Boots & Sabers

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Tag: Budget

Wisconsin’s shifting tax burden

Here is my full column that ran in the Washington County Daily News earlier this week.

The state of Wisconsin and local governments extracted the most taxes ever from Wisconsinites in fiscal year 2022. Wisconsinites had the lowest combined state and local tax burden in at least fifty years in fiscal year 2022 (FY22). Both of those statements are true according to a report from the Wisconsin Policy Forum. What does this mean for the upcoming budget debate?

 

Let us begin with the data. According to the Wisconsin Policy Forum (formerly the Wisconsin Taxpayers Alliance), total state and local tax collections for FY22 was $35.36 billion. That was an overall increase of 4.1% over the previous year and is the most taxes ever collected in a single year in Wisconsin. Of that, state taxes were $23.78 billion and local taxes were $11.58 billion. State tax collections rose by 5.1% over the previous year while local taxes increased by 2% over the previous year.

 

At the same time, personal income in Wisconsin has grown. In calendar year 2021, personal incomes rose 6.7% driven by federal COVID relief funds and some real wage increases. Since personal income rose faster than state and local tax collections, the tax burden, as a percentage of personal income, slumped to a record low of 10.1% since the Wisconsin Policy Forum began compiling records in 1970. It is not that our tax burden is decreasing. It is simply that the burden has the illusion of being lighter since our incomes are rising at a faster rate.

 

That is the data. What does it tell us? First, it tells us that the state and local government coffers are brimming with cash right now. Ignore the pleas of poverty from your favorite government entity. Many units of government have surpluses and will be using that as an excuse to increase spending in their next budgets. In state government, not even the Republican-led Legislature is talking about returning all surpluses to taxpayers.

 

Instead, they are talking about modest tax reductions combined with more spending.

 

Second, while tax burden as a percentage of personal income is decreasing slightly, personal income is still not keeping up with inflation. According to the U.S. Congress Joint Economic Committee, as of November of 2022, the annual cost of inflation for the average Wisconsin household since January of 2021, the last month we had a normal inflation rate, is $8,299. That is an 14.1% in household costs in less than two years. While personal incomes are increasing, the cruel cost of inflation is leaving Wisconsinites with less actual buying power every month.

 

Third, it could have been worse. The reason that state and local tax collections only rose 4.1% in FY22 is thanks to over a decade of relatively consistent tax policy discipline by the Republicans. Think back to the successive state budgets by the Republicans in the Governor Walker era and even in the previous budget when they kept the caps in local property tax increases, cut income tax rates, eliminated the state property tax, and dozens of other choices. These choices have resulted in slowing the rise of tax collections.

 

Thanks to Republican policies, state individual income taxes actually decreased by 0.7% in FY22 and net property taxes only grew by 0.8%. The aggregate tax collection increases were almost completely driven by an increase of 9.5% in state sales tax collections as a result of inflationary consumer prices. Corporate income tax collections were up a stunning 15.6%. Corporate income tax collections are thrice as much as they were in 2018. Interestingly, this increase is mostly due to more robust auditing of out-of-state businesses that was launched in the 2015-2017 state budget by, you guessed it, legislative Republicans and Governor Scott Walker. Corporate tax rates are not increasing, but the state is better at collecting what corporations are obligated to pay.

 

The decade-long effort by Republicans has resulted in a systemic shift of the tax burden from individual income and property taxes to consumption and corporate taxes. This has also resulted in record tax collections and annual state budget surpluses. Those surpluses are not the dividends of spending discipline, but of intelligent tax policies.

 

As state lawmakers consider the next budget, they should not take too much of the fact that the tax burden as a percentage of personal incomes is at a historic low. That metric must be understood in the context of the inflationary pressures on Wisconsin’s taxpayers from all angles and the overall cost of living in the state. Flush state coffers should be viewed as an opportunity to put more money back into the pockets of Wisconsin’s taxpayers to help them contend with the rising cost of living.

Wisconsin’s shifting tax burden

My column for the Washington County Daily News is online and in print. Here’s a part:

The state of Wisconsin and local governments extracted the most taxes ever from Wisconsinites in fiscal year 2022. Wisconsinites had the lowest combined state and local tax burden in at least fifty years in fiscal year 2022 (FY22). Both of those statements are true according to a report from the Wisconsin Policy Forum. What does this mean for the upcoming budget debate?

 

[…]

 

That is the data. What does it tell us? First, it tells us that the state and local government coffers are brimming with cash right now. Ignore the pleas of poverty from your favorite government entity. Many units of government have surpluses and will be using that as an excuse to increase spending in their next budgets. In state government, not even the Republican-led Legislature is talking about returning all surpluses to taxpayers.

 

Instead, they are talking about modest tax reductions combined with more spending.

 

Second, while tax burden as a percentage of personal income is decreasing slightly, personal income is still not keeping up with inflation. According to the U.S. Congress Joint Economic Committee, as of November of 2022, the annual cost of inflation for the average Wisconsin household since January of 2021, the last month we had a normal inflation rate, is $8,299. That is an 14.1% in household costs in less than two years. While personal incomes are increasing, the cruel cost of inflation is leaving Wisconsinites with less actual buying power every month.

 

Third, it could have been worse. The reason that state and local tax collections only rose 4.1% in FY22 is thanks to over a decade of relatively consistent tax policy discipline by the Republicans. Think back to the successive state budgets by the Republicans in the Governor Walker era and even in the previous budget when they kept the caps in local property tax increases, cut income tax rates, eliminated the state property tax, and dozens of other choices. These choices have resulted in slowing the rise of tax collections.

 

Thanks to Republican policies, state individual income taxes actually decreased by 0.7% in FY22 and net property taxes only grew by 0.8%. The aggregate tax collection increases were almost completely driven by an increase of 9.5% in state sales tax collections as a result of inflationary consumer prices. Corporate income tax collections were up a stunning 15.6%. Corporate income tax collections are thrice as much as they were in 2018. Interestingly, this increase is mostly due to more robust auditing of out-of-state businesses that was launched in the 2015-2017 state budget by, you guessed it, legislative Republicans and Governor Scott Walker. Corporate tax rates are not increasing, but the state is better at collecting what corporations are obligated to pay.

 

The decade-long effort by Republicans has resulted in a systemic shift of the tax burden from individual income and property taxes to consumption and corporate taxes. This has also resulted in record tax collections and annual state budget surpluses. Those surpluses are not the dividends of spending discipline, but of intelligent tax policies.

 

As state lawmakers consider the next budget, they should not take too much of the fact that the tax burden as a percentage of personal incomes is at a historic low. That metric must be understood in the context of the inflationary pressures on Wisconsin’s taxpayers from all angles and the overall cost of living in the state. Flush state coffers should be viewed as an opportunity to put more money back into the pockets of Wisconsin’s taxpayers to help them contend with the rising cost of living.

Return surplus to the taxpayers

Here is my full column that ran in the Washington County Daily News earlier this week.

Thanks to over a decade of solid budgeting from Republican Legislatures, the state of Wisconsin is in a strong financial position and forecasting a massive budget surplus when the current fiscal year ends next June. The Wisconsin Department of Administration issued a required report in November forecasting that the state will finish the current biennial budget with a general fund surplus of $6.6 billion. This is the largest forecasted surplus in Wisconsin history.

 

With the state’s coffers overflowing, every hog is at the trough jostling for position and every politician is eyeing their favorite one to fatten. There will be no shortage of requests, demands, justifications, and admonitions from advocates to spend every dollar of the surplus and more. Instead, the Legislature should give it, and more, back to the beleaguered taxpayers.

 

First, let us dig into the anatomy of the forecasted surplus. According to the 62-page DOA report, the state entered the budget with a $2.52 billion balance, added $1.78 billion to the balance in first fiscal year of the budget, and projects to add an additional $2.276 billion to it by the end of this fiscal year for a total biennial budget surplus of $6.576 billion. This is based on the current economic outlook and current tax policies. The reason for the surplus is relatively straightforward. The state spent every dollar it appropriated (actually, a little more), but it collected far more in taxes than it needed. For example, in FY22 which ended on June 30th of this year, the state collected $534 million more in income taxes than lawmakers said they needed in the budget. It collected $338 million more in sales taxes and $1.05 billion more in corporate taxes than it needed.

 

Why? The primary reason is inflation. While the underlying economy is struggling, the price of everything is going up. Incomes are up, corporate taxable profits are up, the price of consumer goods are up, and taxes are based on percentages of those things. The budget did not make any inflationary assumptions when it was created. Inflation has averaged 7.4% since the beginning of this budget in July of 2021. If the projected surplus is realized, it will be due to the state collecting about 10.6% more in taxes than it budgeted.

 

The assumptions used to forecast the surplus are telling, and troubling. The DOA uses economic projections from a single source — IHS Markit. It is concerning that in such tumultuous economic times that the DOA would rely on a single source. They forecast that the nation will have a mild recession in 2023 with a 0.2% decline in GDP before returning sluggish growth in 2024. It also forecasts that inflation will decline to 3% versus prior year by the end of 2023.

 

I hope they are right because those are relatively optimistic projections compared to many other sources. But it reminds us that a forecast is just an educated guess, and we should not spend money that we do not have.

 

The data also shows that while inflation is also pushing up wages, the buying power of those wages are not keeping up. According to the data in the DOA report, personal income rose by 7.4% in 2021 (inflated by COVID bailouts) and 2.3% in 2022. That compares to annualized inflation of 7.1% in 2021 and 7.75% year-todate in 2022 according to the Federal Reserve. Every dollar of wage increases is being consumed by inflation and then some. Wisconsinites’ expenses are increasing at a far faster rate than their wages.

 

Under normal circumstances, it is immoral for the government to overtax the people and then use that as an excuse to increase spending. With a suspect economic forecast and the buying power of Wisconsinites being eaten away by inflation, it would be unconscionable for our elected leaders to do anything other than to return the surplus to the people who paid it with a sheepish, “ope.”

High inflation lights fuse of government taxing and spending time bomb

Here is my full column that ran earlier in the week in the Washington County Daily News 

The U.S. Consumer Price Index, the key measurement for inflation, jumped to 7% in December marking the highest inflation rate we have seen since “Star Trek II: The Wrath of Khan” was released in theaters. It is only going to get worse. There is no sign of inflation abating any time soon and it has lit a fuse that will ignite massive increase in taxes and spending.

 

The CPI measures a basket of goods that is designed to be representative of an average American’s expenses. While overall expenses have gone up 7%, the distribution is even more troubling. According to the Bureau of Labor Statistics, the big drivers are protein foods (12.5%), gasoline (49.6%), fuel oil (41%), natural gas (24.1%), used cars and trucks (37.3%), and new vehicles (11.8%). The extreme price increases in the energy sector are drastically increasing transportation costs and will further ripple through the economy as businesses try to get goods to consumers.

 

Even worse, the Producer Price Index, which measures the change in prices from the perspective of the sellers, rose faster than CPI at 9.7% in 2021. That is the largest calendar year increase since this metric was first calculated in 2010. With the PPI higher than the CPI, it indicates that businesses are absorbing some of the inflation and not passing all of it along to consumers… yet. As businesses realign their consumer prices with their costs, we can expect to see the CPI continue to rise.

 

All of this has a direct impact on every Wisconsinite as the costs of groceries, fuel, home-heating, and other essentials continue to increase. Buckle up, because it is going to get worse as those inflation numbers hit government budgets.

 

Wisconsin has always been a high tax state, but over the years, Republicans have put a few safeguards in place by capping increases to the rate of inflation. That was sensible when we had inflation of 2% or 3%. As inflation moves to 7% or possible above 10%, the ability of Wisconsinites to afford their government will be severely strained.

 

For example, in 2011, the Republicans implemented Act 10, which did a number of things including restricting public employee unions to being able to only negotiate wages up to the rate of inflation. In practice, that meant that most public employees have been receiving wage increases at the rate of inflation every year. With employee costs representing 70% or more of most government budgets, that means that 2022 will see significant spending increases for no additional value.

 

Also, Wisconsin caps government school district spending increases to changes in enrollment and inflation. Higher inflation means a much higher spending increase limit for school districts to pay for those increases in employee wages. This will drive a steep increase in property taxes at the same time that the housing prices upon which property taxes are based have gone up 9.5% according to the Wisconsin Realtors Association.

 

While spending and tax increases of 7% or more are looming, the ability for Wisconsinites to afford those increases is not keeping up. According to the BLS, Wisconsin’s wage growth ranks 37th in the nation for the third quarter of 2021, the most recent data available. Wisconsin’s average hourly wage in the private sector increased at a rate of 3.9% — a little more than half the rate of inflation. As inflation is squeezing Wisconsinites’ expenses, government is about to take a bigger slice. For those who are retired or on a fixed income, the bite of government will be even more severe.

 

To make it even worse — sorry, there is no good news here — recall that inflation measurements are a lagging indicator. Government budgets this year will be set based on inflation incurred last year. When inflation does eventually abate or a period of deflation possibly sets in, there is no mechanism to rein in the inflationary spending of government. Those spending increases will be baked into the pie forevermore unless elected leaders are willing to actually cut spending — something that neither Republicans nor Democrats have been willing to do in Wisconsin in my lifetime.

 

The only way to snuff out the fuse is to elect people who are willing to say “no” to increasing spending even in the face of inflation. Wisconsin’s private-sector workers are suffering from President Biden’s inflation. Government employees should not be immunized from inflation at the expense of their private- sector neighbors. It starts right now with the primaries for local government elections and the general election in April. It continues through the November elections. The people we elect in these next two general elections will be the ones making budget decisions at the end of the year.

 

Choose wisely.

Assembly Passes Budget

Moves on to the Senate.

MADISON – Assembly Republicans approved a state budget late Tuesday that would cut taxes by more than $3 billion over two years, clear the way for an expansion of I-94 in Milwaukee and end the 8-year-old freeze on in-state tuition at University of Wisconsin schools.

 

Their $87.5 billion plan passed 64-34, with four Democrats joining all Republicans in support. The Republican-run Senate is to take it up Wednesday.

 

The Legislature’s version of the budget would increase spending by 5.4% over current levels. Democratic Gov. Tony Evers sought to spend about $3.7 billion more than lawmakers.

 

The Republican version of the budget has at its heart a series of tax cuts.

 

It would reduce income taxes by $2.75 billion over two years, primarily by lowering one tax bracket from 6.27% to 5.3%.

The Legislature takes up the budget

My column for the Washington County Daily News is online and in print. Here’s a part:

This columnist has been following Wisconsin’s budget- making for over two decades and two things really stood out this time. First, there is no real spending restraint in Madison, but there is a marked difference between the parties.

 

The current Republican version of the state budget spends $87.5 billion over the biennium. That is a $6.05 billion, or 7.4%, spending increase over the previous budget of $81.5 billion. The previous budget was a 7.8% spending increase over the budget before that. Throughout that period, the Republicans had strong majorities in the Legislature.

 

By contrast, Governor Evers’ budget proposal would have spent $92.2 billion, or 12% more than the previous budget. It is safe to say that while both parties eschew the frugal mores of most Wisconsinites, the Republicans are slightly less extravagant.

 

On the other hand, Republicans do support real tax cuts while Democrats do not. In the current fiscal environment, the increase in spending in the state budget is bolstered by borrowing and the fact that tax collections are at record highs. To write that another way, the state government is taxing Wisconsinites more than ever. The Republican budget gives most, but not all, of those record tax collections back to the people who pay them. The Democrats just want to spend or redistribute the money.

 

The other aspect of this budget cycle that drew attention is how little actual negotiation took place between the Legislature and the executive. The fact that Governor Evers and Republican leaders do not have a working relationship has been evident for some time. In the previous budget cycle, there was at least some attempt at real discussion. This time, it was evident that Evers was unwilling to even pretend to negotiate. His method of negotiation is to wage rhetorical war through the media without ever picking up the phone.

Republicans add massive tax cut to budget

Here is my full column that ran in the Washington County Daily News last week:

Bolstered by new financial projections that show a massive influx of taxes, the Republicans on the Wisconsin’s legislative Joint Finance Committee voted to do the right thing – give the money back. More precisely, they voted to never collect the excess taxes in the first place by lowering tax rates for the people paying the bills. Especially after a very tough year for so many Wisconsinites, the Republicans’ respect for taxpayers is laudable.

 

The largest proposed tax cut is a very simple cut in the state income tax for most taxpayers. Wisconsin is one of 41 states that continues to impose an income tax. Wisconsin’s income tax is progressive in that it is divided into four brackets and taxes at progressively higher rates as people’s income increases. The Republicans focused their income tax cut at the largest bracket.

 

Under the Republican tax cut proposal, individuals earning between $23,930 and $263,480 and married couples earning between $31,910 and $351,310 would see their tax rate reduced from 6.27% to 5.3%. That bracket covers the majority of Wisconsin’s income taxpayers and directly impacts the middle class by letting them keep more of their hard-earned money. The proposed income tax cut would allow a large percentage of taxpayers to keep a total of $2.75 billion of their money instead of sending it to Madison for politicians to spend. That is $2.75 billion that will be put into Wisconsin’s economy and directly benefit families and businesses throughout the state. The second tax cut that Republicans put into the budget is a reduction in property taxes by $650 million over the biennial budget. This tax cut proposal is more of a shift than a real tax cut. The budget would push more state taxpayer spending to technical colleges and local schools through the state equalization aid formula but would require those government units to reduce their property taxes by a total of $650 million. The budgetary maneuvering would not reduce aggregate state and local government spending, but it does secure federal COVID relief money for schools while also extending a property tax decrease for taxpayers.

 

All told, the two tax cuts inserted into the budget add up to $3.4 billion is tax relief for a wide swath of taxpayers. According to lawmakers, the average Wisconsin taxpayer would see $1,200 in tax savings over two years. That is $900 in income tax savings and $300 in property tax savings. That is real money left in the pockets of real Wisconsinites.

 

The Republican tax cuts were added to the proposed state budget after all of the state government’s government programs had been funded and spending increased. The Republicans voted to increase spending on schools; on higher education; on law enforcement; on shared revenue; on almost everything. The Republicans are advancing a budget that increases spending throughout state government and spends more overall than any other budget in the history of the state of Wisconsin. All of the taxpayers’ commitments have been met – and then some.

 

Yet, despite unprecedented spending, the state is still projected to collect record high taxes. The state government is already going to collect all of the taxes it needs to pay for the record spending. All the Republicans are doing is what any honest cashier would do when a customer accidentally hands them a $20 instead of a $10. They are giving the taxpayers their change back.

 

The Democrats, on the other hand, want to take those record taxes and spend them or redistribute them. In their world view, every dollar spent by a politician in Madison is better spent than if it were spent by a farmer in Allenton or a teacher in Brillion. It is a philosophy rooted in arrogance and avarice.

 

For this reason, Governor Tony Evers is likely to use his powerful line-item veto to veto part or all of the tax cuts. If he does veto the tax cuts, the money will still not be appropriated to spend on anything. It will merely be collected by the government to create a surplus for a future legislature and governor to spend or return. Evers would be taxing excess tax money from taxpayers for no other reason than because he could.

 

Wisconsinites can do far more good for their families, businesses, and churches with $3.4 billion and any politician in Madison ever could. Let us hope that Governor Evers cares more about Wisconsinites than some of his fellow Democrats in the Legislature who voted against the tax cuts.

 

What to do with a surplus?

My column for the Washington County Daily News is online and in print. Here’s the gist:

As Democrats salivate over spending a projected tax surplus, the families paying for that surplus will also be having their budgets squeezed by raging inflation. It is a budgetary pincer that will squeeze the middle class at a time when the middle class is just recovering from a pandemic.

 

The decisions for the Legislature should be a very simple one. If the state collects more taxes than it planned to, then give it back to the people who paid it. They should not redistribute it to people who did not pay the taxes and they should not spend it on things that make politicians feel good about themselves.

 

Just give it back. It’s not yours.

Lawmakers have unique opportunity with state budget

As the JFC goes to vote today, here’s my full column that ran in the Washington County Daily News earlier this week.

After months of public hearings and discussion, the Legislature’s Joint Finance Committee is set to take their first votes on the state’s biennial budget this week. The budget is the single most important piece of legislation that state politicians pass. This is also the state budget that precedes the next election for governor and will set the tone for that race.

 

The budget process is always fraught with emotion and heated rhetoric. It should be. Wisconsinites work hard for their money and politicians should not be cavalier about seizing and spending it. It is going to be a raucous couple of months in state politics.

 

Wisconsin’s budget process typically begins with the governor soliciting proposals from state agencies and submitting a budget. From there, the JFC, composed of members from both parties from both houses of the Legislature, whittles down the budget to a version that is sent to each house of the Legislature. Once the Assembly and the Senate debate, amend, and pass an identical version, the budget is sent to the governor for signature. Wisconsin’s governors have the most powerful veto power in the nation and often carve up the budget with selective vetoes. Finally, the Legislature will vote to override, or not, selective vetoes and the budget becomes law. When Governor Tony Evers gave the Legislature his proposed budget in February, it was riddled with hundreds of policy items from legalizing marijuana to expanding Medicaid. Democrats and Republicans like to add policy items to the budget because the budget is the only piece of legislation that must be passed. By adding in pet policy goals, politicians can use the budget as a bargaining chip to get their pet policies into law.

 

The first vote by the JFC will be to strip the budget of nonbudgetary policy items. This is an important first step and the Republicans must be thorough in purging policy items from the budget. While it might be tempting to add Republican policy ideas as bargaining chips, Republicans must keep the budget language to the bare minimum necessary to fund state government. Evers has proven untrustworthy in negotiations and any unnecessary words in the budget bill could turned against them with his veto pen. The Republicans must minimize that risk.

 

As the JFC moves to the next step of setting budget priorities, they should wait until the governor decides where to spend the windfall from the federal government. Governor Evers is deciding where to spend billions of dollars from the COVID-19 federal spending spree on top of the billions that local and state governments have already received. Once all of the federal taxpayer money is allocated, state lawmakers will have a better idea of where to allocate state taxpayer money.

 

This is a unique opportunity for the legislature to offset state spending with federal dollars. For example, the most recent federal spending bill sends over $25 million to Wauwatosa, $405 million to Milwaukee, and $25 million to Green Bay.

Despite being closed for most of the year, Milwaukee Public Schools received almost $800 million from federal taxpayers. The state government has received $210 million in infrastructure grants. Since all of these government bodies are flush with federal taxpayer cash, state lawmakers should reduce the amount that state taxpayers fund them by comparable amounts.

 

With so much federal tax money flowing into local and state governments, state lawmakers could save state taxpayers billions of dollars and send them money back to them in the form of substantial tax relief. In effect, state lawmakers could leverage the federal windfall for economic stimulus through meaningful tax cuts. Meanwhile, all state and local government priorities are completely funded.

 

Republicans have an opportunity to pass a budget that will make a meaningful difference in the bank accounts of taxpayers and business owners throughout the state. Meanwhile, they will define Republican priorities as voters begin to think about who will lead the state in 2023 and beyond. The incredible increase in federal spending is foolish and destructive to our nation, but at least state lawmakers can salvage something good out of it.

Lawmakers have unique opportunity with state budget

My column for the Washington County Daily News is online and in print. It’s budget season! Here’s a part:

This is a unique opportunity for the legislature to offset state spending with federal dollars. For example, the most recent federal spending bill sends over $25 million to Wauwatosa, $405 million to Milwaukee, and $25 million to Green Bay. Despite being closed for most of the year, Milwaukee Public Schools received almost $800 million from federal taxpayers. The state government has received $210 million in infrastructure grants. Since all of these government bodies are flush with federal taxpayer cash, state lawmakers should reduce the amount that state taxpayers fund them by comparable amounts.

 

With so much federal tax money flowing into local and state governments, state lawmakers could save state taxpayers billions of dollars and send them money back to them in the form of substantial tax relief. In effect, state lawmakers could leverage the federal windfall for economic stimulus through meaningful tax cuts. Meanwhile, all state and local government priorities are completely funded.

Budget Process Continues as Evers Pouts

Evers doesn’t play nice with others.

MADISON (WKOW) — Gov. Tony Evers said Thursday he has not been in talks with Republican leaders in charge of the legislature while GOP leaders on the committee that writes the budget said they could start taking votes on removing items from Evers’ budget as soon as next week.

 

[…]

 

“If the question is specifically ‘is there room to negotiate on tax increases, the answer to that would be ‘no,'” Born said. “There’s a lot of stuff in this budget that are areas of agreement, things we can work on, agree with, and negotiate if that’s what people want to do in the governor’s office but tax increases is absolutely not one of them.”

Evers Budget Includes Over $1.1 Billion in Tax and Fee Increases

Nothing says, “I care about Wisconsinites who lost their livelihoods in a pandemic” like jacking up taxes.

In summary, the changes included in the Governor’s budget would increase net taxes by $1,020,728,000 ($464,824,000 in 2021-22 and $555,904,000 in 2022-23) and would increase net fees by $17,162,700 ($7,172,900 in 2021-22 and $9,989,800 in 2022-23). In addition, it is estimated that measures included in AB 68/SB 111 to enhance the collection of current taxes would generate an additional $78,031,700 ($38,745,800 in 2021-22 and $39,285,900 in 2022-23).

Evers Spends Projected Surplus, and Then Some

Jinkees

Gov. Tony Evers’ biennial budget proposal fulfills many Democratic priorities with big spending increases, but Republicans have raised concern that the $91 billion proposal would almost entirely drain the state’s coffers — by close to $2 billion — and leave Wisconsin in a more precarious financial position down the road.

 

The state is projected to have a nearly $2 billion surplus in its general fund by the end of the year, but Evers’ projected budget, which includes $1.6 billion in new tax revenue from marijuana, big manufacturers and the wealthy, still reduces that to around $143 million by mid-2023.

Remember that the surplus is just projected. It may be more. It may be less. But either way, Evers wants to spend it all and raise taxes to boot.

And this is possibly the dumbest statement I’ve read today:

“It’s not necessarily inappropriate to draw down a big chunk of your reserves when you’re facing a once-in-100-years pandemic,” Wisconsin Policy Forum research director Jason Stein said. “You don’t have the reserves just to put them on a wall and admire them, but at the same time … you have to think about what’s going to be sustainable for the state budget because some of these challenges are not just going to evaporate either.”

A projected surplus is not “reserves.” Stein suggests that the surplus is some sort of rainy day fund. It is not. It is projected surplus revenue because tax collections were higher than expected and/or spending was less than expected. That money could be rolled into the next budget, used to pay off debt early, or it could also be given back to the people because we didn’t need to spend it. Evers just wants to spend it.
Then Stein goes on to suggest that it might make sense to spend it because of the pandemic. But the mere fact that we have a project surplus tells us that the government has sufficient money for expenses without drawing from any rainy day fund. While the pandemic impacted thousands of people and businesses, the government did just fine. The fact that we had a pandemic should not be used as a lazy excuse for more government spending.

Make Wisconsin a destination state

My column for the Washington County Daily News is online and in print. I continue to charge the windmill of Wisconsin government’s spending problem. Here’s a part:

Wisconsin cannot reduce the cost of government and, subsequently, the cost of living if it does not reduce government spending.

One wonders where all of that spending is going. Both states have world-class public universities, but Texas state taxpayers spend less than 50% per capita on them. Both states have a good transportation infrastructure, but Wisconsin state taxpayers spend 13.8% more per capita. Wisconsin is spending almost 28% more on K-12 education for marginally better results, but the student demographics are drastically different.

Generally, as one goes through the state budget, Wisconsin spends much more on almost everything than other states. It is difficult to see any additional value for all of that additional spending. “Value” should be the word that dominates the upcoming state budget debate. If taxpayers are going to spend 10%, 25%, or 50% more on something than other states, then state politicians should be able to articulate how taxpayers are getting 10%, 25%, or 50% more value for the dollars spent. If they can’t, then the spending is just being wasted.

The upcoming budget session is another opportunity for Wisconsin policy-makers to make the choices that will determine if Wisconsin will ever be a destination state for businesses and workers. If they choose to keep increasing spending because it is the path of least resistance, then businesses and people will continue to relocate into other states and Wisconsin will miss this historic opportunity when businesses are going to be moving more than ever.

State of Wisconsin Projects Surplus Despite COVID

Well, this is surprising.

The Legislative Fiscal Bureau on Monday reported state tax collections totaled more than $17.5 billion in the 2019-20 fiscal year, a 1.1% increase from the previous year. That’s about $112.6 million, or only 0.6%, less than projected in January, according to the state Department of Revenue.

[…]

A final report released in October will include expenditures and revenues, but Lang said he doesn’t anticipate any major changes and the state will likely end the fiscal year with “a relatively large balance.”

This is good news, but it is not the whole story. The budget impacts will be felt for some time.

“I would say that while all this is good news, it doesn’t mean that there aren’t tough days ahead,” Nygren said. “If you don’t do additional reductions between now and the end of this second year of the budget, all the negative impacts will fall into the next budget. … My opinion is it’s better to make those tough decisions now.”

The full impact of COVID-19 remains to be seen in Wisconsin, including on businesses and individuals drawing unemployment. Last week, the Department of Workforce Development reported nearly 500,000 claimants have been paid more than $3.5 billion in unemployment benefits since March 15.

More State Budget Cuts Are Necessary

More, MUCH more, will be necessary.

MADISON, Wis. (CBS 58) – About $70 million in budgetary spending cuts have taken effect across several agencies as the state tries to manage the likely long-term economic effects of the COVID-19 pandemic.

The largest cut is with the UW System which saw a $40.8 million budget reduction. The next largest cut was for the Department of Health Services which saw a cut of $7.5 million.

The Evers administration’s planned actions were initially praised by Republicans, but have since drawn some criticism.

“After claiming that he would cut state operations spending by 5%, the plan released by Governor Tony Evers […] shows actual cuts to operations spending of less than 2.5%,” Rep. John Nygren (R – Marinette) said in a statement released this week. “Making matters worse, nearly two-thirds of the cuts are being shouldered by the UW System. While Gov. Evers’ initial announcement was promising, this additional information leaves more questions than answers.”

Tax Cut Heads to Evers’ Desk

Remember that we do not have a tax surplus… yet. We have a projection that says that we will have a surplus at the end of the budget next summer. Bearing that in mind, this is a good bill. It takes a projection that says that the state is collecting more taxes than it needs and reduces the taxes accordingly. If the projection is wrong and we head into deficit, then they can adjust taxes the other direction. To my point in a column a few weeks ago, however, this is not spending money we don’t have. It isn’t spending anything at all. It is simply having the government collect LESS so that it does not run as much of a surplus over the term of the current budget.

The tax cut bill would would deliver an average reduction of $106 for most qualifying filers. Married couples who file jointly would see an average cut of $145; all other filers would see an average reduction of $81. The bill also would reduce taxes for manufacturers by nearly $45 million by exempting their machinery and tools from property taxes and trim state debt by $100 million.

This is a good bill. It is unfortunate that Governor Evers will likely veto is so that the government can overcharge for their services and spend more.

Taxes Up. Spending Up More.

Despite record taxing, the state will still not have enough to cover it’s projected spending. It’s the spending, stupid.

Wisconsin had the highest budget reserves in 40 years this June largely due to a spike in corporate tax revenues, according to a report from the nonpartisan Wisconsin Policy Forum. However, the report says the state’s reserves are still slightly below the national average and the current state budget will spend $800 million more than the state is projected to take in by 2021.

The analysis looked at Wisconsin’s Annual Fiscal Report that provides data on state taxes, spending and reserves. It shows the state had $1.7 billion in budget reserves after taking in more than $17 billion in tax revenues during the prior fiscal year, which ended June 30. That was a year-over-year increase of 7.4 percent and the largest annual percentage increase since 2000, according to the report.

Jason Stein, a researcher for Wisconsin Policy Forum, said the overall increase in the state’s tax revenues was driven largely by a spike in the amount of Wisconsin corporate tax revenues. He said the state collected more than $442 million in corporate taxes.

“Corporate taxes, especially, rose almost 50 percent,” said Stein. “So, that was the most they have risen, the fastest rate since 1964. So, that’s really an exceptional change. And it was due to a couple things and one of them was due to that federal tax law.”

Give. It. Back.

There are only three acceptable uses for a government surplus. 1) return it to the taxpayers; 2) pay down debt; & 3) put it in the rainy day fund. In this case, the rainy day fund is already well funded. In this case, they should just give it back.

Wisconsin collected $76 million more in taxes than anticipated last fiscal year, prompting lawmakers from both parties to claim credit for a sign of positive economic growth in the state.

The nonpartisan Legislative Fiscal Bureau on Monday announced general fund tax collections for the 2018-19 fiscal year, which ended June 30, were up 7.4% from the previous year.

The $17.3 billion collected in taxes was $75.5 million, or 0.4%, more than anticipated in May when the state was finalizing its 2019-21 budget.

Oh, and tax cuts work… just sayin’.

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