Is Evers Tax Break Plan A Shell Game?

Gov. Tony Evers. File photo by Emily Hamer/Wisconsin Watch.

Democratic Gov. Tony Evers says his state budget would cut income taxes by $1.2 billion over the next two years. Republicans say that will largely be offset by tax hikes the governor’s budget includes.

Who’s right? Let’s do the math.

But first the rhetoric:

“I’m delivering on my promise of a 10%, middle-class tax cut and providing $1.2 billion in tax relief for working families,” Evers said in his budget address to the Republican-controlled Legislature. “Under my plan, if you’re a single filer making less than $100,000, or a married joint filer making less than $150,000, the cornerstone of my tax plan will cut your taxes by 10%.”

But Assembly Speaker Robin Vos, the longest-serving Republican legislative leader, dismissed the governor’s claim. “[Evers’] tax cuts are hand-picked, rather than for all Wisconsinites, and are almost equal to the number of tax increases he’s proposing,” Vos said.

What’s the Evers tax-cut math that totals $1.2 billion?

-A new, refundable Family and Individual Retirement (FAIR) credit equal to 10% of what taxpayers owe in income taxes, if their taxable income is less than $100,000 for single taxpayers and $150,000 for married taxpayers filing a joint return.  State budget aides say the FAIR credit would cut income taxes by $418.7 million in the first year of the budget and $429.9 million in the second. The average income tax cut would be $200, they add.

-A new tax credit for “family caregivers” that would provide $96.7 million in help during the first year of the budget, and $98.3 million in the second, to someone “providing care or support to adult family members requiring assistance with one or more daily activities.” The credit would cover half those expenses, up to a maximum of $500 per year. Those eligible for the credit would be married tax filers filing jointly with taxable incomes of up to $150,000 and single filers with incomes up to $75,000.

Evers aides say 240,000 taxpayers would claim the credit and get an average of $400. But Republican legislators killed this same proposal two years ago.

-Raising the percentage of the federal Earned Income Tax Credit (EITC) claimed by families with one or two children. The EITC is “effective in reducing child poverty, yet Wisconsin’s credit … lags most other states,” Evers says. The budget office estimates about 200,000 taxpayers would get $60.7 million more in the first year of the budget and $63.8 million in the second. The average additional tax break would be more than $300 per year.

-Raising the income eligibility threshold to claim the Homestead Credit to $35,000 per year, which the governor said would help more residents pay their rent and property taxes. It would provide about $100 million in tax relief over the next two years.

Those tax cuts total the $1.2 billion claimed by Evers. But Republicans note that the following two tax increases Evers wants would offset most of that cut:

-Putting a $300,000 cap on what taxpayers can claim under the Manufacturing and Agriculture Tax Credit – a tax break Republicans passed in 2013, but one Evers insists lets the wealthiest residents avoid paying their “fair share” of taxes. According to Evers aides, “Approximately 170 [taxpayers] with average gross incomes in excess of $5 million in 2021 claimed $149.7 million in the manufacturing credit, or nearly $900,000 per claimant.” Evers says limiting that tax break would bring in $348.7 million more in the first year of the budget and $306.4 million in the second – a huge tax increase, Republicans say.

-A new limit on what taxpayers with incomes of up to $400,000 for individuals, and $533,000 for married filers, can claim on capital gains profits. This change “preserves the exclusion for all but the highest income earners, while continuing to provide relief to ordinary retirees and small investors,” Evers says. But Republicans point to these numbers: That change would net $185.2 million in higher taxes in the first year of the budget, and $154.2 million in the second.

That’s a total of $994 million in tax hikes. But Republicans also say Evers will raise taxes on both employees and employers to pay for his plan to fully fund paid family and medical leave. One estimate says that could cost more than $250 million by 2026.

Republican Sen. Duey Stroebel, a member of the Joint Finance Committee, said the $7.1-billion surplus “includes one-time federal Covid money that cannot support the checkbook-busting permanent increases Evers proposes.”

“Evers had to propose raising taxes on job creators to pretend his numbers worked,” Stroebel added.

Steven Walters started covering the Capitol in 1988. Contact him at stevenscotwalters@gmail.com