Boots & Sabers

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0644, 04 Sep 19

Another year, another tax surplus

Here is my full column that ran in the Washington County Daily News yesterday.

In a fitting coda to the two remarkable terms of Governor Scott walker, the Legislative Fiscal Bureau released a report last week showing that the preliminary general fund tax collections for fiscal year 2019 came in a whopping $702.6 million more than anticipated. Such a number demonstrates the remarkably good shape in which Walker left the state economy and the state’s finances.

When the Legislature and the governor write a budget, they have to estimate the amount of revenue that the various taxes will generate for the state. This estimate is based on the tax laws in place combined with economic forecasts. As with any estimate, the further one looks into the future, the less certainty there is with the number.

When the Legislature passed the previous biennial budget which just came to a close, they estimated that they would collect $16.6 billion in taxes including income taxes, sales taxes, corporate taxes, excise taxes, public utility taxes, and the other many and varied taxes extracted from the people of Wisconsin. Based on the preliminary data, the state actually collected $17.3 billion in taxes leaving a $700 million surplus. For a little historical perspective, the state of Wisconsin ended the fiscal year with more tax collections than expected in six of the eight Walker budget years.

This tax surplus gives us a few critical insights. First, it was not that long ago that Wisconsin’s budget was in an annual crisis with tax revenue falling short of projections. Coupled with overspending, Wisconsin had massive annual deficits. You might remember when Governor Walker first sat behind the governor’s desk, he was handed a massive budget deficit that required an immediate Budget Repair Bill, a.k.a Act 10. Governor Walker and the conservative Republican majorities in the Legislature, quickly righted the ship of state over the violent objections of the Democrats. Wisconsin has enjoyed budget surpluses ever since.

Second, recall that tax surpluses are simply a factor or the state collecting more than they estimated they would collect. These estimates have often been used in other states and in previous eras in Wisconsin to create phony budgets. Wisconsin must pass a balanced budget. Unlike the federal government, a state does not have the power to print money, so the state must account for every dollar spent.

In order to create the fiction of a balanced budget to support more spending, politicians will inflate tax revenue estimates for the budget. Then, when actual tax revenues fall short of the inflated estimates, the same politicians will enact new taxes or borrowing to pay the bills. It is a cynical method of budgeting by crisis. The consistency of the tax revenue surpluses during the Walker budgets show that the Republicans used responsible, conservative tax revenue estimates to create their budgets.

Third, the tax surplus is a result of the fact that Wisconsin’s economy is booming thanks in part to the economic policies Governor Walker and the Republican- led legislatures of recent years. Taxes are generated when money moves. Money moves when the economy is healthy. With more people employed in Wisconsin than ever before, businesses thriving, new construction happening everywhere, and people spending their higher incomes, the state of Wisconsin gets a slice of every dollar that moves.

As the Republicans cut taxes several times over the previous eight years, the money that people kept was put to good use in our economy, thus creating more wealth, more income, more spending, and, yes, more tax revenue. As has been demonstrated time and time again, when the tax burden is too heavy, cutting taxes always feeds more economic activity and results in more tax revenue. And the tax burden in Wisconsin is still far too heavy.

The one significant black mark on the Walker budget years is that while the state had budget surpluses, Walker and the Republicans still increased spending every single budget. And in the most recent budget, with Republicans controlling the Legislature and Governor Evers in power, the notion of any spending constraint was abandoned. At some point, the economy will enter a recession, tax revenues will collapse, and we will all regret that we failed to control spending during the good times.



0644, 04 September 2019


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