Assembly GOP proposes middle-class tax cut paid for by state reserve funds
State Assembly Republicans publicly embraced Gov. Tony Evers’ call for a middle-class tax cut Thursday and offered a plan to do it, but Evers swiftly rejected the plan as fiscally irresponsible.
Assembly Republicans unveiled their plan at press conferences throughout the state, including one at the state Capitol. It would provide, on average, a $170 tax cut to nearly 2 million qualifying mostly middle-income tax filers.
Assembly Speaker Robin Vos, R-Rochester, urged Evers to use his first State of the State Address on Tuesday to declare support for the plan.
It is conceptually similar to what Evers called for during the campaign. But it would be paid for through state reserve funds instead of by capping a tax credit for manufacturers and farmers, as Evers proposed.
“We’ll see how serious (Evers) is,” Vos said. “I take him at his word. I think he’s serious about doing a middle-class tax cut.”
Evers spokeswoman Melissa Baldauff said in a statement the Assembly GOP plan “falls short” of what he seeks.
“The governor’s sustainable plan to cut taxes for middle-class families — which is funded by rolling back tax giveaways for millionaires — would provide relief for 86 percent of taxpayers without adding to the deficit or relying on one-time funds,” Baldauff said.
Evers has not detailed how he would deliver a tax cut. His campaign pledge was to cut income taxes by 10 percent for individuals making as much as $100,000 and families making as much as $150,000.
The Assembly GOP plan calls for increasing the standard deduction on the state income tax effective in 2020. For married taxpayers filing jointly who would qualify for a tax cut, it would average $231, according to the Legislature’s nonpartisan fiscal bureau.
About a third of tax filers wouldn’t benefit from the cut, mostly because they either don’t make enough money to pay income taxes or make more than the amount where the deduction would phase out — $126,802 for married joint filers and $108,313 for single filers.
The key differences between the GOP and Evers approaches are in whom the plan affects and, more sharply, in how to pay for it. The Assembly GOP plan would give tax cuts to a handful of higher-earning filers compared to Evers’ campaign pledge.
Evers also wants to cap the tax break for manufacturers and farmers at $300,000 of annual income. Republicans contend doing the latter risks harming the state’s robust economy.
“Why jeopardize what has brought us to this point of prosperity by undoing a tax cut that has brought us to today?” said Rep. John Nygren, R-Marinette, who co-chairs the Legislature’s budget-writing committee.
The Assembly GOP plan would reduce state tax collections by about $490 million in the second and final year of the next state budget cycle. That includes an ongoing total tax reduction of $338 million plus a one-time cost of $152.1 million to account for the timing of the change.
In June the state ended the last fiscal year with about $588 million in the general fund after revenues outpaced expenditures by $9.5 million. In the current fiscal year, a $34.1 million surplus is expected to increase the fund balance to $622.6 million. An updated projection on state finances is due from the fiscal bureau next week.
Vos said Assembly Republicans want to advance the tax cut in a separate bill from the state budget.
Senate Majority Leader Scott Fitzgerald, R-Juneau, praised the plan in a statement issued immediately after the Assembly press conference, saying he’s “glad to see that our colleagues in the Assembly are prioritizing plans to lower taxes.” Fitzgerald said he has asked a trio of GOP senators to work “on a plan to deliver tax relief for hard-working families.”