Evers, GOP leaders at odds over middle-class tax cut

Photo by Michelle Stocker, The Capital Times

Gov. Tony Evers says he doesn’t think he could sign the GOP’s version of a middle-class income tax cut because Republicans had failed to provide a path to pay for it in future years.

GOP leaders, meanwhile, said the version Evers and Dem lawmakers unveiled was a “non-starter” with them, as the two sides remained deeply divided over their shared goal of cutting taxes for the middle class.

Evers Tuesday called his version of the middle-class tax cut “far superior,” saying the proposal from GOP lawmakers would take money that he said is needed to pay for other priorities. It would cut taxes by $892.3 million for individuals over the two-year budget while raising them $518 million on manufacturers by capping an existing credit.

“Right now I cannot support a plan that has no plan for funding in the future,” Evers said.

Assembly Speaker Robin Vos, testifying on the GOP version at a hearing Tuesday, said the state can fund the plan through its surplus and avoid “jeopardiz(ing) the jobs” that have been created through the manufacturing and ag tax credit.

“We are not going to raise taxes, period; we are not going to raise taxes, especially on our job creators, when we have a huge surplus,” the Rochester Republican said.

And Senate Majority Leader Scott Fitzgerald, R-Juneau, tweeted Evers was “wants to hike taxes on WI businesses to pay for his plan. That’s not a tax cut, that’s a tax shift to create winners and losers. Our plan cuts taxes for families without raising them on anyone else — only creating winners.”

In unveiling the Dem version of the cut, state Sen. La Tonya Johnson, D-Milwaukee, declared “The methods matter.”

The Dem proposal includes a two-pronged approach.

One, there would be a new nonrefundable tax credit equal to 10 percent or $100, whichever is greater, for some earners. Two, those who qualify for the federal earned income tax credit would see a boost in what they could claim as a credit against their Wisconsin taxes. The latter credit would be refundable, meaning those who qualify would get a check if their credit exceeded their tax liability.

For the income tax credit, according to Evers’ office:

*individuals with an adjusted gross income of less than $80,000 and married-joint filers at less than $125,000 would qualify for the full 10 percent credit.

*the 10 percent credit would gradually phase out for individual filers with an AGI of up to $100,000 and married-joint filers up to $150,000.

For the EITC:

*those who qualify could claim a credit to their state taxes equal to 11 percent of the federal credit, up from 4 percent, for one child. For those with two children, the credit would increase to 14 percent from 11 percent. For those with three or more children, the credit would remain at 34 percent of the EITC.

Over the 2019-21 budget, the new income tax credit would equal a cut of $839.2 million, while the EITC proposal would reduce taxes $53.1 million.

Meanwhile, the cap on the credit for manufacturers would hike taxes $518 million.

During Tuesday’s news conference, Dems said the average credit between the income tax cut and the EITC proposal was about $225 per filer.

Dem also talked about a price tag of $373.9 million for the package. But that referenced how much it would cost the state from expected revenues over the two years after deducting the tax hike on manufacturers.

See the Dem proposal:
http://www.wispolitics.com/wp-content/uploads/2019/02/190205Tax2.pdf

See a background document from Evers’ office:
http://www.wispolitics.com/wp-content/uploads/2019/02/190205Tax3.pdf

Listen to the Dems’ news conference:
https://soundcloud.com/wispolitics/190205_1302a/s-mvksM

Vos during a media availability touted what he sees as the simplicity of the Republican version of the tax cut. 

Vos noted the GOP plan would increase the standard deduction on a sliding scale, a change that doesn’t require anyone “to file any special paperwork” or “go through any extra hoops.”

“I would prefer to have the simplest, easiest way and not make people go through a bunch of bureaucratic hoops,” Vos told reporters at a news conference this afternoon minutes after Dems and Gov. Tony Evers announced their plan.

While Vos said he hadn’t yet reviewed the proposal, “if it’s based on raising taxes on anyone in the state, it’s a nonstarter.”

The Dem proposal would kick in for tax year 2019, which runs Jan. 1-Dec. 31, while the Assembly GOP plan would begin in tax year 2020.

Under the Dem plan for tax year 2020, the middle-class tax cuts would total $441.1 million, while the increase on manufacturers would be $235.4 million with a net reduction of $205.9 million in tax collections for that year.

Under the Assembly GOP plan for tax year 2020, the income tax reduction would amount to $338.1 million.

Hear the audio of Vos’ availability:
https://soundcloud.com/wispolitics/assembly-speaker-robin-vos-comments-to-reporters

See a new LFB memo on the GOP plan:
http://www.wispolitics.com/wp-content/uploads/2019/02/190205LFB.pdf

GOP lawmakers touted their version of the tax cut plan at a joint public hearing Tuesday, selling it as a way to return the budget surplus to taxpayers. 

And many Republicans pushed back against the idea of rolling back the manufacturing and ag tax credit to cover the cost, arguing the approach would “raise taxes on the same people we want to cut taxes for.”

Meanwhile, an Evers administration official repeatedly called for bipartisan conversations around the plan, as committee Dems bemoaned their exclusion from Republicans’ work in drafting the bill. They also called for making the tax cut “sustainable.”

“We can work together. I truly believe you’ve got a governor who would love to sit down and roll up his sleeves,” Department of Revenue Secretary Peter Barca said this afternoon. “Let’s come up with a comprehensive plan that meets the goals that we’ve outlined.”

Tuesday’s public hearing — before members of the Assembly Ways and Means Committee and Senate Agriculture, Revenue and Financial Institutions Committee — began shortly after Democrats and Evers unveiled their version of the tax cut.

Under the GOP bill, the standard deduction would increase on a sliding scale.

Republicans, including the bill’s authors, lamented Evers’ initial proposal to pay for his version of the credit. On the campaign trail, the Dem had called for a cap on the manufacturing and ag credit at the first $300,000 of income. But under the proposal unveiled Tuesday, that cap would only apply to manufacturers claiming the credit.

But committee Dems, including Milwaukee Sen. Chris Larson, charged GOP lawmakers are “rushing to spend” the surplus, a decision that could mean a lack of funds for roads or other priorities down the line.

Still, Senate bill author Howard Marklein, R-Spring Green, countered the bill doesn’t spend anything but rather “returns money to the taxpayers that sent it to us in the first place.”

Dems and Barca also called for holding off on the GOP plan and working out the issue over the remainder of the fiscal year through budget talks.

“The appropriate time to do this is part of the budget,” Barca said.

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