A short Legislative Fiscal Bureau memo prepared for Senator Mark Miller tallies the fiscal impact of the tax cuts contained in the biennial budget bill and in other bills already enacted this year. According to the June 9th LFB memo, the total cost of the tax cuts in the Joint Finance Committee’s version of the biennial budget bill will be $93.4 million in the 2011-13 biennium, but will gradually become much larger – growing to about $270 million per year in fiscal year 2020-21.
The combined cost of the tax cuts in the budget bill and in other bills already enacted this year will be $212 million in 2011-13, and the cumulative tally over the next ten years is projected to be $2.3 billion. Because many of the tax cuts are delayed or phased in, their annual price tag will grow steadily and will add to the state’s structural deficit. That impact (calculated by measuring the future fiscal impact relative to the effect in 2012-13) will be a $109 million boost to the structural deficit in the 2013-15 biennium and $238 million in the following biennium.
All of the new tax cuts benefit corporations or wealthy Wisconsinites. However, two other changes in the budget bill will raise taxes for seniors and low-wage workers by $70 million over the next two years – by cutting the state Earned Income Tax Credit by $56.2 million and by ending indexing of the Homestead Tax Credit (i.e., ending inflation adjustments to the Homestead credit formula). That change will cost low-income Wisconsinites $13.6 million over the next two years, and that amount will grow steadily in the years ahead as inflation erodes the value of the credit.
To read more about the effects to those two tax credits, see the updated version of WCCF’s two-page paper about the effects of the budget for working families.
The largest of the various tax cuts is the corporate tax break unveiled for the first time at 11:00 p.m. on June 3, during the last hour of the Finance Committee’s work on the budget bill. As I noted in a blog post yesterday, “Icing on the Cake for Corporations, Crumbs for Working Families,” the annual cost of that credit will grow from $10 million in 2012-13 to $129 million in 2016-17, once it is fully phased in.
Senator Miller issued a press release Friday, in conjunction with the LFB memo, contrasting the $2.3 billion in tax cuts with the $1.6 billion loss for schools over the next two years.