Senate Opposes Sales Tax Holiday

Wisconsin lawmakers haven’t been able to come to agreement on the fate of a proposed sales tax holiday, with the two houses of the Wisconsin legislature engaged in political brinksmanship that hasn’t yet been resolved.

Some history: Last month, the Wisconsin Assembly passed a bill (Assembly Bill 944) that included a tax rebate for citizens of $100 per child and set a weekend in August for a sales tax holiday. Both events would be one-time occurrences. After sending the bill to the Senate for consideration, Assembly leaders said they plan to adjourn, which means that its members aren’t planning to meet again until 2019.

The fact that the Assembly doesn’t anticipate having another floor session this year is significant because it means that any changes the Senate makes to Assembly-approved bills won’t have the opportunity to be approved by the Assembly, a necessary step before bills can go to the Governor for his signature and become law. In essence, Assembly leaders are forcing the Senate to either pass the same version of the bill that was approved by the Assembly, or risk not having the bill approved at all. Assembly leader Robin Vos made sure the Senate got the message by describing the tax cut proposal as “take it or leave it.” The Senate is planning to meet one more day, March 20, before adjourning for the year.

Senate leaders have made no secret of their antipathy toward the sales tax holiday portion of the bill, with Senate Majority Leader Scott Fitzgerald calling the tax break a “gimmick,” and saying, “There’s just not the votes for it. I wouldn’t vote for it.” Despite some reservations about whether passing another tax cut now is fiscally responsible, there is little doubt the Senate would approve the child tax credit, but because it is in the same bill as the sales tax holiday, Senate leaders are balking at approving AB 944. Instead, the Senate has put forth its own bill that includes the child tax credit but not the sales tax holiday (Senate Bill 798). However, if the Senate passes the version of the bill without the sales tax holiday, the Assembly won’t have the opportunity to pass the Senate-approved version, because the Assembly has—at least in theory—adjourned for the rest of the year. Assembly leaders have the ability to call the Assembly back into session, although at least so far they have said they will not.

Got all that? That’s a lot of political strategy centered around the sales tax holiday, which at its heart is a high-cost gimmick that would not provide any real economic benefit. In fact, although it is being marketed as an opportunity to buy school supplies without paying sales tax, the sales tax holiday would actually undercut Wisconsin’s education systems by reducing resources available to support K-12 schools and university system. The holiday would reduce state revenue by $52 million, and local revenues by $4 million.

The sales tax holiday isn’t the only proposal at stake. There are several Assembly-approved bills that the Senate would probably modify and send back to the Assembly—if the Assembly were still in session. For example, Senator Fitzgerald said that the plan to close the Lincoln Hills secure juvenile correctional facility is “not ready for prime time” because the process to create it was “horrendous.” It’s not clear whether the Senate will approve that bill.

Senate leaders are exerting a great deal of pressure on Assembly leaders to meet again to give the Senate the opportunity to make changes to bills approved by the Assembly. If the Senate can get the Assembly to blink first, it could mean the demise of the proposed sales tax holiday gimmick.