Assembly passes GOP-backed middle-class tax cut that Tony Evers is likely to veto
MADISON - Republicans in the state Assembly passed a middle-class income tax cut Tuesday that has little chance of becoming law.
The GOP-controlled Senate will also take up the measure Wednesday, but Democratic Gov. Tony Evers has repeatedly said he won't support it.
The Republican proposal would cut taxes for middle-class families by 10 percent — a pledge Evers made on the campaign trail. Evers' plan would be paid for in part through a reduction in a controversial tax break for manufacturers.
GOP lawmakers instead would achieve the cut by spending a budget surplus — a funding mechanism Evers strongly opposes.
The Assembly passed the measure 61-33, with all Republicans for it and all Democrats against it.
Evers criticized the Republican plan hours before the vote but came short of saying he would veto it if it gets to his desk.
"Personally, I can’t understand how we could use up all the surplus for this and then ignore the rest of the budget," he told reporters.
He called his plan superior but said he is willing to negotiate with Republicans to find common ground. On Twitter, he called the plan "irresponsible."
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GOP senators register concerns
With Evers' opposition to the plan, its success in the Legislature would be symbolic, Republican Sen. Luther Olsen of Ripon said.
"I have some concerns about it, but it's not going to be law anyway," Olsen said, adding that he will probably vote in favor of the bill. "(The vote is) just laying down a statement that we support tax cuts."
Olsen said he supports cutting taxes but has concerns about taking the surplus money off the table for schools and prisons that have had difficulty retaining guards.
"There's lots of things we need to deal with," Olsen said. "I just want to make sure we have enough money to get our house in order" and then consider a tax cut.
Republican Sen. Steve Nass of Whitewater also has concerns about the effect the tax cut could have on the state's budget, Nass aide Mike Mikalsen said.
"He is squarely undecided" on the tax cut, Mikalsen said a day before senators were expected to vote.
Nass supports cutting taxes but is worried approving the legislation before passing the budget could create fiscal headaches for lawmakers. Evers is likely to recommend spending increases that some lawmakers will find hard to resist amid public pressure, Mikalsen said.
"You have to look at (the tax cut) in conjunction with the Christmas-tree budget Gov. Evers is about to deliver," Mikalsen said.
The GOP plan
The Republican plan would cost $490 million in its first year and $338 million annually after that, according to the nonpartisan Legislative Fiscal Bureau.
A married couple with a combined income of between $100,000 and $125,000 would see an average decrease of $212. A couple making between $60,000 and $70,000 would see the largest average decrease, $311.
The state had $588.5 million in its primary account as of June 30, the end of the last fiscal year. It is projected to end the current fiscal year with $691.5 million.
Evers has said he wouldn't support the bill, but Evers administration officials and Assembly Speaker Robin Vos of Rochester in recent days said they both would be open to considering changes. The two hadn't spoken about modifying the Republican bill as of last week.
The competing proposal comes just two weeks before Evers is scheduled to release his 2019-'21 state budget, which he has said will include his version of the tax cut.
Evers' plan also relies in part on the state budget surplus — just not as much as Republicans. Neither side has a way to fully fund the cost of the tax cut.
In addition to the tax break for the middle class, Evers' plan would expand the earned income tax credit, which provides the working poor with tax breaks or cash payments.
Evers' plan would provide more than $440 million in tax relief this year to lower- and middle-class people while increasing taxes by more than $220 million on manufacturers.
Taken together, the plan would reduce state tax collections by about $219 million this year, according to figures compiled by the Evers administration.
Evers wants his plan included in the state budget, and Democratic lawmakers said he would make adjustments in his spending plan to account for the reduced revenue.
But Republicans won't support a plan that raises the tax burden on manufacturers, who along with agriculture producers are eligible for a tax credit that gradually reduced the state tax on the production earnings of manufacturers and agricultural businesses to nearly nothing — from 7.9 percent to 0.4 percent.
Democrats oppose this tax credit because the vast majority of the money received through the credit goes to recipients who earn more than $1 million annually and the lack of job creation requirements to obtain it.
Republicans support the credit because of the job creation they say the credit fosters and the incentive it provides to manufacturers to come to Wisconsin.
According to a 2018 analysis from the Legislative Fiscal Bureau, 79 percent of the amount awarded — $196.2 million of $248.5 million — went to tax filers with incomes of $1 million or more. The vast majority of recipients, however, earn less than that.