Ongoing spending increases in Gov. Tony Evers’ biennial budget could put the state in a tough financial spot when the 2025-2027 budget rolls around, but so could a GOP flat income tax proposal, according to a new Wisconsin Policy Forum report.

The state is in a strong position with a more than $7 billion projected surplus, thanks in part to federal pandemic relief dollars. But Evers’ budget proposals would exceed revenues by nearly $5.3 billion in 2024 and $1.3 billion in 2025, resulting in the “largest imbalance of any budget on record,” according to the report. While a portion of the money would be one-time spending, a large amount would be ongoing and difficult to maintain.

Meanwhile, Senate Majority Leader Devin LeMahieu’s plan for 3.25 percent flat income tax over a four-year year period would lower state revenues by nearly $5 billion over the 2023-25 budget and $9.4 billion in the next one.

“This would likely make the overall budget even more difficult to sustain,” the report notes.

JFC Co-chair Rep. Mark Born, R-Beaver Dam, at a luncheon last week said Republicans are unlikely to include a flat tax in the budget, calling it a “long-term goal.” Evers has said the measure would be a “poison pill” in the budget.

The report advises lawmakers and the governor to ensure new spending and tax cuts are sustainable in the coming budget and later budgets as well, considering the possibility of a recession on the horizon.

Evers has proposed to spend $103.8 billion through 2025, including both state and federal money — a 17.9 percent boost in spending in the first year of the budget, and 0.8 percent in the second year. The amount includes $48.1 billion in general purpose revenue — a 23.2 percent increase in the first year compared to 1.2 percent in the second.

Republicans on the Joint Finance Committee have vowed to work off the base budget and strip out the guv’s policy provisions. They are likely to remove a good portion of the spending Evers recommended.

See the report here.

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