Bruce Murphy
Murphy’s Law

Republicans Discover the Middle Class

But their proposed tax cut is unfunded and doesn’t address state’s tax inequity.

By - Feb 14th, 2019 10:54 am
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Assembly Speaker Robin Vos, R-Rochester, is seen at the State of the State address in Madison, Wis., at the State Capitol on Jan. 10, 2017. Photo by Coburn Dukehart/Wisconsin Center for Investigative Journalism.

Assembly Speaker Robin Vos, R-Rochester, is seen at the State of the State address in Madison, Wis., at the State Capitol on Jan. 10, 2017. Photo by Coburn Dukehart/Wisconsin Center for Investigative Journalism.

It has been almost shocking to watch Assembly Speaker Robin Vos and Senate Majority Leader Scott Fitzgerald tout their plan for a middle class tax cut, which they declare is superior to the plan being offered by Gov. Tony Evers. 

Shocking because it represents such a change for the two Republicans, who had worked with Gov. Scott Walker to relentlessly cut taxes on the wealthy. 

One of the first things Walker proposed upon becoming governor was reducing the earned income tax credit, which was designed to keep working people out of poverty. It was also a Republican idea that had been championed by Gov. Tommy Thompson. 

But Thompson was so old school. The new 21st century thinking of the three Republican leaders was suggested by Vos’ statement that “Wisconsin is a really good place to be poor.” They soon set out to correct that disgraceful situation. The average single-parent family saw their tax credit drop by 23 percent under the reduced earned income tax Republicans passed, as a study by the UW-Milwaukee Employment and Training Institute found, noting “a dramatic and devastating impact on some of the lowest wage, single working parents.”

But the wealthy, meanwhile, were getting lots of tax breaks. In Walker’s first term, the three Republican leaders passed $36 million in capital gains tax breaks, and 46 percent of those breaks went to the top 2 percent of earners in Wisconsin, according to the non-partisan Legislative Fiscal Bureau. They also passed $49 million in tax breaks for those with Health Savings Accounts, again benefiting the well-to-do. The average income of someone with such an account is more than $100,000, according to the Government Accountability Office.

Year after year, Walker and the Republicans passed and applauded themselves for new tax cuts that were consistently skewed toward the wealthy. Perhaps the most dramatic was the Manufacturing and Agriculture Tax Credit: 79 percent of the credit goes to individuals with an income of more than $1 million, and 21 individuals with an adjusted gross income of $30 million or more a year received $38.9 million in tax breaks, the Fiscal Bureau found. 

Yes, low and middle income taxpayers did get some cuts in taxes, but the lion’s share of the money went to the wealthy and super wealthy. An analysis of all the tax breaks in Wisconsin from 2011 through 2016 by the Institute on Taxation and Economic Policy found the average tax reduction was $10,015 for the top 1 percent of taxpayers, and $1,806 for the next 4 percent of taxpayers versus $379 for the middle 20 percent of taxpayers and just $175 for the bottom 20 percent of taxpayers.

By 2018 Vos had gotten his wish, and Wisconsin’s tax system was no longer more generous to the poor. The top 1 percent now pays 7.7 percent of their income in taxes, compared to 10.1 percent for both the bottom 20 percent and the middle 10 percent of taxpayers, according to data from the Institute on Taxation and Economic Policy. In short, we have a state tax system that increases America’s wealth gap, which at this point is the worse since the creation of the federal income tax in 1913. 

Not surprisingly, most voters would prefer a system that taxes the wealthy more. A 2016 poll of Wisconsin voters found 68 percent favored increasing taxes on the wealthy and large corporations to reduce income inequality and just 28 percent disagreed.

Evers ran against Walker on a number of issues, including the promise of a middle class tax cut, and the repeal of the Manufacturing and Agriculture Tax Credit.  And Vos and Fitzgerald appear to have gotten the message and quickly moved to propose such a cut, which was passed by the state Assembly and then the Senate. But it’s quite different than the proposal by Evers, who has suggested he will veto it. 

Evers plan pays for 60 percent of it by eliminating the Manufacturing and Agriculture Tax Credit going to manufacturers while retaining it for agricultural firms. He notes there is no evidence the credit has caused manufacturing employment to grow. In fact, Wisconsin has trailed the nation and nearly every state in such employment growth since the tax cut was passed. You could also say the governor is meeting Republicans half way by retaining part of the tax credit. 

The Vos and Fitzgerald plan, by contrast, provides no long-term funding for their tax cut. They simply grab a one-time cash surplus in the current two-year budget, which as conservative commentator George Mitchell wrote, is nothing more than “fiscal mumbo jumbo” that “will increase the 2019-21 structural deficit facing Evers and the GOP Legislature.”

Vos contends Republicans are returning a surplus to taxpayers: “When we can, we should return surplus dollars to taxpayers; after all, it’s their money.” 

In fact, it amounts to an accounting trick that will add to the $906 million structural deficit that former Gov. Walker bequeathed to Evers.

Assembly Minority Leader Gordon Hintz (D-Oshkosh), called the Vos approach “Washington, D.C.-style budgeting, when you give away the farm in tax cuts and then say we don’t have the money to fund government.”

This has become the classic playbook for Republicans: run up the red ink while in power and then decry the deficit and move to “starve the beast” when Democrats are in power. Grabbing this cash surplus will make it harder tor Evers to fulfill campaign promises he made to increase K-12 school funding. 

Vos may have a personal reason as well for resisting the Evers plan. You see the legislator, a reputed millionaire, is a likely beneficiary of the manufacturing tax credit. As research by the liberal group One Wisconsin Now has found, “Vos’ financial disclosures reveal his personal wealth includes businesses with millions in real estate holdings and manufacturing interests. Entities for which he claims ownership include Robin J. Vos Enterprises, Inc. and Romata LLP. Romata owns property assessed as manufacturing that houses popcorn manufacturing and packing operations under the corporate umbrella of Robin J. Vos Enterprises.”

And the state’s current tax structure has been very good to him, the group found: “Tax records obtained by One Wisconsin Now show Romata reported $0 in net state tax liability in 2017 and Robin J. Vos Enterprises reported $0 net state tax liability for 2012, 2013, 2014, 2015, 2016 and 2017.”  

The Assembly Speaker did not respond to a request for a comment on this from Urban Milwaukee, but it’s safe to say that his work of the last eight years has made Wisconsin a much more generous state for wealthy people. How dare Gov. Evers threaten this paradise for plutocrats?

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Categories: Murphy's Law, Politics

One thought on “Murphy’s Law: Republicans Discover the Middle Class”

  1. Thomas Martinsen says:

    Robin Vos appears to be about nothing more than RV. This is reprehensible and venal. He should be removed by voters.

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