JustFixIt by putting forth a plan which would 100% fund the maintenance, resurfacing and reconstruction of all county highways for the next three decades,” said County Administrator Joshua Schoemann. “I believe this plan will serve as a model across the State, further demonstrating how setting priorities can result in solutions to maximize the use of every taxpayer dollar we receive and meeting the expectations for essential government services.”

Schoemann has raised some eyebrows by branding this plan “#JustFitIt.” The Transportation Development Association has been using that same hashtag in its campaign to raise the state’s gas tax. Schoemann told MacIver News his version will “just fix it” by making road repairs a priority – not by making higher taxes the priority. Washington County started this process by taking a long hard look at itself.

“We went through a ranking of priorities and then we rank every program against those priorities,” Schoemann said. “There have been literally dozens that we’ve eliminated or given over to nonprofits, saving hundreds of thousands of dollars.”

That will go a long way towards Washington County’s #JustFixIt campaign.

Washington County is responsible for 186 miles of highway. It estimates improvement and maintenance will cost $143 million over the next 32 years, including adjustments for inflation. If the county adopts the 2050 Transportation Network Sustainability Plan, officials predict it will ultimately result in a $9 million surplus.

The county currently budgets $3 million a year on road work from its 0.5 percent sales tax collections. The county estimates it will be able to increase that by 3 percent a year until at least 2030, and after that reduces it to 1 percent. The plan also assumes that state aid will remain stagnant at $490,000 each biennium throughout the 32-year plan.

Other funds are expected to become available along the way to further offset costs. For example, the county currently has a $2 million economic development fund that ends in 2022. At that point, any remaining funds could be redirected towards road work.

All the major road reconstruction projects are front loaded into the first 11 years of the plan. That’s meant to take advantage of the current low borrowing rates and the political climate in Wisconsin that’s led to the elimination of prevailing wage and efforts to reform state wet lands regulations.

The $9 million surplus will be spent along the way. The highway department plans to use it to build 3 roundabouts and reconstruct 6 bridges over the next 32 years.

The Public Works Committee approved the plan on Jan 24. The county will take it up on February 13th.

Schoemann said the county board is excited about the plan, but his colleagues in other counties are more skeptical.

“The feedback I’ve received is ‘well you might have figured it out, but the rest of us haven’t or can’t or what have you,’” Schoemann said.

Washington County wouldn’t be the only county to figure out how to fund road repairs without a tax hike. Marquette County has managed to maintain the best roads in the state through prioritization just within its highway budget. That’s resulted in 99 percent of Marquette’s county highways being in fair or better condition. Incredibly, the county receives almost the smallest amount in state aid of any Wisconsin county.

By reprioritizing the entire county budget, Schoemann expects even better results in Washington County. He believes if Washington County can #JustFixIt through making road maintenance a genuine budget priority, there’s nothing standing in the way of other local governments adopting the same solution.

January 25, 2018 | By M. D. Kittle

Walker Pitches Tax Break, Health Care Fix In ‘Ambitious Agenda’ State Of The State

MADISON, Wis. – In an upbeat State of the State address to the Legislature that was reminiscent and forward-looking, Gov. Scott Walker on Wednesday proposed a tax break for families and an ambitious initiative aimed at checking the escalating costs of health insurance.

Walker ticked off the highlights of a dizzying year of activity in state government, from delivery of a tax-deleting state budget to the landing of the biggest economic development deal in Wisconsin’s history.

The Republican governor, running for a third term this year, reminded Wisconsinites of the fiscal woes he inherited when he took office in 2011 and just how much has changed to the good since.

“Today, I am proud to delare that the state state of our state is historically strong,” Walker said to uproarious applause from the Republicans who have controlled both houses of the Legislature since they and Walker swept into power more than seven years ago.

Walker ticked off the highlights of a dizzying year of activity in state government, from delivery of a tax-deleting state budget to the landing of the biggest economic development deal in Wisconsin’s history.

He pointed to signs of hale health in the state’s economy, punctuated by a 3 percent unemployment rate – the lowest jobless rate in 45 years.

What a difference seven years make, Walker hammered home, as a crowded field of Democrats campaign to replace him.

“Eight years ago, things were not very good in our state. There were double-digit tax increases, billion-dollar budget deficits, and record job losses … and Wisconsin consistently ranked in the bottom ten states for business,” the governor said. “We don’t want to go back to those days.”

‘Reform Dividend’

Looking ahead, Walker laid out an ambitious agenda (he calls it as much – Ambitious Agenda for 2018) for what promises to be an abridged, election-year legislative session. Some of his proposals come with new costs – sure to make fiscal hawks uneasy – but administrative sources say much of the new initiatives will be paid for with government savings or through funding already in the budget.

Walker wants to use a projected budget surplus expected to top $480 million to fund new child credits. Wisconsin families would receive $100 for every child, under 18 and living at home. The cost is pegged at $122 million annually.

“As I promised, when we have a surplus, we will give it back to you, the hardworking taxpayers,” the governor said. “This is your reform dividend. You deserve it.”

Walker and the Republican-controlled Legislature have delivered on some $8 billion in tax cuts – property, income, and others since 2011.

“I’m very interested in the Governor’s plan to help Wisconsin’s families with a refundable tax credit. It has the potential to make a real impact on working families in our state,” said Sen. Alberta Darling (R-River Hills), co-chair of the Legislature’s budget-writing committee.

The “Reform Dividend” was the theme of last year’s State of the State address, as Walker pushed for tax relief and a huge boost in education spending. The latter was once warmly embraced by one of Walker’s Democrat challengers in this year’s gubernatorial race, Superintendent of the Department of Public Instruction, Tony Evers.

Health Care Stability

Looking to fix the damage done by the Affordable Care Act – aka Obamacare – Walker proposes asking the federal government for a Section 1332 State Innovation Waiver that allows states to change their insurance market as long as consumer protections remain. It’s part of a package of initiatives he calls the Health Care Stability Plan.

The governor says he wants to stabilize the individual insurance market, which under Obamacare has seen premiums explode, tens of thousands of health insurance consumers forced out of their plans and insurers exiting the fragile market. Walker proposes creating a state-based reinsurance program similar to other states that have sought waivers. A funding partnership between the state and federal government, the initiative according to officials would create a corridor-based reinsurance program, adjusted annually based on actuarial analysis. The Walker administration anticipates the program would offer coverage up to 80 percent of claims above $50,000 and below $250,000, driving premium costs down.

Minnesota, which Democrats love to point at as the ideal progressive state, has a similar program in place. In 2016, Minnesotans braced for premium hikes soaring as high as 67 percent with insurers packing up. Democratic Gov. Mark Dayton was forced to acknowledge President Obama’s Affordable Care Act was “no longer affordable for increasing numbers of people.”

Minnesota’s Legislature created the new $550 million reinsurance fund to help defray costly claims for insurers. Some would call that a subsidy, but the design is to take a bite out of health care costs for some 200,000 people on Wisconsin’s individual market.

Walker also proposes a law guaranteeing coverage of pre-existing conditions.

“That way someone who has cancer or another serious disease or ailment will not have to worry about obtaining or keeping coverage,” the governor said.

On the health care front, Walker proposes a permanent waiver for the state to provide SeniorCare, the prescription drug assistance program for Wisconsin residents 65 and older. The state has sought an extension of the program four times since it was first approved in 2002. Walker asserts the state can “provide certainty and stability for those who depend on SeniorCare.”

Working Welfare

Walker also pitched a welfare reform package he wants the Legislature to pass in a fast-moving special session.

“We want able-bodied, working age adults to work at least 30 hours a week or enroll in job training to get assistance. We want to expand welfare reform statewide. And we want to ensure that everyone getting public assistance can pass a drug test. If someone fails, we set aside resources to get them into rehabilitation because we understand that if we get them healthy, we can find a job for anyone in the state.

The bills, ten in all, build on Walker’s “Wisconsin Works For Everyone” welfare reform initiative announced nearly one year ago. Much of that agenda made it into law in the 2017-19 state budget.

Walker proposes FoodShare cards include photo identification of the recipient, a measure aimed at cutting fraud. The new initiative also expands the work requirement for FoodShare recipients. And anyone who owns a home worth more than $321,000 would not be eligible for taxpayer-funded meals and other welfare programs.

Education and Economic Development

Building on record public education expenditures, the conservative governor pushed a plan to increase so-called Sparsity Aid in Wisconsin’s low revenue school districts. Legislation led by state Rep. John Nygren (R-Marinette) would increase aid by $6.4 million for the 2018-19 school year. The bill provides an increase from $300 per pupil to $400 for qualifying districts. And the “low revenue ceiling” for districts that spend less would rise from $9,100 to $9,400 per pupil for the 2018-19 school years, rising by $100 per year thereafter, up to $9,800 by the 2022-23 school year.

“In order to ensure accountability to local voters, districts where a referendum to raise the revenue limit was rejected by the voters within the past three years would not be allowed to raise their revenue limits,” the governor wrote earlier this month.

Walker also wants to spend $20 million to create a “Wisconsin Career Creator” program on college campuses statewide.

“With all of the new jobs being created in our state, we must have enough graduates with the skills to fill these careers,” he said, noting, among other significant economic development projects, the Foxconn Technology Group’s multi-billion dollar plan to create as many as 13,000 good-paying jobs in southeast Wisconsin. The unprecedented development project came with an unprecedented incentives package to seal the deal.

The governor proposes creating a Rural Economic Development Fund, at a cost of $50 million per year. The program would support the development of new businesses and the expansion of small businesses in rural areas. It also provides funding for training.

With the rural initiative, Walker is proposing a Family Farm Fund that would provide scholarships to encourage students to pursue ag-related studies at Wisconsin’s technical colleges or at the UW College of Agriculture.

In the shadow of the Lincoln Hills juvenile prison controversy, Walker reiterated a plan to close the troubled corrections center and create six smaller facilities throughout the state. The complex in Lincoln County would be converted to a medium security adult prison, likely focusing on alcohol and drug abuse treatment. The corrections reform plan, Walker said, would ultimately save tax dollars.

Walker’s progress report was, as expected, warmly received by members of his party, and roundly lambasted by his political opponents.

“Despite Governor Walker’s frantic attempts to improve his public approval ratings in a tough election year, Wisconsin residents will not be fooled. This election year enlightenment has shown that he has failed to deliver on his empty promises of the past and his misguided priorities have taken the state in the wrong direction,” said Senate Minority Leader Jennifer Shilling (D-La Crosse) in a press release.

“Every time we drive over a pothole or cast a ballot for a school referendum, voters see the underfunding of our roads and local schools,” she added.

“This afternoon, Governor Walker laid out an ambitious agenda that is only possible because of the progress we have made over the past seven years,” said Sen. Chris Kapenga (R-Delafield). “I am honored to be working side-by-side with Governor Walker to advance bold welfare reforms that will lead to more employment and self-sufficiency.”

December 20, 2017 | By M. D. Kittle

Paul Ryan Rejoices In Tax Reform Decades In The Making

MADISON, Wis. – On the brink of the GOP tax reform package’s passage in the House Tuesday, Speaker Paul Ryan declared that the vote “has been a moment decades in the making.”

On Wednesday, after the U.S. Republican-controlled Senate passed the bill, a video montage of Ryan’s long struggle for tax reform made the rounds on Twitter. The vid begins with a clip of a fresh-faced 20-something kid just elected to the 1st District Congressional seat he has held for nearly 20 years.

“Our tax system is punishing all those qualities that make America great,” the Janesville Republican says in the clip, from 1998.

Ryan has spent his political career hammering home the inequities of the U.S. tax system, which include one of the highest corporate tax rates in the world.

“For America to be competitive in the future we need to lower taxes,” Ryan says in another clip.

As he and his fellow conservatives were about to realize a dream 30 years in the making – the last time congress overhauled the tax system Reagan was in office – Ryan rallied the troops, asserting, “We are in a generational defining moment for our country.”

Amid all the overheated rhetoric from a Democratic Party that could not find one congressional member to vote for a tax cut that will benefit the vast majority of taxpayers, Ryan took a well-deserved victory lap Wednesday.

Polling on the bill has not been so good, but that, Republicans say, has much to do with the dour and dire way liberals portrayed it.

And what a victory it is.

The tax bill slices individual tax rates and lowers the corporate tax rate from 35 percent to 21 percent. For a Republican-controlled congress that flubbed the repeal of Obamacare, the tax reform package is a huge win. And for President Trump, who is expected to soon sign the measure.

Polling on the bill has not been so good, but that, Republicans say, has much to do with the dour and dire way liberals politically painted it.

House Minority Leader Nancy Pelosi (D-Calif.) described the reform package as “the end of the world” and “Armageddon.”

Sen. Chris Van Hollen, one of the more hyperbolic Dems, insisted that giving taxpayers their money back was “one of the biggest legislative heists in history.”

While the legislation has its warts, it delivers on promises made by Republicans for longer than Ryan has been in office.

Ryan predicts perceptions will change once American workers start seeing more money in their paychecks beginning next month.

“When we get this done and people see the withholding improvement, when they see the jobs occurring, when they see bigger paychecks, that’s what’s going to produce the results,” the Speaker told reporters.

December 13, 2017 | By Chris Rochester

New Analysis Shows Federal Tax Reform Could Add Over 65,000 Jobs to Wisconsin’s Economy and Boost Wages by Nearly $2.5 Billion

Historic reforms will turbocharge Wisconsin’s economy, adding tens of thousands of jobs while cutting the tax burden for working families

MADISON, Wis. – Wisconsin’s economy could see a big boost if Congress completes its work to overhaul the tax code for the first time in 30 years, according to a new analysis released today by the MacIver Institute.

John Dunham & Associates calculates that 65,318 jobs would be created in 2018 if tax reform is enacted. The same study shows that Wisconsin workers could see their wages increased by nearly $2.5 billion.

The study also showed significant tax reductions for Wisconsin taxpayers – especially those in middle to lower income households, who would see their taxes reduced by as much as 8.7 percent.

Dunham modeled the analysis off the House-passed version of the bill. A conference committee is working this week to produce a final version of the bill that is expected to be taken up for a final vote next week.

“Our IRS code is one of the most complex and costly tax systems in the world. We are well past due to make our tax code more competitive, fairer and less costly. This analysis shows that Wisconsin workers, small businesses and corporations all will be big winners if Congress finishes the job on tax reform,” said Brett Healy, president of the MacIver Institute.

“With all the work Governor Walker has done to reform the tax and business climate in Wisconsin, we are primed for an economic boom. If Congress can pass this tax cut and comprehensive reform of the tax code, it will launch the Wisconsin economy and have a real impact on the lives of all Wisconsinites,” Healy said.

“The bottom line is this: This is a once-in-a-generation opportunity to dramatically reform the federal tax code. It’s the peoples’ money, let them keep it. They’ve earned it,” Healy said.

Fast Facts – The study found the House-passed tax reform bill will:

  • Grow Wisconsin wages by $2.5 billion in 2018
  • Add more than 65,000 Wisconsin jobs in 2018
  • Increase Wisconsin’s economic growth by 0.7% over 10 years
  • Cut Wisconsinites’ income tax burden by up to 8.7%

Click here for details about the report’s methodology.

December 13, 2017 | By Chris Rochester

Here’s The Most Outrageously Overheated Liberal Quote About Tax Reform

The federal tax code hasn’t been overhauled since 1986, but now Republicans in congress are inching closer to passing a major tax reform package that reduces rates and cleans up most of the special interest carve-outs that have accumulated over the past 31 years.

The debate over this pivotal public policy change has, predictably, descended into partisan hyperbole. Will tax reform cause people to die, bring about the end of the American republic, or even cause the armageddon? It seems like some on the left think it will, including many high-profile progressive politicians and prognosticators.

We asked our Facebook audience to rate the Top Ten Most Outrageous Statements about tax reform on a scale of 1-10, with #1 being the most ridiculous example of leftist outrage. In reverse order, the results:

#10 – “Instead of bread, the populists are told to be grateful for their circuses.” – Catherine Rampell in Washington Post editorial

#9 – “51 Senate Republicans voted to commit one of the biggest legislative heists in history.” – Sen. Chris Van Hollen on Twitter

#8 – “Millennials: move away if you can. USA is over. We killed it.” – Kurt Eichenwald on Twitter (MSNBC, Vanity Fair)

#7 – “This corruption is hollowing out America’s middle class & tearing down our democracy.” – Sen. Elizabeth Warren on Twitter

#6 – “The coup is underway. Make no mistake about it. EVERYONE OFF THE BENCH!” – Michael Moore on Twitter

#5 – “This vote will live in infamy. It eviscerates the last vestige of Congressional integrity and does irreparable damage to our once proud Republican Party.” – Gov. Jerry Brown on Twitter

#4 – “The Senate just killed American families.” – Lacey Hannen (Actress)

#3 – “This evil will kill people and increase human misery so the idle right and other plutocrats can have even more money.” – Chauncey DeVega (Salon.com)

#2 – “It is the end of the world…The debate on health care is life/death. This is Armageddon.” – Nancy Pelosi (NY Post)

And now, the most ridiculously over-the-top (but real) doom-and-gloom statement about tax reform…

“Millions of Americans died tonight. So did the careers of every one of these psychotic drooling animals in the Republican Party who voted for it. This was mass murder. They all belong in prison.” – Bill Palmer on Twitter (The Palmer Report)

November 29, 2017 | MacIver News Service

Heritage Foundation: Tax Savings Breakdown

The Heritage Foundation hopes to clear up some misperceptions of the federal tax reform bill currently under construction in the Senate this week. It’s released a series of infographics that illustrate how families of different incomes and employment would make out under the reforms. The charts help show that most individual income tax payers, especially lower and middle income families, will see significant savings if the bills make it through congress. This week is seen as a critical moment in the chances of that happening.

November 29, 2017 | By M. D. Kittle

The Faulty, Fuzzy Math Of Tax Reform, Foxconn Critics

MADISON, Wis. – Critics of a Republican tax reform package winding its way through congress are employing fuzzy math – again – in an attempt to tear down the first rewrite of the tax code in more than 30 years.

It’s the same kind of “static” math that Wisconsin Dems use in ripping into an unprecedented economic development deal expected to transform the Badger State economy.

The Wall Street Journal points out such wringing of hands “comes with ill grace from people who cheered Barack Obama’s doubling of the national debt in eight years.”

The Wall Street Journal Editorial Board recently took on some faulty numbers propping up a failed narrative in the Journal’s classic beatdown of “Democrats and their media chorus.”

The tax-and-spend left is suddenly worried about what a $1.5 trillion tax cut would do to the bloated national debt. As the publication points out, such wringing of hands “comes with ill grace from people who cheered Barack Obama’s doubling of the national debt in eight years.”

It’s also overwrought, the editorial adroitly points out.

The left-wing debt brigade bases its reasoning on Congressional Budget Office estimates, which has often – much too often – underestimated the revenue growth unleashed by the simple act of allowing taxpayers to keep more of their hard-earned money.

“A classic example is the 2003 cut in the tax rate on capital gains,” the Wall Street Journal editorial board points out.

CBO predicted $215 billion in capital-gains revenue through 2007, $162 billion below the actual $377 billion that came in.

“CBO underestimated economic growth and how much investors would cash in their gains,” the editorial states.

The budget office’s projections on the pending tax reform package are based on a very conservative 1.9 percent annual economic growth figure over the course of the 10-year tax cut. Such a slow growth rate would defy history. The U.S. Gross Domestic Product growth rate has averaged 3.19 percent from 1948 until 2017. If the U.S. economy grows at the average rate, CBO’s projected $1 trillion revenue “hole” created by the tax reform proposals would be filled.

“An average growth rate of even 2.4% over the decade would more than fill the hole,” the Journal noted.

The tax-cuts-will-explode-the-debt narrative not only defies the past, it’s a bet against America’s future economic growth. That’s a bad bet.

Pending tax reform legislation would expand the U.S. economy by 3.7 percent, boost the workforce by 925,000 jobs, and raise wages 4.4 percent for families over the long run, according to the Tax Foundation. In Wisconsin, middle-income families would see a $2,632 increase in annual income, and the freed capital would generate an additional 18,707 jobs, according to the Tax Foundation’s analysis using a “macroeconomic model.”

The latest CBO figures rely on static scoring. The agency earlier this week said it is “not practicable” at this point to do dynamic calculations taking into account macroeconomic effects.

Flat Foxconn Math

Such static measurements by Wisconsin’s nonpartisan Legislative Fiscal Bureau created a firestorm of false talking points for the left in the wake of the biggest economic development deal in Badger State history.

In August, the headlines screamed, “Wisconsin won’t break even on Foxconn plant incentives for 25 years,” based on the fiscal bureau’s static analysis.

The fiscal bureau acknowledges that “any cash-flow analysis that covers a period of 30 years must be highly speculative,” but that didn’t stop liberals from all kinds of doom-and-gloom speculation.

Taiwanese tech giant Foxconn Technology Group plans to build a massive $10 billion-plus liquid crystal display screen manufacturing complex in Racine County. Foxconn says it will create 13,000 jobs, paying nearly $54,000 on average. The deal calls for up to $3 billion in state economic incentives, including $150 million in sales tax exemptions.

The fiscal bureau acknowledges that “any cash-flow analysis that covers a period of 30 years must be highly speculative,” but that didn’t stop liberals from all kinds of doom-and-gloom speculation.

“They fail to account for the income that would grow over the next three decades, and as we know from history, we have wage growth in this state,” said Scott Manley, senior vice president of Government Relations for Wisconsin Manufacturers and Commerce. “Not to mention the fact that when you bring 13,000 jobs to an area, that’s going to have an upward impact on wages for everyone.”

The fiscal bureau’s analysis also failed to take into account the broader impact of an economically transformational project, one that is expected to generate some 10,000 construction jobs, thousands more jobs supporting Foxconn and the region, and billions of dollars in secondary investment.

“What it didn’t account for was the largest foreign investment that has ever taken place in this country. It didn’t account for an entirely new ecosystem that is going to attract investment on a scale that no one can truly appreciate,” Manley said.

What History Says

The same assessment limitations and flaws permeate the tax cut debate.

History is replete with real examples of tax reductions spurring economic growth. In the 1920s, tax rates dropped from a high mark of 70 percent to less than 25 percent. As the Heritage Foundation pointed out in a historical look at U.S. tax cuts, personal income revenue increased substantially in the 1920s – from $719 million in 1921 to $1.16 billion in 1928.

In the early 1960s, President Kennedy moved to reduce the breathtakingly high top rate of more than 90 percent to 70 percent.

After President Kennedy’s tax cuts, revenue increased 62 percent. After President Reagan’s tax cuts, income tax revenue went up more than 54 percent.

“What happened? Tax revenues climbed from $94 billion in 1961 to $153 billion in 1968, an increase of 62 percent,” the report noted.

The Reagan tax cut of 1983 drove up income tax revenue by north of 54 percent by 1989.

Despite history’s verdict, based on actual numbers, tax reform critics continue to roll out the same flawed budget busting narratives. They do so even as vaunted budget analysts warn that long-term projections are “highly speculative.”

“Political interests who fundamentally believe in bigger government and more more government believe the best way to get there is to have a well-funded government that taxes to the max, and they will do whatever they can to derail meaningful tax reform,” Manley said. “If that means cooking the numbers to make it difficult to get tax cuts done in the first place, that’s what they do.”

September 1, 2017 | By Brett Healy, MacIver Institute President

Healy: Federal Energy Tax Would Hurt Wisconsin Families

The following op-ed first appeared in the Milwaukee Journal Sentinel on August 29.

As Congress pivots to tax reform, some lawmakers have considered raising taxes on energy developers to pay for tax cuts elsewhere. Such tax hikes would slam Wisconsin’s natural gas industry, leading to higher utility costs and fewer jobs.

Wisconsin doesn’t have any natural gas wells of its own. But hugely important pipelines crisscross the state. Thanks to these pipelines and transport hubs, two-thirds of all Wisconsin households heat their homes with natural gas.

Wisconsin’s electric utilities rely on natural gas as well. In 2016, local utility companies consumed nearly as much natural gas as all Wisconsin residents’ combined.

The natural gas industry is a pillar of Wisconsin’s economy. Natural gas firms injected more than $9 billion into the state economy in 2015. The oil and natural gas industry supports more than 98,000 jobs. The average wage in the industry, excluding retail jobs, is more than $100,000 — nearly double the median income in Wisconsin. Those wages, in turn, create demand for other goods and services, supporting small businesses across the state.

Levying new taxes on the energy industry would harm communities across America. Nationally, the natural gas and oil industry supports 10.3 million jobs. Every direct job generated by energy companies supports another 2.7 jobs.

An overwhelming majority of Americans recognize that new taxes on natural gas would hurt them. More than seven in 10 voters oppose higher taxes on the American energy industry. They know intuitively what economists have shown empirically, that raising taxes on job-generating industries jeopardizes Americans’ livelihoods.

And it’s not as if the industry refuses to pay its dues. Energy firms already fork over huge sums to Uncle Sam. Each day, natural gas producers pay $70 million in federal taxes. They pay millions more in state and local taxes.

Instead of further taxing energy producers, lawmakers should seek to raise additional revenue by encouraging even more production. Speedily approving pipelines, authorizing offshore energy exploration and enacting other pro-development policies could create 2.3 million new jobs and increase government revenue by $122 billion a year by 2035, according to a 2015 Wood Mackenzie analysis.

Tightening regulations, by contrast, could cost the economy more than 800,000 jobs and $18 billion in government revenue over the same period.

The energy sector is a jobs and revenue-generating powerhouse, in Wisconsin and across the nation. If lawmakers stifle this economic activity by raising taxes on natural gas firms, they’ll leave working-class Wisconsinites out in the cold.

August 8, 2017 | By M. D. Kittle

Foxconn Fiscal Impact Soars Into The Billions

[Madison, Wis…] – A new memo from the nonpartisan Legislative Fiscal Bureau details a hefty state commitment to the mammoth Foxconn economic development plan with a lengthy break-even schedule.

But the LFB acknowledges it has no way of accounting for all the potential positive economic impacts the proposed Foxconn manufacturing campus could bring.

The analysis, released Tuesday, was among state agency memos breaking down the fiscal impact of the proposed $3 billion in incentives tied to the estimated $10 billion project.

Foxconn would receive a total of $2.9 billion in tax credits over the 15-year lifetime of a specially created Electronics and Information Technology Manufacturing Zone (EITM) – if the world’s largest manufacturer of liquid-crystal display panels comes through on constructing its first North American plant in Wisconsin and fills all of the proposed 13,000 jobs, at an average annual salary of $53,875.

An incentives package bill introduced last week in the Assembly provides Foxconn with refundable tax credits for each job it creates paying between $30,000 and $100,000. The credit would be based on 17 percent of the company’s payroll in the EITM zone, for a total of up to $1.5 billion in tax benefits.

As the LFB points out, Foxconn plans to have about 1,000 permanent positions in Wisconsin this year (at an estimated payroll of $13.8 million), with plans to increase its workforce to 13,000 positions and a total annual payroll of $700 million by the beginning of 2021.

State payments of the payroll tax credit are estimated to begin in 2018-19, at $2.4 million, rising to $119.1 million annually between fiscal years 2023 and 2033. That assumes Foxconn’s workforce remains at 13,000 from 2021 through 2033.

And Foxconn would be eligible for a refundable credit of up to 15 percent of its capital expenditures in the zone. Aggregate payments for the capital tax refund could not top $1.35 billion. Credits would be paid from the state’s General Purpose Revenue appropriations.

State capital tax credit payments to Foxconn would total $192.9 million annually in fiscal years 2020 through 2026, according to LFB.

“The company would receive the full amount of credit, even if it has little or no Wisconsin income or franchise tax liability,” the LFB analysis states.

The state Department of Administration projects the “cost” of the refundable state tax credits under the incentives package would exceed the potential increased tax revenue until fiscal year 2032, when the last EITM payroll credit is paid.

But as project supporters note, the tax benefits wouldn’t exist without Foxconn building and hiring in Wisconsin. They call it a “pay-as-you-grow” economic development proposal.

In that vein, Foxconn and its contractors would save $139 million through a sales and use tax exemption, according to the LFB report.

“However, since it is highly unlikely that Foxconn would locate in the state without the incentives provided under the bill, this amount should not be viewed as a state revenue loss,” LFB notes.

In a Break-Even Analysis, the DOA projects the state wouldn’t begin making money on the Foxconn deal until 2042. The Fiscal Bureau notes such a timeline must be viewed cautiously.

“(A)ny cash-flow analysis that covers a period of nearly 30 years must be considered highly speculative, especially for a manufacturing facility and equipment that may have a limited useful life.”

Democrats critical of the bill, particularly those mulling a run for governor, fired out press releases insisting the LFB analysis shows that the incentives package is nothing more than a taxpayer giveaway to a company that posted $136 billion in revenue in 2015.

“As today’s memo shows, Wisconsin taxpayers are assuming 100% of the risk of this proposal, and we are smart to be skeptical of the deal and ask questions,” state Rep. Gordon Hintz (D-Oshkosh), on a growing list of potential Democrat candidates for governor, said Tuesday.

The Fiscal Bureau memo cautions that its analysis focuses on the impacts of the Foxconn project on the state treasury. It does not take into account the other “benefits to the state’s economy and residents.”

While Foxconn would receive up to $1.5 billion in capital expenditure tax credits and sales tax exemptions, the incentives would “induce private investment of $10 billion from Foxconn alone, for a leverage ratio of $6.70 of private investment for each $1 of public outlay. The payroll credit would spur a leverage ratio of 5.9 to 1. And those ratios climb higher when indirect and vendor-related jobs associated with the project are factored.

“Most state expenditures do not result in private investments of this nature,” the LFB report states. “The project would also provide greater employment opportunities for the state’s present and future workforce, and add a new sector to the state’s manufacturing economy.”

Then there are the trades jobs needed to construct a dozen or more buildings on the proposed 20 million-square-foot manufacturing footpad. DOA estimates peg an average annual employment of some 10,200 construction workers and equipment suppliers earning average total compensation of $59,600 during the four-year construction period. Total income is estimated at $2.4 billion.

Another 6,000 indirect and related jobs are estimated to be created during construction, with average compensation of $49,900, according the Fiscal Bureau report. The total increased state tax revenue – primarily income and sales taxes – associated with the construction period is estimated at nearly $190 million.

DOA estimates a total of 22,000 indirect jobs and those secondary positions (suppliers) supporting Foxconn’s operations will be created, with combined annual wages of $1.1 billion per year beginning in 2021.

“The way to judge this project is not by government revenues, not by government figures. It’s what it means to our overall economy,” said state Rep. Adam Neylon (R-Pewaukee), chairman of the Assembly’s Jobs and Economy committee. The committee held a hearing on the bill last week.

Foxconn “will grow our GDP, it will have a tremendous impact on our economic activity in the state. A lot of people will benefit because of this incentives package. We have a situation where we will be attracting talent instead of losing it,” Neylon added. “It’s a mistake to think that government revenue is the end goal. The ultimate goal is economic benefit, not how much more state government can take in and spend.”

Neylon said his committee still plans to vote Thursday on the bill, with amendments. The lawmaker says he has received at least 50 amendment ideas on the legislation since the bill was introduced last Tuesday, from technical matters to more significant issues such wetland relocation.

“I think reading these new fiscal analyses reaffirms a lot of what we were told during the public hearing and what we were led to believe,” Neylon said. “It also exposes some areas we are working on to clean up or clarify or make sure there are safety nets in place within the language of the legislation.”

July 7, 2017 | By M. D. Kittle

Facing Historic Tax Hike, Illinoisans Look To Get Away

[Madison, Wis…] You’ll forgive Illinois taxpayers if they feel like they’re in a Southwest Airlines commercial these days.

You know the ads: Some poor schlub royally screws up and wants desperately to escape his mistake. In the Southwest commercial, we hear the voiceover guy ask said poor schlub, and anyone who knows the feeling, “Wanna Get Away?”

In the case of Illinois, it’s the debt-ridden state’s lawmakers playing the part of schlub, although there’s not much sympathetic about these politicians who have just made their state’s citizens a lot poorer. And, undoubtedly, some of those numbers will wanna get away for good, joining tens of thousands of others in the last year to leave the Land of Bankruptcy.

On Thursday, some Illinois House Republicans joined Democrats in signing a deal with the tax-and-spend devil, overriding Gov. Bruce Rauner’s vetoes of a budget package that will permanently hike taxes by 32 percent, retroactive to July 1. Individual income tax rates climb from 3.75 percent to 4.95 percent, and corporate rates will soar from 5.25 percent to 7 percent – one of the highest corporate tax rates in the nation.

Yes, the deal means the state will have its first budget in more than two years, putting an end to the nation’s longest fiscal impasse since the Great Depression. Yes, the state will be able to pay many of the creditors it has long stiffed.

Illinois was sitting on a backlog of bills and $800 million in late-payment interest, according to the Associated Press. Illinois’ annual deficit sits at $6.2 billion, with $14.7 billion in past-due bills.

But Rauner said the Democrats’ budget plan, led by tax-and-spender-in-chief, House Speaker Michael Madigan, did nothing to deal with the structural fiscal problems the state faces, not the least of which is a runaway public pension debt estimated at $250 billion by credit rating agency Moody’s Investors Service.

The Republican governor, who rose to power on a wave of voter discontent following a similar bailout of Springfield with the state’s largest temporary tax increase, said the override vote was another step in “Illinois’ never-ending tragic trail of tax hikes.”

“(Madigan’s spending plan) is not balanced, does not cut enough spending or pay down enough debt, and does not help grow jobs or restore confidence in government,” Rauner said. “It proves how desperately we need real property tax and term limits.”

And at the end of it all, Moody’s stands on the verge of downgrading the state’s credit strength to “junk” status, which would make Illinois the first state to hold the dubious honor of holding speculative venture ratings. The credit ratings service agreed with Rauner that the bailout may help pay outstanding bills in the short-term, but it won’t solve the state’s deeper fiscal woes.

“Illinois’ fiscal skeleton is so rotten that even by fixing this short-term cash flow problem there’s a long-term debt crisis that’s been happening under years and years of over-promising on things like public sector pensions, underfunding those pensions, but all the while knowing that no amount of money could keep up with the growth of that debt,” Austin Berg, senior writer for the Illinois Policy Institute, told MacIver News Service on the Vicki McKenna Show, on NewsTalk 1310 WIBA in Madison.

Berg has spent the past couple of weeks tracking the final days of the budget battle.

He said Wisconsin has benefitted by Illinois’ fiscal disorder, as an exodus of Illinoisans seek a better life. It’s not that Wisconsin has a lower income tax rate than its neighbor to the north, Berg said. It doesn’t. The Badger state’s progressive rate ranges from 4 percent to 7.65 percent. Wisconsin’s lowest bracket was higher than Illinois’ 3.75 percent flat tax. That has changed.

“To be clear, this exodus of Illinoisans to Wisconsin by the thousands over the last couple of years, it’s not as if Wisconsin is a tax paradise. It’s not as if Wisconsin has extremely low taxes,” Berg said. “But the trajectory of the states couldn’t be anymore different.”

In Wisconsin, Republican Gov. Scott Walker and the GOP-controlled Legislature have presided over six years of balanced budgets, cuts to property, income, and corporate taxes by billions of dollars, and saved taxpayers another $5 billion and counting through reforms to public sector collective bargaining.

Walker outlined more tax cuts in his most recent budget proposal, and an Assembly majority plan to phase in a state flat tax is estimated to cut income taxes by a combined $2.7 billion over a dozen years.

The MacIver Institute has advocated a glide path to a 3 percent flat income tax.

Walker spokesman Tom Evenson in an email to MacIver News said Wisconsin is an attractive place for people and businesses to relocate to.

“Our state has low unemployment, low debt, lower taxes and a tremendous education system,” Evenson said when asked about Wisconsin’s economic position compared to Illinois’.

“Over the past six and half years, we’ve seen countless businesses choose to relocate their operations to Wisconsin from other states. As the governor said recently, ‘And why wouldn’t they?’ We’ve moved Wisconsin into a top ten state for business, our workforce is dedicated, and we are getting government out of the way of economic growth. Our common sense conservative reforms are working,” Evenson added.

Many of those businesses have opted to move their operations from Illinois – which will have the fourth highest corporate tax rate in the country – to the greener pastures of Wisconsin.

Illinois continued to bleed residents to out-migration. The Land of Lincoln for three straight years has lost more residents than any other state, according to U.S. Census data. In 2014, the state saw a net exodus of nearly 100,000 residents, and more than 114,000 between July 2015 and 2016. On net, Wisconsin took in more than 11,000 Illinoisans in 2015 according to the Illinois Policy Institute. Illinois lost almost 86,000 people on net to Wisconsin between 2006 and 2015.

The state’s tax drag is a big reason, Berg said. He doesn’t see a loud “political revolution” in the fallout. No pitchforks. It will be quiet. It won’t be televised.

“It’s people saying tearful goodbyes, calling a Realtor and getting a moving truck, because that’s what we’ve seen the last few years,” the reporter said. “You can expect to see a lot more Illinoisans in Madison.”

In short, they wanna get away.

May 17, 2017 | By Brett Healy

MacIver Institute Analysis: A Deeper Dive Into the Assembly’s “Road to a Flat Tax”

Is a flat tax worth a sales tax on gas? A look at the numbers and details of the latest development in Wisconsin’s transportation showdown

[Madison, Wis…] State Rep. Dale Kooyenga knows the odds are long that his “Road to a Flat Tax” will survive the budget process.

The Brookfield Republican’s ambitious transportation and tax reform package aims to build a sustainable transportation infrastructure program while simplifying and lowering the state’s complicated tax code, eventually bringing a 3.95 percent flat income tax to all Wisconsin taxpayers. (For background on what a flat tax could look like in Wisconsin, please read MacIver’s report from January, A Glide Path To A 3% Flat Income Tax).

Kooyenga’s goal of moving away from our highly punitive income tax brackets to a single flat tax is an important goal and one we need to pursue if Wisconsin is to compete for population growth, business start-ups and retiree retention in the future. While Gov. Scott Walker and the Republican-controlled Legislature have provided nearly $5 billion dollars in tax relief since 2011, Wisconsin’s high overall tax ranking has only improved one spot, down to 16th highest among the states.

Ultimately, the proposal could cut taxes by billions of dollars, significantly lowering the burden that has long plagued citizens of this high-tax state. It drives down transportation bonding, potentially saving taxpayers hundreds of millions of dollars in interest payments that could be dedicated to other priorities. The plan also would start to reform Wisconsin’s anti-consumer and unjust minimum markup law, which forces Wisconsinites to pay higher prices on many of the goods they purchase every day. And, if government doesn’t get in the way, Kooyenga’s plan could truly limit the size of state government.

There are big victories for free-market conservatives in this plan; unfortunately, the pros come with one incontrovertible and overriding negative. Kooyenga’s plan, in order to placate the tax-and-spend crowd, makes a deal with the devil: it applies the 5 percent state sales tax, 5.5 percent in almost every county in the state when you add in the local 0.5 percent sales tax option, placing a new tax on a widely-used and critically-important product.

Here is the biggest problem with the proposal to apply the 5 percent sales tax to gas – we would be adding a new tax on a tax, only to be taxed again. It is nearly impossible, as witnessed by the Legislature’s reluctance to agree with Walker’s proposal to abolish the statewide forestry tax, to repeal or get rid of a new tax once it has been created. Most politicians are loathe to ever give up revenue, or as we like to say, your money. Wisconsinites do not need a new tax. Wisconsinites need fewer taxes and an overall lower tax burden.

The transportation proposal does lower the state’s gas tax – at 32.9 cents per gallon one of the highest taxes in the country – by nearly 5 cents. But those savings are overshadowed by the implementation of a new tax that could burrow into the state’s revenue system forever.

Taken separately, there are some very intriguing ideas worth exploring in the reform package. At the top of that list is a flat tax that could not only keep a lot more money in the wallets of Wisconsin taxpayers, it could single-handedly make the Badger State a much more competitive place to do business. States with flat income taxes have better population growth, more in-migration, faster private sector growth, higher personal income growth, and larger gross state project growth than states with high income taxes.

Wisconsin has had a progressive tax structure the entire time it has taxed income, but that doesn’t make the flat tax an “out-there” idea. Seven states levy no individual income tax at all, and eight states have a flat individual income tax, including Illinois, Indiana, and Michigan. Two more states, New Hampshire and Tennessee, only tax income on dividends and interest, and Tennessee is on a glide path to complete elimination of the income tax by 2022.

Some might portray the idea as radical, but it’s important to note that all Illinoisans pay a 3.75 percent flat tax rate. That’s right – millionaires in Chicago pay a lower state income tax rate than single people earning less than $11,000 in Wisconsin.

Wisconsin’s lowest income tax rate of 4 percent is the fourth highest bottom rate among the 33 states with a progressive income tax. Not only do we push away high earners with rates that punish success, we punish the poorest in our society.

Kooyenga’s plan also bolsters the free market by starting to reform the state’s Great Depression-era prevailing wage law, and directly limits the size of government by eliminating 180 state Department of Transportation jobs. It brings “fund integrity” back to the state budget by preventing $81 million from being transferred from the general revenue account to the transportation fund. This is important to those of us who care about GAAP accounting standards.

Kooyenga says there’s been a good deal of misunderstanding, if not misinformation, about his reform package, from its cost to its ultimate impact.

Today, the MacIver Institute takes a closer look at the key elements of the proposal, and what they aim to accomplish.

Numbers Game

Kooyenga these days must feel like a dead man walking. Members of his own party have skewered his proposal, unveiled earlier this month.

Walker has panned the plan as a tax increase at the pump. The Republican governor, pointing to Legislative Fiscal Bureau projections showing a net effect $433 million tax increase, said he cannot support the package.

“To me, that is the most troubling part of the plan,” Walker told the Associated Press. “I think people are taxed enough. I oppose a gas tax increase, no matter what you want to call it.”

While the GOP Assembly made a show of solidarity with Kooyenga during the unveiling of his reform package, several lawmakers tell MacIver News Service the proposal, as it stands, is probably dead on arrival.

Currently, gas is exempted from the 5 percent state sales tax and the 0.5 percent add-on in 64 of Wisconsin’s 72 counties. While Kooyenga justifies the revenue increase with a 4.8 cent-per-gallon reduction in the state’s high gas tax and the lowering of the minimum markup, it doesn’t change the fact that a conservative transportation plan adds a tax.

“The Assembly plan includes a massive net tax increase on fuel to reduce bonding in a budget that has the lowest level of transportation bonding since the 2001-2003 state budget – without any new road projects,” Walker wrote in an email to MacIver News Service. “I am working with members of the Senate and Assembly on reforms that protect taxpayers while investing in our infrastructure – all without an increase on taxes at the pump.”

Transportation bonding may be at its lowest level in 15 years, but debt continues to dog the fund. Assembly Republicans are adamant that the lower bonding level is still just too high.

Walker’s 2017-19 budget proposal includes $6.1 billion for transportation, with $500 million in new bonding.

Kooyenga estimates the sales tax on gas would generate some $660 million in new revenue over the biennium, $300 million of that marked to buy down Walker’s bonding proposal to $200 million. Doing so would significantly ease borrowing costs.

By 2018, the transportation fund is expected to fork out $413 million a year in debt service, representing 22 percent of tax-and-fee dedicated transportation fund revenue. Walker last week reiterated to conservative talk show host Vicki McKenna that state bonding is at its lowest level since 2001-2003.

The Fiscal Bureau projects sales tax collections would be more like $270 million in 2017-18, including $70 million in contingent bonding authority, and $390 million in 2018-19.

Kooyenga and Assembly Republicans have attempted to make debt reduction a huge selling point of the package, but is the current debt load too high? There is disagreement on that front. The Transportation Projects Commission has said the transportation fund could still be considered stable with debt service as high as 25 cents of every transportation dollar.

‘Fund Integrity’

Walker’s budget proposal calls for spending $325 million in general fund money on transportation over the next two years.

Kooyenga notes that what Walker characterized as a $433 million tax increase includes leaving $81 million in the state’s general fund that could no longer be siphoned into the troubled transportation fund. The legislator’s plan puts a lock on the general fund, at least when it comes to transportation.

Walker and fellow Republicans have long criticized his predecessor, Gov. Jim Doyle, a Democrat, for grabbing $1.3 billion from the segregated transportation fund. In November 2014, voters approved a referendum establishing a constitutional amendment ending the practice of raiding the transportation fund for other government programs.

While Kooyenga says he doesn’t find using general fund money for transportation as egregious, he asks, “Why is it right to go from the general fund to transportation but not okay to go from transportation to the general fund?” It’s a matter of fund integrity, the lawmaker says.

Kooyenga’s plan would use the $81 million for income tax reduction. The counties’ portion of the sales tax on gas, an estimated $43 million, would be retained by the state and applied to the flat tax.

Maximum Friction – The Unjust Minimum Markup Law

The reform package rests heavily on reducing Wisconsin’s minimum markup rate from 9.18 percent to 3 percent.

Also known as the Unfair Sales Act, the minimum markup law prohibits the sale of merchandise at less than cost while ratcheting up the “minimum price” for alcohol, tobacco and gasoline.

Any move by lawmakers to reform this special interest protection will be difficult. There will be pitched resistance from an army of lobbyists and flacks who will stop at nothing to maintain the status quo.

Krist Atanasoff, owner of Iron River, Mich.-based Krist Oil Co. and an outspoken critic of the minimum markup law, operates 37 gas stations in Wisconsin and 36 in Michigan. Although Michigan’s gas tax is 5 cents higher than Wisconsin’s, Atanasoff says his Wisconsin customers pay a higher price at the pump thanks to the state’s “dumb state law.” The businessman supports Kooyenga’s plan.

“As a petroleum marketer, I don’t want the crony capitalist protections so many in our industry want. I just want to compete, without government favor,” Atanasoff wrote this week in a letter endorsing “The Road to a Flat Tax.” As the convenience store chain owner notes, none of the money consumers pay in minimum markup costs goes to road construction or upkeep. “It is merely a government-mandated guaranteed profit margin for one industry.”

But are there any guarantees that consumers will see cost savings at the pump should the minimum markup rate be reduced? No. Some speculate that convenience stores could simply raise the price of gas to offset the loss.

Matt Hauser, executive director of the Petroleum Marketers, told the Wisconsin Radio Network that there has never been conclusive evidence changing or eliminating the markup on gas would offset a tax increase. He, again, defended the minimum markup law as protection from large chain retailers pricing out smaller operators.

“We’re concerned it’s really just a smoke screen to draw away from the real issue…that Wisconsin is getting ready to implement a significant tax increase on gasoline,” Hauser told WRN, referring to Kooyenga’s plan to lift the sales tax exemption on gas.

Kooyenga countered that it’s the convenience store lobby creating the smoke screen. The minimum markup is applied on top of the state’s gas tax. Lowering the tax by nearly 5 cents would cut into gas station profits.

While the Legislative Fiscal Bureau examined the other elements of Kooyenga’s reform package, it curiously seems to have taken a pass on reviewing the minimum markup reduction and the impact it would have on consumers.

The mark down on minimum markup is a small step in the right direction but a colossal missed opportunity. What about all of the other products consumers are overcharged on because the minimum markup is applied? Why is it the job of the state government to prevent businesses from giving their customers a better deal or a low, low price?

The minimum markup law is an unjust law. Wisconsin consumers are being ripped off everyday and every time a business is prevented from offering their products at the lowest price possible. But making an unjust law a few percentage points better does not suddenly make it a just law.

Mega Money

Wisconsin’s powerful road-building lobby has offered a relatively tepid response to Kooyenga’s proposal – no sharp criticisms, but certainly no ringing endorsements. Road builders, of course, want more money now, but they like the projected $3 billion in new revenue that could be generated over the 12-year life of the transportation/tax plan. That money could be used to buy down debt, but it more than likely would go to projects.

The Southeast Wisconsin Mega Projects, north and south and eventually east and west, are pegged at $9 billion-plus.

Assembly Speaker Robin Vos (R-Rochester) and Rep. John Nygren (R-Marinette), who serves as co-chairman of the Legislature’s budget-writing Joint Finance Committee, have sought much more in revenue. They have long said every idea is on the table, including higher gas taxes and vehicle fees, but they insist Kooyenga’s reform package is a good start in finding long-term solutions for Wisconsin’s transportation budget problems.

One of the big complaints from fiscal conservatives is that the plan includes an increase in funding for a Wisconsin Department of Transportation that has been found to be poor stewards of taxpayer money. An audit released earlier this year showed the agency was riddled with significant cost overruns, due in large part to its failure to account for inflation on major highway projects.

“I’m not giving DOT an additional cent,” Kooyenga said. “I’m actually giving DOT less money because I’m cutting 180 of their engineers. I am lowering bonding.” Kooyenga, a certified public accountant who helped uncover a huge surplus in the poverty-declaring University of Wisconsin System, does not consider bonding – or using tax money to pay down tax money – as increased revenue for the agency.

Checking Government Growth – Lowering Tax Revenues to Control the Growth of Government

Kooyenga’s reform package, he says, limits the growth of state government. The proposal’s most ambitious and quite frankly most appealing idea, a 3.95 percent flat tax phased-in over 12 years, could slow government growth.

“We are reducing the size of government by $2.3 billion that never gets here,” Kooyenga said. “This represents about 1.5 percent growth that will not go to increasing the size of government. It will stay in income taxpayers’ pockets.”

The tax cuts are even higher than Kooyenga’s projections, according to a Fiscal Bureau review. The flat tax would trim income taxes by a net $2.7 billion by 2029, the bureau reported Wednesday. Democrats and their friends on the left are characterizing Kooyenga’s plan as tax cuts for the wealthy, with a little over one-third of the reductions targeted for taxpayers making $300,000-plus per year.

“The simplicity of the flat tax masks the inequality of it,” Rep. Gordon Hintz (D-Oshkosh) told the Milwaukee Journal Sentinel. “It’s really a tax giveaway to the wealthiest individuals.”

Or as we like to point out, a flat tax is really about tax fairness and stopping the counterproductive punishment of success. Simple math shows that Hintz is just plain wrong. A person earning $25,000 a year will pay $1,000 in tax under a 4 percent flat tax system. A person making $300,000 a year will pay $12,000 in tax.

The successful will still pay more taxes to cover the cost of government under a flat tax system but it would no longer be at an unfair and inequitable ascending rate.

Critics of a flat tax also don’t recognize the significance of the individual income tax in today’s economy – particularly for pass-through businesses. Business structures have changed quite a bit since the invention of the Internet, let alone since the invention of the income tax.

Pass-through businesses – including S-corps, sole proprietorships, and partnerships – are an increasingly common form of business practice in which profits are taxed under the individual income tax rather than the corporate tax. More than half of working Wisconsinites are employed by a pass-through business, which pay a top marginal income tax rate of more than 48 percent – the eighth highest rate in the country.

Ultimately, Kooyenga and advocates of a flat tax say the reform is about fairness, lifting the yoke of heavy taxation off of all taxpayers. Wisconsin has long had its progressive tax code under the guise of being more fair and friendly to the poor. Liberals in particular demand the rich must “pay their fair share” and help reduce income inequality by paying more in taxes.

Quantitative state data from 2002 to 2012 show states with flat income taxes have better population growth, more in-migration, faster private sector growth, higher personal income growth, and larger gross state product than states with high income taxes. State revenue also grew more in states with no income taxes, showing that life doesn’t grind to a halt when the government stops taxing its citizens as heavily.

As the MacIver Institute notes in its “Glide Path To A 3% Flat Tax Income Tax,” tax migration plays a significant role in economic competitiveness.

“Wisconsin’s reputation as a high-tax state has a significant impact on the state’s ability not only to attract newcomers, but also to retain those who are already residents,” MacIver’s Ola Lisowski wrote in a January policy brief. “Annually, Wisconsin loses an estimated $136 million in adjusted gross income to tax migration.”

Census Bureau data show that the majority of those leaving Wisconsin are heading to states that boast warmer weather and lower taxes, such as Florida, Arizona, Texas, and Colorado. A flat tax could stem the tide of Wisconsinites fleeing the state for lower tax burdens.

Some conservative lawmakers have expressed concerns that a change in political leadership could wipe out the flat tax. Kooyenga says it would take a two-thirds vote in both houses to change the rates once they are in statute. The beautiful thing about it all, the lawmaker says, is that the income tax cuts would go on, no matter who’s in office. “It’s on autopilot.”

Rounding Down

While making up a fraction of the traffic control systems statewide, not many transportation topics have ignited more controversy than roundabouts. Beyond their costs, critics say roundabouts pop up without much DOT consideration of public input.

Kooyenga’s reform package would prohibit DOT and local governments from designing a roundabout for any state or local highway unless the roundabout is approved by the local government of the community where the roundabout would be located. But the moratorium would be in place for just two years and would not apply to projects that commenced before the moratorium bill is signed.

Taxpayer Option

The transportation plan would allow counties to impose a 0.5 percent sales tax, with the proceeds to be used for local road maintenance and repair. Voters must approve the local roads optional sales tax at referendum. The ballot question must be held during a spring election or a general election, not during the lower voter turnout elections. The sales tax would be in effect for four years, with a four-year renewal, if voters concur. If voters reject the question, the county would have to wait at least 12 months before putting the issue on the ballot. It all goes away after Dec. 31, 2027. Local governments in the county would divide 50 percent of annual proceeds for their road repair and maintenance needs.

The optional sales tax would come with a “maintenance of effort” provision. Such mandates under Obamacare have tied states’ hands and extended financial obligations under the law. They lock governments into maintaining taxpayer-funded programs, typically at an escalating cost to taxpayers.

Republican governors have long railed against the extension of the maintenance-of-effort imposed in the “free” money to states in the 2009 federal stimulus package. States were forbidden to make major changes in Medicaid eligibility. “Therefore, Medicaid spending has continued to rise as lawmakers have chosen to cut other programs or raise taxes,” wrote John Hood in a 2012 National Review piece headlined, “Say No To Medicaid Expansion.”

Kooyenga says the idea behind his maintenance-of-effort mandate in his local option sales tax proposal is to keep local governments from shifting sales-tax-based transportation money into another government fund. But those who warned against Medicaid expansion have seen their admonitions come to pass. The base of Medicaid spending, once expanded, continues to grow at a broader, expanded rate.

The transportation plan includes the complete repeal of the state’s prevailing wage law, an anti-free-market giveaway to labor unions at the expense of taxpayers. The law requires wages on taxpayer-funded construction projects to be paid at inflated rates preferred by unions. Two years ago, the Republican-controlled Legislature repealed prevailing wages for certain local projects. If only conservatives had control of every branch of the federal government so we could make some progress with the equally repugnant Davis-Bacon Act.

Kooyenga’s reform package adopts many of the cost-savings and oversight recommendations included in the Legislative Audit Bureau’s January report.

The Final Analysis

While they may not support his proposal, or at least elements of it, many of Kooyenga’s Republican colleagues say the lawmaker did what Republican leadership said the party would do after posting historic wins in November: Go big and bold. He was charged with a Herculean task in coming up with a plan that would solve the DOT’s budget problems, put Wisconsin on the road to real income tax reduction, and work to bring a broad spectrum of competing interests to some kind of consensus.

“I understand there is an insatiable appetite” for transportation money, Kooyenga said. “I just thought it was my job to figure out what we need and go from there.”

While it includes some worthwhile, free-market ideas, Kooyenga’s reform proposal ultimately is flawed by its need to appease. It has the fingerprints of politics and special interests all over it. Anytime politicians make a decision based on politics or the next election, taxpayers lose.

While proponents claim the gasoline sales tax is not a tax increase but simply an expansion of the tax base, we disagree. There’s no way around it – this is a tax increase for the consumer.

According to the nonpartisan Legislative Fiscal Bureau, the sales tax would result in an equivalent fuel tax increase of 7.2 cents per gallon for gas and 10 cents for diesel, based on a price of $2.40 per gallon of gas and $2.95 per gallon of diesel. The pain at the pump only increases as the price per gallon of gas increases. What happens when gas prices hit $3.50 per gallon again? What about $4? Kooyenga has said the idea is to put curbs on high-end and low-end pricing, but consumers have a right to be concerned.

While we applaud the immediate 4.8-cent cut in the gas tax, without scoring the impact of the change in the minimum markup law, questions remain about the overall taxpayer impact of the transportation funding plan. We would be much more comfortable with the overall design of this proposal if it deleted the entire minimum markup law and let full competition for customers drive down the price of gas. MacIver has spent a great amount of time and effort reporting on the consumer injustice that is Wisconsin’s minimum markup law. Our feelings are clear. Why does the government have any role in the setting of prices? Sounds like a scheme you might find in Venezuela.

When it comes to taxation, simplicity and transparency are critical to a fair and effective tax system. Having state government impose a sales tax on top of a tax is a step in the wrong direction.

In the final analysis the question remains: Is a simplified, fairer flat tax worth the price of applying the sales tax to gasoline? We think not. While there is much to like in “The Road to a Flat Tax,” there is more work needed to make it a good deal for taxpayers.

May 11, 2017 | By Brett Healy

MacIver Institute Joins Nationwide Conservative Coalition: Promote Fiscal Responsibility in Upcoming Transportation and Infrastructure Spending

[Madison, Wis…] The Trump administration is widely expected to unveil a far-reaching infrastructure proposal in the near future. In anticipation of President Trump’s proposal, more than 50 organizations from around the country, led by Americans for Prosperity, sent a letter to Congress today urging fiscal responsibility. The John K. MacIver Institute for Public Policy signed onto the letter.

The letter calls on members of Congress to avoid the wasteful spending of the Obama administration, maximize taxpayer dollars in any new infrastructure spending, and use the opportunity to implement long-overdue reforms that will reduce bureaucracy and cut costly red tape.

The full letter follows.

On behalf of our organizations and the millions of Americans we represent, we write to encourage you to prioritize fiscal responsibility while addressing the nation’s infrastructure needs. Previous transportation spending policies shepherded by the Obama administration — the 2009 “stimulus” and all its attendant boondoggles — were chock-full of waste and pet projects and made the nation’s fiscal problems worse. American families cannot afford to repeat the failed mistakes of the past.

Forthcoming transportation plans should be an opportunity for Congress and the Trump administration to further relieve the economy from bureaucratic and regulatory hurdles while maximizing taxpayer dollars. Here’s how:

Reform environmental review processes. Lengthy and often duplicative environmental impact studies increase project costs and drag project timelines. Possible reforms could include the removal of greenhouse gas emissions from the review process and limiting the scope and application of the National Environmental Policy Act as well as other planning and analysis mandates. Doing so would save time and reallocate limited tax dollars from paperwork and red tape to asphalt and concrete.

Repeal draconian labor regulations. Overturning President Barack Obama’s executive order requiring federal contractors to use Project Labor Agreements on federally-funded projects and repealing the Davis-Bacon wage mandate that drives up project costs by 22 percent are two great places to start. Heritage Foundation research shows that repealing Davis-Bacon and reinvesting the funds back into infrastructure would add over 160,000 construction jobs to the economy.

Prioritize transportation dollars on core infrastructure projects. A growing percentage of federal transportation spending — now up to 25 percent of all spending — is going to non-highway projects, diverting these dollars from their ostensible purpose of building roads and bridges. Infrastructure dollars should go toward core projects — not on ancillary projects like highway beautification and public transit.

Empower the states. States, localities, and the private sector understand local needs better than Washington bureaucrats. Local policymakers should have the flexibility to manage projects reflecting local priorities and manage their funding. Federal policymakers can get out of the way by removing existing federal barriers to state-based funding and financing.

Fully pay for projects. The spirit of President Trump’s first budget blueprint, the so-called “skinny budget” that cuts non-defense discretionary spending, should be applied to future transportation spending initiatives. Any new spending should be offset with spending cuts, not tax increases nor budget gimmicks.

Seek spending reforms instead of new funding sources. Two concerning ideas circulating on Capitol Hill include creating a national infrastructure bank and using new revenues from corporate income repatriated from abroad. Congress should be cautious of both. The first would lead to more bureaucracy and subsidies for the politically- connected at taxpayers’ expense, and the second has little to do with transportation issues and instead is a symptom of our broken federal tax code that should be addressed in the context of comprehensive tax reform.

We look forward to working with you in promoting responsibility in upcoming transportation and infrastructure initiatives. Keeping these conservative principles in mind as you craft plan details will improve our nation’s infrastructure and create jobs while protecting taxpayers. Thank you for your consideration.

March 24, 2017 | By Richard Chandler

Expanded Earned Income Tax Credit Will Encourage Work

Guest Perspective by Richard Chandler

Among Governor Walker’s top priorities are encouraging work, promoting economic growth and reducing taxes. Wisconsin’s Earned Income Tax Credit (EITC) helps accomplish all these goals, and the Governor’s proposed budget bill would make it even more effective.

The Earned Income Tax Credit may sound technical but it addresses a widespread issue that affects people who are deciding whether to enter the workforce in entry level jobs. People who haven’t been working notice that when they take a job, they start paying taxes and they also lose public benefits they’ve been receiving. The combination of new taxes and lower benefits can make it economically unattractive to take a job.

The solution to this problem is the EITC, which is a tax credit that offsets some of the taxes imposed and benefits lost when people start working. It helps encourage people to take entry level jobs, then phases out as people gain job experience and move up the wage ladder. Lower-income wage earners with children qualify for the credit.

There’s a federal EITC, and Wisconsin and 25 other states add to it with a state EITC. The Governor’s 2017-19 state budget bill proposes an expansion of the state EITC to encourage more people to join the workforce.

A review of Wisconsin’s EITC showed that, compared with other states, we had one of the most robust EITCs for people with three or more children, but were at the lower end of the scale for people with one child. The Governor proposes to increase Wisconsin’s EITC for workers with one child, raising it to 11 percent of the federal EITC. This would benefit an estimated 130,000 lower-income working families.

One other issue with Wisconsin’s EITC is that, in some cases, workers who receive the EITC will see a smaller payment if they marry. The Governor proposes to remove this disincentive to marriage by saying that if EITC recipients marry, there will be a three-year “honeymoon period” when their EITC payment will be the larger of the married couple EITC or the payments they received when they were still single. This would help an estimated 8,000 filers in the first year after it’s enacted.

The EITC benefits workers all across Wisconsin. It is easy to administer because people simply claim it when they file their tax returns. In short, it’s a sensible and effective way to encourage work and reduce poverty.

We know that work gives people a sense of purpose and self-worth and enables them to contribute to their communities, in addition to supporting themselves and their families. It’s also well-known that Wisconsin employers have many job openings and are looking for workers. Making sure Wisconsin’s EITC is as effective as possible will encourage more people to start climbing the job ladder, help employers fill jobs, and strengthen Wisconsin’s economy.

Richard Chandler is the Secretary of the Wisconsin Department of Revenue.

January 25, 2017 | By Ola Lisowski

A Glide Path to a 3 Percent Flat Income Tax


A Policy Brief by the John K. MacIver Institute for Public Policy

EXECUTIVE SUMMARY | Download the executive summary in PDF format here.

Since the beginning of his tenure, Governor Scott Walker has made tax reform a priority for Wisconsin. Walker has said he hopes to lower the tax burden every year of his term. Thus far, he has stuck to his pledge, having lowered taxes by $4.76 billion in under six years.

Both the amount of taxes and the different types of taxes that Governor Walker has cut since he took office is impressive.

It should not be simply glossed over how much progress Wisconsin has made reducing taxes in recent years. In 1994, less than 25 years ago, Wisconsin ranked 3rd nationally in overall tax burden and our taxes were 16 percent above the national average.

Today, property taxes are at the smallest percentage of personal income since 1945, 3.6 percent. The average homeowner in Wisconsin, in 2016, paid $116 less in property taxes than he or she paid in 2010. According to the Department of Revenue, the typical family in Wisconsin has seen their income taxes cut by $1,159. Wisconsin’s state and local tax burden, as reported in December 2016 Census Bureau data, fell to 10.8 percent of personal income, the 16th highest among the states. By comparison, the year prior, Wisconsin’s tax burden ranked the 15th highest at 10.9 percent of personal income.

While Walker and the Republican Legislature should be lauded for all the taxes they have cut, these tax cuts have done little to improve Wisconsin’s overall tax ranking. Similar to the Census Bureau data mentioned above, the nonpartisan Tax Foundation’s most recent ranking of state and local tax burdens puts Wisconsin at the fourth highest in the nation and highest in the Midwest. In the same study, the Tax Foundation found that state and local taxes take up 11 percent of all personal income in Wisconsin every year. These tax cuts have also done little to stop or even contain the never-ending and seemingly inevitable growth of the state budget. The 2011-2013 state budget spent over $66 billion from all funding sources. The 2015-17 state budget spent nearly $74 billion.

Clearly, it is time to think about the next big and bold reform that will transform our state and make Wisconsin an economic powerhouse for generations to come. It is time for a flat tax in Wisconsin.

Wisconsin’s reputation as a high-tax state has a significant impact on the state’s ability not only to attract newcomers, but also to retain those who are already residents. Annually, Wisconsin loses an estimated $136 million in adjusted gross income to tax migration. The high tax burden drives individuals to leave for those states with lower tax burdens or no income tax at all, such as Florida and Texas. One study, which examined Internal Revenue Service data from 1992 through 2015, showed that Wisconsin lost $3.40 billion in wealth to Florida, $1.08 billion to Arizona, and $769 million to Texas during the 23-year period. In that time, almost 93,000 people migrated from Wisconsin – that’s more than the entire population of Racine, the state’s 5th largest city. The loss of so many individuals, their businesses, and their economic activity does not bode well for the economic future of the state. Lower, flatter income taxes are one way to help stem the tide of emigration from Wisconsin.

Low, flat state income tax rates are actually common throughout the country. Seven states levy no individual income tax at all. New Hampshire and Tennessee currently tax dividend and interest income, though recent reforms in Tennessee have set a glide path to total elimination of the income tax in 2022. Eight states have flat individual income tax structures, and 33 states, including Wisconsin, levy progressive tax rates based on income level.

In today’s mobile economy, every state must compete for new residents and new businesses or risk losing them to other states. While climate and the local job market are big factors in a person’s decision to move, a state’s tax burden plays an important role in keeping recent graduates, people looking for a better life, and retirees from moving to a state with a lower tax burden.

The personal income tax, not just the corporate tax, is also becoming a bigger factor in the financial health and growth of businesses. The number of pass-through entities has nearly tripled since 1980, making pass-through businesses the most common business form in the country. Pass-through entities are not subject to typical corporate taxation, but are instead taxed under the individual income tax. Profits are passed through to the shareholders or partners of these companies and become part of their income. More than half of Wisconsin’s workforce is now employed by pass-through businesses, giving the individual income tax even greater importance to the livelihoods of Wisconsinites and the success of their businesses. In Wisconsin, pass-through businesses pay a top marginal income tax rate of over 48 percent – the 8th highest rate in the country.

Taking nearly half of a company’s income is detrimental to success and economic growth. Many states are wising up to the fact that high income taxes hurt competitiveness by punishing success and hard work. Despite the rhetoric that progressive taxation results in a fairer outcome, evidence shows that progressive income taxes are actually associated with higher income inequality.


This report sets out to explain why Wisconsin should continue to ratchet down its relatively high individual income tax system and many different rates to one flat rate. Evidence from a variety of sources – economic, social, and fiscal health metrics, as well as academic studies – demonstrates the benefit of a lower and flatter income tax structure. After examining Wisconsin’s position within the Midwest and considering recent reforms around the country, this report will recommend that Wisconsin transform its progressive income tax to a flat 3 percent tax rate for all taxpayers over an eight year period. In subsequent papers, we will continue to build our case through a comparison with Indiana, a state similar in size and demographics to Wisconsin, and will recommend specific steps that Wisconsin can take to make a flat tax a reality.

A systematic glide path to a 3 percent income tax rate would give Wisconsin the most competitive income tax among Midwestern states while greatly improving the state’s attractiveness on a national level. Such a move would have a significant impact on the incomes of all Wisconsinites and most importantly, would allow working class people to keep more of their income. A 3 percent flat tax would be a tax cut for everyone in Wisconsin. Under the current “progressive” tax code, our lowest tax rate of 4 percent for those who make just $11,120 per year is the 4th highest tax rate among the 33 states with a progressive income tax system.

Spacing out the rate reductions over a number of years protects the state budget from sudden and steep revenue drops, giving sufficient time to make gradual adjustments so the transition to the new tax system is smooth.

If Wisconsin is serious about becoming a high-performing state in a 21st Century economy, it must continue its recent tax-cutting momentum to fundamentally change the fiscal trajectory of our state and to lighten the tax burden for its hard-working residents.

Our economic future depends on it.

Download the full report here.

Former MacIver Institute researcher Matt Crumb contributed to this report.


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