By M.D. Kittle | Wisconsin Reporter
MADISON – The time has come
A fact’s a fact
It belongs to them
Let’s give it back
Midnight Oil’s “Beds are Burning,” the band’s late-1980s poli-rock anthem to settling Australia’s aboriginal score, could very well be the rallying cry of tax-cut crusaders like state Sen. Glenn Grothman.
The West Bend Republican will tell you the $71 million more in unanticipated tax revenue the state of Wisconsin grabbed up in the past fiscal year belongs to the taxpayers, and the state should give it back.
Grothman on Monday called on the Legislature to convene the fall session for the “purpose of reducing Wisconsin’s tax burden.”
“This was a fine budget in regard to taxes, resulting in the first personal income tax cut in fourteen years, and two of the five lowest property tax increases in the last twenty-five years,” the senator said in a release, referring to the $650 million in income tax cuts driven by Republicans in the recently signed 2013-15 budget.
CUT IT: Sen. Glenn Grothman, R-West Bend, wants the Legislature to sharpen its tax-cutting scissors now that state revenue is better than expected.
A family of four with a median income of $80,607, for instance, will save $174 per year over the next two years on state income tax, according to a report released by the state Department of Revenue earlier this summer.
Add on other state tax reforms included in the budget and overall tax cuts top $1 billion, according to Revenue.
But this is no time to put down the scissors, Grothman contends.
“(M)any of us felt that we could have done better. Now that tax collections are better than expected, it is time to act,” the senator said.
With massive structural deficits transformed into significant budget surpluses – to the tune of about $670 million – in the last fiscal year, Grothman is pitching more relief for taxpayers. He’d like to see the Legislature use the better-than-expected revenue to further drive down the state income tax rate.
Or, Grothman said, the money could go to property tax relief. While the overall property tax levy is projected to go up by less than 2 percent in December, Grothman said it would be nice to hold rates at near flat, where they have been over the past two years.
“Money added to schools in the last two years did not replace reductions in equalized aid from the prior budget, causing disproportionately high increases in some communities,” he said. Putting a cool $50 million into the state’s equalization formula would “ensure all districts see the benefit of our drive to hold property taxes down.”
It all sounds good to taxpayers. After it all, it is their money. Why not give it back?
But taxpayer beware: Permanent tax cuts without sustained revenue or comparable spending cuts have a way of riding up like an ill-fitting pair of boxer shorts.
“As long as ongoing spending is reduced by that same amount you don’t have a problem,” funding the tax cut, said Dale Knapp, of the Wisconsin Taxpayers Alliance. “It’s when you do this kind of tax cut and continue to spend, that’s what creates the gap.”
Wisconsin over the past couple of years has done much to right its flagging fiscal ship, by adhering more closely to balanced budget principles. Recent budgets have reversed the days of billion-dollar structural deficits — a fundamental imbalance in government receipts and expenditures.
The state has even taken a big bite out of its massive GAAP, or Generally Accepted Accounting Principles, deficit. The shortfall in GAAP, which has no time for the monkey business and smoke-and-mirror accounting tricks of standard government budgeting, is beginning to creep back up because of this budget cycle’s tax cut and other elements, Knapp said.
As of Aug. 1, state bean counters pegged the structural deficit north of $230 million, as it stands, going into 2015-16. The total shortfall during the run of the 2015-17 budget is projected at $545 million, according to the Legislative Fiscal Bureau. Some of that deficit is due to tax-cut promises. Structural deficits have, in the past, soared much higher – approaching $3 billion.
The GAAP deficit won’t be known until the end of the year, but the previous fiscal year’s deficit was $2.2 billion, about $800 million below the state’s high watermark of nearly $3 billion, according to the Fiscal Bureau.
True, tax revenue has come in unexpectedly robust, but there are some concerns that federal tax law changes made at least some of that uptick in tax money a one-time deal.
“If this is one-time money, we have to be careful about permanently adding school aid or tax cuts. That’s what leads to structural deficits,” Knapp said.
Grothman says it’s not a certainty but a probability that tax revenue will continue to come in higher than anticipated.
“We got more than we thought, and that probably means we are going to get in more than we thought over the next two years,” he told Wisconsin Reporter in an interview.
That’s why keeping a sharpened budget ax may become all the more important going ahead – if taxpayers want to keep their tax breaks and keep the state’s fiscal house in order.
Grothman says he looks forward to a robust debate in the Legislature this fall on which taxes should be cut.
“Conservatives around the state are now anxious to see what action legislators feel appropriate to take upon learning that both sales and income tax collections appear higher than expected,” the senator said.
Contact M.D. Kittle at mkittle@wisconsinreporter.com
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