Monday, October 8, 2012

We've Moved!

The Wisconsin Budget Project blog has moved! Our new and improved blog is now at this location: We will no longer be updating the blog at this location.

Readers who subscribe to the Wisconsin Budget Project blog via email or feed reader will have their subscriptions automatically switched to the new site.

This change is part of a upgraded website for the Wisconsin Budget Project. Check out the new website, and the improvements that make it easier than ever to find useful information on tax and budget issues.

Thursday, September 27, 2012

DOR Budget Sheds Little Light on the Fate of the EITC

If you don’t read the WCCF blog, let me bring you up to date on what we know and don’t know about funding in the next biennial budget for the state’s Earned Income Tax Credit (EITC). 

The Dept. of Children and Families’ budget request for the 2013-15 biennium recommends a large reduction in one of the funding sources for the EITC.   Beginning in fiscal year 2014-15, DCF proposes cutting $37 million from the portion of the credit’s funding that comes from the block grant known as Temporary Assistance for Needy Families (TANF).  But since the rest of EITC funding is the responsibility of the Dept. of Revenue, the DCF recommendation doesn’t tell us whether the intent is to reduce total EITC funding or only to shift the funding sources.

In a post on the WCCF Blog on Monday, I explain why a funding shift could be a good thing for important programs for low-income kids, such as the Wisconsin Shares child care subsidy program. However, it’s still unclear whether the DOR budget will include state GPR funding to replace the proposed cut in TANF dollars for the EITC. As Monday’s blog post notes, the DOR budget request makes no mention of the proposed TANF reduction and how it would be handled. It appears that we’ll have to wait to learn the Walker Administration’s plans for the EITC.

Read more here.

Jon Peacock

Wednesday, September 26, 2012

New Census Data Shed Light on State and Local Revenue and Spending

New figures released Wednesday by the U.S. Census Bureau indicate that Wisconsin ranked 23rd in 2010 in total General Revenue for state and local governments. The state was 1.1% below average in General Revenue per capita, but 3.2% above average when it is measured relative to income (because the state’s per capita income was 4.2% below the national average in 2010).

Wisconsin’s total state and local taxes in 2010 ranked 9th for the second straight year when measured as a percentage of personal income, and ranked 15th when total taxes are compared on a per capita basis.  Our state always ranks much higher in taxes than in total General Revenue because we rely less than most other states on charges and fees and also receive less federal funding. Wisconsin ranked 32nd nationally in both of those revenue categories (measured relative to income).

Narrowing our focus again to just the tax revenue by far the largest share of total state and local taxes in Wisconsin, 39.5%, came from property taxes. The other major tax sources were personal income taxes at 23.7%, general sales taxes (17.4%), selective sales taxes (11.5%), and corporate income taxes (3.5%).

We’ll report later on the 2010 spending data and the revenue trends.

Jon Peacock

Municipalities Make a Case for Part of the State’s Revenue Surplus

At a press conference in the Capitol on Tuesday, the League of Wisconsin Municipalities urged state policymakers to use the better-than-anticipated tax revenue to restore $48 million in shared revenue that was cut in the last state budget.  As we noted in a previous blog post, the Dept. of Revenue announced in early September that fiscal year 2011-12 tax collections surpassed the estimated level by $126 million.

The League’s Executive Director, Dan Thompson, says the additional funding would allow municipalities to invest in the services and infrastructure necessary to grow their economies, and could also help hold down property taxes later this year.  (Of course, that would require legislative action in a special session within the next couple of months.)

A resolution approved by League members at their conference last October: “urges the Governor and the Legislature to restore shared revenue funding to 2002 levels when the state’s future tax collections increases as a result of job creation and economic growth in our communities.”

Read more in the League’s press release  and in their letter to Governor Walker.

Jon Peacock

Tuesday, September 25, 2012

The Taker/Maker Misunderstanding

CBPP Analysis Describes the Makers among the So-called “Takers”

There’s been a lot written over the past week or so about Mitt Romney’s comments about the 47% of Americans who in a typical year don’t pay federal income taxes.  I’ve been meaning to weigh in on the topic, but I can’t improve on the many other columns and blog posts that have challenged the misconceptions about “the 47 percent” and the characterization of America as a nation that is about evenly divided between “takers” and “makers.”

There was a particularly good blog post on the issue today by the Center on Budget and Policy Priorities. It challenges the taker/maker dichotomy by taking a closer look at the portion of the 47% who have low-paying jobs, so they don’t pay federal income taxes, but they do pay payroll taxes (as well as state and local taxes). These workers make up about three-fifths of the group that some fiscal conservatives have characterized as the “takers;” however, the CBPP analysis of Census data puts them in a very different light:

Monday, September 24, 2012

Does the State Income Tax Code Provide a Significant Penalty for Marriage?

DOR Floats Ideas for Reducing Income Taxes for Married Couples

The budget request submitted by the Dept. of Revenue last week does something that struck me as unusual – it raises a concern about the current tax code and lays out a range of options to mitigate the alleged problem, but doesn’t endorse any of them.  Specifically, the department explains that although Wisconsin’s income tax code attempts to avoid imposing higher state income taxes for married couples than for unmarried partners, it doesn’t fully succeed in that regard.

The DOR budget request lays out six possible approaches for mitigating the concern that married couples will sometimes have to pay higher income taxes than similarly situated individuals or unmarried couples. Those options range in cost from about $63 million in the 2013-15 biennium to $734 million during that period.  One option that I was very disappointed not to see in the DOR list is to mitigate the significant marriage penalty in the Homestead Tax Credit.

An article in the Milwaukee Journal Sentinel discusses the marriage penalty issue and the DOR musings about possibly addressing it.  The article cites a couple of concerns or considerations that I raised with the reporter, Jason Stein, about potentially forfeiting a large chunk of state tax revenue to address the issue.  To elaborate on those points, here are some of the questions I think policymakers need to grapple with:

Sunday, September 23, 2012

Budget Writers Buy More Time

Contemplating the Congressional Can Kicking

With the new fiscal year only about a week away, Congress bought itself some more time before adjourning for nearly two months. The House and Senate found one thing that they could agree on – that neither side wanted to head into the last 6 weeks of campaign season during a budget impasse that shuts down the federal government. To avoid that, they wrapped up work  on a temporary budget measure (approved in the Senate early Saturday morning by a vote of 62 to 30), which does the following:
  • Funds the government through March 27. 
  • Sets total appropriations at the level set in the Budget Control Act last August, which means that most discretionary programs will get a 0.6% increase for the first six months of federal fiscal year 2013, which starts on October 1. 
  • Gives defense spending the 0.6% increase as well, which provides about $1 billion more than the the House bill and almost $9 billion more than the Senate bill.
  • Continues the SNAP (food stamp) and TANF programs without any changes for 6 months. 
  • Leaves in place (at least for now) the cuts from sequestration that will take effect in January.
This sort of temporary budget fix is technically known as a “continuing resolution.”  As Gail Collins said in her New York Times column Saturday, it is also sometimes referred to as “kicking the can down the road,” but I agree with her that it’s nonetheless a relief that at least the House and Senate can agree on that much.  Her column (“The Polar Express”) about the just-ended session touches on some of the unfinished legislation – including the farm bill, overhauling the postal service, and the importation of dead polar bears!