New Year Brings Tax Reductions, At a Cost

As we ring in the New Year, we will also see the initiation or phased-in increase of at least eight new or expanded state tax cuts and tax credits that take effect in 2011.  Some of these tax cuts are rather obscure, but others are higher profile changes that are very popular -- such as the phased-in deductions for health care premiums and child care expenses.

These tax changes add up to an estimated $210 million cut in state taxes over the 2011-13 biennium, according to a new analysis by the Wisconsin Budget Project. After adding in other tax reductions with different effective dates, the analysis calculates that tax changes contribute more than $320 million to the structural deficit for the coming biennial budget.

Top 10 Posts of 2010

Just in time to ring in the new year, the Wisconsin Budget Project presents our top ten posts from 2010.

DOA Announces a $293 Million Increase in Projected State Revenue

In case you missed it, brief news articles and blogs reported yesterday that the Department of Administration announced that the state’s budget prospects are looking a little bit brighter because of new revenue estimates that have been revised up by about $293 million for the remainder of the current fiscal year and the next biennium.

$23 Million Federal Bonus Rewards Wisconsin for Cutting Red Tape to Cover Uninsured Kids

Wisconsin received a $23 million federal bonus today for the state’s success in improving access to health insurance for children by simplifying BadgerCare enrollment and renewal procedures. The 2010 bonus payment for Wisconsin, which is the second largest among the bonuses to 15 states this year, rewards the state for improving enrollment of low-income, Medicaid-eligible children by removing red-tape and other barriers to enrollment and renewal. 

You can read more in today’s WCCF blog post, or in the WCCF press release.  However, I’d like to stress a few key points that I should have highlighted more prominently in those summaries:

1. As a result of the bonus funding for about 85,500 Medicaid children in Wisconsin, coupled with the Recovery Act's enhanced cost-sharing, the state will pay only about 13 percent of the $138 million cost of covering those children.
2. Federal bonus funding will be available to states for 3 more years, and Wisconsin will be eligible for very substantial bonus payments in each of those years, if lawmakers don’t reverse the progress the state has made in improving the BadgerCare Plus application and renewal procedures.
3. The enhanced federal percentage of costs provided by the bonus formula will become even more important in the coming years when the Recovery Act’s enhanced Medicaid funding is gone, because the state share of Medicaid costs will grow from 30 percent to 40 percent (prior to calculating the bonus amounts).  

Jon Peacock

$10 Million Grant for Dental Health Training Approved Last Week, but Exposes Divergent Priorities of Oral Health Care Providers

A WCCF blog post on Tuesday explains that the State Building Commission voted last week to approve a $10 million grant to Marshfield Clinic to set up a center to train rural dentists, after Marshfield raised $10 million in matching funds for the project.  The grant generated a heated debate on the Commission --drawing  attention to the substantially different dental health care policy and fiscal priotities between some of the state's major oral health care providers. 

Read more in the recent WCCF post.

Tax Collections Up 3.6 Percent in FY 2011

The Department of Revenue has released its new GPR tax revenue collection figures for the first five months of fiscal year 2011, through November 2010. Collections to date are up 3.6 percent over the previous fiscal year. So far this fiscal year, income tax collections increased by 3.3 percent over the previous year, and sales tax collections increased by 4.3 percent.

The Department of Administration’s November 2010 revenue estimates count on 4.2 percent growth in GPR tax revenues for fiscal year 2011, 0.6 percentage points higher than the rate so far this year.  The difference between 3.6 percent growth and 4.2 percent growth would amount to about $78 million over the course of a year. We'll try not to worry about that difference quite yet, because the state can easily close that gap if economic growth improves in the coming months.

New Report Describes Property Tax Loopholes

The Institute for Wisconsin’s Future has released a new report that describes loopholes in Wisconsin’s property tax system worth hundreds of millions of dollars. The report noted that there are more than a hundred property tax exemptions currently in law. If all properties were taxed at their market value, it would generate up to an additional $700 million.

Lion’s Share of Tax Cuts Will Go to Highest Earners

Most of the benefit from the tax provisions in the new tax deal signed by President Obama last week will go to the highest earners. The package extends the Bush tax cuts for all income levels for another two years, reduces the number of people affected by the estate tax, and extends the duration of several tax credits aimed at helping low- and moderate-income families.

The Tax Policy Center has done a distributional analysis of how the effects of the tax package will play out, and shows that the top 20 percent of earners – those earning more than $105,000 – will garner 57 percent of the benefit from the tax package. (The Tax Policy Center’s analysis focuses on changes in tax policy, such as the extension of the Bush tax cuts, expansion of the Earned Income Tax Credit, and the payroll tax holiday, and does not include other provisions such as the continuation of federal unemployment benefits.)

Changes to the Estate Tax in the Tax Deal

President Obama and Congressional Republicans have reached an agreement on a tax deal, and first the Senate and now the House have voted to approve the proposal. The package now moves to Obama for his signature.

However, some House Democrats let it be known they were reluctant to support the proposal. One of the main sticking points was a provision that would limit the estate tax to only the largest estates.

JFC Approves Controversial PSC Proposal for Increased Energy Conservation Spending

The most contentious issue on the agenda of the Joint Finance Committee (JFC) today was the proposal from the Public Service Commission (PSC) calling for utilities to substantially increase spending on energy efficiency measures, in order to reduce energy consumption and greenhouse gas emissions and reduce energy spending for consumers. Although business groups called the PSC proposal a "$340 million energy tax hike" over the next four years, the committee approved it today on a party-line vote of 12 to 4.

Environmental groups and the PSC disagree with the business groups’ critique of the proposal. However, what makes the ongoing dispute about the PSC plan particularly interesting is the combination of the substantive debate, the changing political landscape, and legal arguments about the authority of the current JFC to clear the way for the PSC plan.

The Federal Tax Cut Conundrum -- CBPP Offers a New Overview

A week ago when the President first unveiled the compromise he negotiated with Republicans on tax issues and unemployment benefits, the initial reaction from many Democrats was quite hostile. In some camps that’s still the case, but as different groups and lawmakers take a closer look at the proposal and the political alternatives, there has been at least a little bit of thawing in the opposition from the left side of the political spectrum, and it easily cleared a key procedural vote in the Senate yesterday.

I think a piece written last week by NY Times columnist Gail Collins provides an amusing and insightful analysis of the reaction of liberals to the proposed deal. This blog post describes her commentary and, more importantly, links to an overview of the compromise plan issued late Friday by the Center on Budget and Policy Priorities (CBPP), which sheds some light on why the number of liberals and moderates supporting the plan has gradually been growing.

WI Continues to Lead the Nation in Ratio of Manufacturing Jobs to Government Jobs

The public sector is under attack on many fronts, as conservative groups and some of the newly elected lawmakers argue for shrinking government and reducing public sector spending. An argument that has recently caught on among proponents of cuts to the public sector is that growth in government employment has been crowding out manufacturing jobs.

Conservative groups have recently latched onto one particular factoid to support their contention that public sector employment is harming the private sector. They note that late last year, “for the first time in state history,” the number of government jobs surpassed the number of manufacturing jobs in our state. The Wisconsin Budget Project just completed an updated analysis of employment in Wisconsin and issued a press statement today stating that “raising alarms about Wisconsin’s ratio of manufacturing jobs to government jobs represents a complete misreading of the data.”

Joint Finance Committee Meets Tuesday on Budget Requests

Next month the lopsided composition of the Joint Finance Committee (JFC) will switch from 12 Democrats and 4 Republicans to exactly the opposite of that.  In the meantime, the current JFC has a quarterly meeting on Tuesday (Dec. 14), when the committee will review and act on a broad range of agency requests. The meeting is supposed to begin at 10:00 a.m. in Room 412 East in the Capitol.

Tax Compromise Would Extend Improvements for Low-Income Tax Credits

The deal President Obama has brokered with Congressional Republicans is disappointing in a number of respects. Nevertheless, some prominent progressive groups have endorsed it (albeit somewhat reluctantly), because it contains positive measures that are unlikely to be part of any compromise negotiated next year. The progressive elements of the proposed package include a two-year continuation of Recovery Act improvements to three important tax credits.

The tax credits affected by the proposal include the Earned Income Tax Credit (EITC), the Child Tax Credit (CTC), and the American Opportunity Tax Credit (AOTC). These three credits are refundable, which means if the amount of credit exceeds a person’s tax liability, the federal government cuts a check to the person for the difference. An analysis released today by the Center on Budget and Policy Priorities found that extension of the tax credit improvements, coupled with the proposed temporary payroll tax cut, would keep 2.4 million Americans above the official poverty line, and would lessen the severity of poverty for 18.4 million poor Americans, including 6.9 million children, who would be lifted nearer the poverty line.

Fiscal Bureau Releases Summary of Agency Budget Requests

The Wisconsin Legislative Fiscal Bureau has released its summary of state agency 2011-13 budget requests.

The Fiscal Bureau’s summary highlights the major changes that have been requested. The summary contains items with a fiscal effect of more than $250,000, or that represent a significant policy change.

Early next week we'll comment on the requested increase in total spending and positions.

Tamarine Cornelius

It's Still 99 Weeks

News reports of Obama’s tax deal with congressional Republicans often refer to one particular provision as “extending” federal unemployment benefits for the long-term unemployed. This wording has lead to some misunderstanding. The proposed package doesn’t so much extend federal unemployment benefits as revive them.

New Report Shows Recovery Act Decreased Poverty in Wisconsin

A new report estimates that portions of the 2009 Recovery Act cut poverty levels in Wisconsin by 1.4 percentage points for all families and by 2.6 percentage points for children.

The Institute for Research on Poverty at UW-Madison built a model to analyze the effect of four programs created or expanded by the Recovery Act: food stamps, refundable tax credits, Making Work Pay Credit, and Economic Recovery Payment. This Wisconsin Budget Project paper shows that Wisconsin residents received more than $3 billion from a variety of Recovery Act direct benefits between February 2009 and May 2010.

Will Walker Raise Taxes for the Working Poor?

Column Suggests Walker May Cut the State Earned Income Tax Credit

Ronald Reagan called the Earned Income Tax Credit (EITC) "the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress."

Wisconsin, like many other states, has its own EITC, which supplements the federal credit. The Wisconsin credit has enjoyed broad bipartisan support. The legislation creating it was co-authored by many Republicans, and the credit was signed into law by Tommy Thompson.  However, some people think Governor-elect Walker may propose cutting the popular tax credit for the working poor.

Joint Finance Committee Membership Set

Membership on the powerful Joint Finance Committee (JFC), which has a huge role in writing the state budget, was settled yesterday when Assembly Democratic Leader Peter Barca named Reps. Jennifer Shilling and Tamara Grigsby to the two committee spots reserved for Assembly Democrats. The number of JFC members who are Democrats will drop in each house from 6 to just two, following the longstanding practice.

New Analysis Shows Impact of Recession on Wisconsin

For many residents of Wisconsin, the recession has dealt a double blow. They have lost both their jobs and their health insurance.
A new analysis of U.S. Census Bureau data by the Wisconsin Council on Children and Families (WCCF)examines the impacts of the recession on families across the state, based on measures such as unemployment, income, poverty and access to health insurance. The analysis includes data for each of 23 Wisconsin counties, as well as for the state as a whole.

For more about the analysis, check out WCCF's newest blog post,  or go straight to the numbers.
 
Tamarine Cornelius

Federal Unemployment Program Expires

As of today, it’s official: The program that provides federal benefits to long-term unemployed workers has expired. There’s hope for the program to be revived, but until then, long-term unemployed workers are getting no further help making ends meet.