Republican Proposal Designed To Give Tax Break To Retirees

Wisconsin State Capitol. Photo by Dave Reid.

A pair of Republican state lawmakers have reintroduced a bill to exempt retirement income from state taxes this week.

State Rep. David Steffen, R-Howard, and state Sen. Rachael Cabral-Guevara, R-Appleton, announced they were circulating the legislation for co-sponsorship on Monday. They say it’s already received bipartisan support.

The bill would exempt the first $100,000 of retirement income for individuals, and the first $150,000 for married and joint filers, who are 67 or older. That includes income from IRAs, 401(k) plans and pensions.

Steffen said the change would mean 98 percent of Wisconsinites would have zero income tax liability in retirement. As more of the state’s population reaches retirement age and older, he said the exemption would make the state responsive to the growing demographic and will help them stay in Wisconsin long term.

“They often are on fixed income, their level of revenue isn’t increasing on a regular basis,” he said. “This helps with that specific demographic, our seniors, who are often dealing with high property taxes, high inflation and don’t have a mechanism to adequately address it.”

But Steffen said the tax break will not only be a win for older adults. He believes the exemption could also help attract workers who are in the middle of their careers and are looking at Wisconsin as a place to finish out their working years.

“Those last 10 to 15 years of work are certainly focused on retirement for those workers, but it’s also the highest earning years,” he said. “It helps the state when we have people who are at their prime professional and revenue-generating self.”

The lawmakers first introduced the proposed exemption in January as an amendment to the state budget. But Steffen said the state Legislature’s budget writing committee did not include the exemption in their $3.5 billion income tax cut plan. Gov. Tony Evers used his veto powers to exclude the top two income brackets from the tax cut, but preserved the breaks for other earners.

Steffen said they lowered the married income cap from $200,000 to $150,000 to be more in line with what Evers has said he would support. The Howard Republican is optimistic the governor will approve it now that the biennial budget has been passed.

“I want to take this new opportunity, this new approach to work with (Evers) on providing a solution that gets money back to the people who overpaid,” Steffen said.

Evers told CBS58 on Monday that he would be willing to negotiate additional tax cuts with Republicans that focus on the middle class.

According to Steffen’s office, state Sen. Lena Taylor and Rep. LaKeshia Myers, both Milwaukee Democrats, have already signed on to the bill. He expects the bill to receive a public hearing this fall.

According to AARP, four states, including Illinois and Iowa, currently have tax breaks for retirement income and nine states do not have any income tax.

Diane Wilcenski, executive director of Wisconsin Retired Educators’ Association, said she was surprised when the tax exemption was first proposed, but is glad to see it return.

“I think that puts us more in line with where Wisconsin should be with other states and not penalizing the retirees for the pension that they’ve earned and work their whole lives for,” she said. “It really is a perk, in my opinion, to them and to the work that they’ve done in the state.”

Wilcenski said a strong pension program has been proven to be a good recruiting tool. She thinks exempting that income would be further incentive for mid-career and even early career professionals.

She said her association will be watching to see what the exemption’s impact will be on long-term state tax revenue before putting their support behind the measure. But she’s optimistic about the bill moving forward.

With some bipartisan support, Republican lawmakers bring back tax break for retirees was originally published by Wisconsin Public Radio.