”CPA Caucus” Seeks Major Tax Changes
Four Republican lawmakers would simplify taxes and end some sales tax exemptions.
Four Republican legislators – Reps. Dale Kooyenga and John Macco and Sens. Howard Marklein and Chris Kapenga – are quietly assembling a package of tax-code changes they want added to the next state budget, if their party keeps control of the Legislature.
In WisconsinEye interviews, Kooyenga and Macco said they have been told by party leaders to keep the package “revenue neutral,” so it neither raises nor lowers taxes overall.
That echoes statements by Republican Gov. Scott Walker, who has said any tax increase – raising the 30.9-cent per gallon gas tax, for example, or the $75 annual vehicle registration fee – must be offset by tax or spending cuts. Walker will present his 2015-17 budget early next year.
But, once you get past the “revenue neutral” mandate, Kooyenga said, “Everything is on the table.” Most tax laws were written when there were no electric cars and no internet businesses that pay no Wisconsin sales tax, he noted.
Last year, state general-fund tax collections totaled $15.09 billion, not counting gas taxes or vehicle registration fees. Personal income taxes totaled $7.74 billion (51 percent of the total); sales taxes, $5.05 billion; corporate taxes, $963 million, and cigarette taxes, $573 million. Wisconsin $2.52-per-pack cigarette tax is higher than in most states.
Kooyenga said grocers, for example, are asking for “clear guidance” on exactly which items are subject to the 5 percent state sales tax and what other items are tax-exempt. “There are ways to make this easier.”
“We’re going to shoot some sacred cows,” added Macco, referring to the billions of dollars in tax breaks and tax exemptions ladled into the tax code over decades.
Some tax-exempt services may be targeted. Among the notable tax exemptions and what a sales tax on them might raise, according to the latest state Revenue Department report:
- Accounting services, $50.5 million a year;
- Veterinary services, $22.9 million;
- Beauty, barber and other personal services, $22.4 million;
- Bottled water, $21.3 million;
- Health clubs memberships, $19.4 million;
- Investigation and security services, $14.5 million,
- Funeral services (although not caskets or vaults), $12.7 million.
“If everybody comes together, and everybody is a little bit mad, it will contribute a quality dynamic that will move Wisconsin forward,” Macco said. “It’s not going to be a small thing to turn this battleship around. But it will set up the next generation of having good, consistent revenue growth into the future.”
No one is challenging two of the most popular tax breaks – taxing food, which would bring in $579 million more in sales taxes, and taxing prescription drugs, $162.6 million.
Kooyenga and Marklein are CPAs and members of the Joint Finance Committee (JFC), which will review and recommend changes to Walker’s budget before handing it to the full Legislature. Kapenga is also a CPA; Macco’s official biography lists him as a financial adviser.
Asked about his tax-reform goals, Marklein said, “The tax code in Wisconsin continues to be too complex and unique. In this next budget, I am committed to simplifying the tax code to make it easier for individuals and businesses to comply.”
Kapenga said CPA legislators like him want “a more simple and straightforward tax code, because it makes it easier for both businesses and individuals to thrive.”
Don’t discount the clout of JFC members Kooyenga and Marklein, they helped get the number of personal income tax brackets reduced from five to four, and led the fight that enacted the Agriculture and Manufacturing Tax Credit – a tax break Democrats say unfairly gives the most help to millionaires.
But don’t discount the clout of special-interest groups who want to keep their tax breaks. Each of them will hire a lobbyist, or join together to hire a battalion of lobbyists, to fight for the status quo.
And, other special-interest groups will see reopening the tax code as a chance to push for new favors.
One example: Business leaders want the $287-million personal property tax repealed, but that money helps pay for local government services. Kooyenga said the personal property tax should be repealed, but beginning to phase it out may be all that’s possible in the next budget.
Kapenga added: “Our long-term goal is to have everyone complete their tax returns on a postcard, so we need to continue eliminating unnecessary exemptions, credits, and deductions, which will also allow us to lower the overall tax rate.”
Steven Walters is a senior producer with the nonprofit public affairs channel WisconsinEye. Contact him at email@example.com