California and Amazon.com have reached an agreement on the collection of sales tax that may lay the groundwork for significant changes in other states as well. As part of the agreement, Amazon will collect sales tax on purchases made in California starting in July 2012, unless there is federal legislation enacted before then that would supersede state law.
California’s agreement with Amazon comes after years of states trying, without success, to force online retailers to collect sales tax. Sales tax is owed on purchases whether those purchases are made online or in physical stores, but states are on shaky legal ground when they try to force online retailers to collect the tax. And big online retailers such as Amazon have devoted significant resources to thwarting states’ collection efforts. (You can read a more thorough analysis of this issue in our 2010 analysis, “Examining Wisconsin’s Progress in Leveling the Tax System for Retailers.”)
Friday, September 30, 2011
Wednesday, September 28, 2011
Tax Cuts Break the Bank
Since the beginning of 2011, Wisconsin has implemented six new tax cuts that will cost the state $200 million over the next two years in lost tax revenue.
While the Legislature was adding these new tax breaks – which primarily benefit upper income individuals and businesses – it was slashing investment in our state’s human capital. The result: fewer resources available to promote the education of Wisconsin children, the safety of Wisconsin communities, and the health of Wisconsin’s workforce.
Instead of taking a balanced approach to close the state’s deficit, one that relied on shared sacrifice, the Legislature dug the budget hole deeper with $200 million in new tax breaks. Those tax breaks have opportunity costs, and we need to acknowledge them.
What could the state of Wisconsin get for $200 million? Here are three examples of what Wisconsin could have done with the revenue represented by those tax breaks:
1) If the Legislature had avoided exacerbating the budget deficit by implementing new tax cuts, we could…
While the Legislature was adding these new tax breaks – which primarily benefit upper income individuals and businesses – it was slashing investment in our state’s human capital. The result: fewer resources available to promote the education of Wisconsin children, the safety of Wisconsin communities, and the health of Wisconsin’s workforce.
Instead of taking a balanced approach to close the state’s deficit, one that relied on shared sacrifice, the Legislature dug the budget hole deeper with $200 million in new tax breaks. Those tax breaks have opportunity costs, and we need to acknowledge them.
What could the state of Wisconsin get for $200 million? Here are three examples of what Wisconsin could have done with the revenue represented by those tax breaks:
1) If the Legislature had avoided exacerbating the budget deficit by implementing new tax cuts, we could…
Monday, September 26, 2011
The Trillion Dollar Question: How Do You Define a Tax Change?
Citizens for Tax Justice Calls Obama Plan a “Massive Tax Cut”
Math should be straightforward, but answering a math problem such as calculating the size of a tax cut or tax increase becomes difficult when politicians and political observers can’t agree on how to define terms like “tax increase” or “tax cut.” That fundamental disagreement is fueling an argument over whether the President’s deficit reduction plan would increase or decrease taxes and whether it would raise or reduce the federal deficit.
The problem is that people disagree on the base that you’re measuring the change against. Should we measure against what the tax code will be in the base year if it stays the same, or the anticipated tax level in that year resulting from statutory changes that have already been enacted? To get less hypothetical, let’s suppose Congress were to decide to extend some, but not all, of the Bush-era tax cuts that are scheduled to expire at end of 2012? Would that be a tax increase or a tax cut? Would it add to the deficit (since some of the expiring tax breaks are being continued), or does it reduce the deficit (if some of current tax breaks are being ended)?
Math should be straightforward, but answering a math problem such as calculating the size of a tax cut or tax increase becomes difficult when politicians and political observers can’t agree on how to define terms like “tax increase” or “tax cut.” That fundamental disagreement is fueling an argument over whether the President’s deficit reduction plan would increase or decrease taxes and whether it would raise or reduce the federal deficit.
The problem is that people disagree on the base that you’re measuring the change against. Should we measure against what the tax code will be in the base year if it stays the same, or the anticipated tax level in that year resulting from statutory changes that have already been enacted? To get less hypothetical, let’s suppose Congress were to decide to extend some, but not all, of the Bush-era tax cuts that are scheduled to expire at end of 2012? Would that be a tax increase or a tax cut? Would it add to the deficit (since some of the expiring tax breaks are being continued), or does it reduce the deficit (if some of current tax breaks are being ended)?
Friday, September 23, 2011
Wisconsinites’ Plummeting Household Income
Household and family income has fallen sharply during the recession. As a new WCCF blog post points out today, inflation-adjusted household income plunged by about $3,600, or 7 percent, from 2006 to 2010. That blog post illustrates that the drop has been similar but less precipitous in the nation as a whole. Read more in that WCCF post.
For county-level income and poverty figures in Wisconsin’s 23 largest counties, and the changes in those counties since 2007, see Table 1 in WCCF’s September 22 press release.
For county-level income and poverty figures in Wisconsin’s 23 largest counties, and the changes in those counties since 2007, see Table 1 in WCCF’s September 22 press release.
Thursday, September 22, 2011
250,000 Wisconsin Children Lived in Poverty in 2010
Today, the Census Bureau released new poverty and income figures for 2010 that are detailed enough to be broken down to the county level. The WCCF blog is posting a series of analyses that examine recent (and troubling) trends in overall poverty, child poverty, household income, and health insurance coverage.
Today's WCCF post examines the spike in child poverty in Wisconsin. The number of children living in poverty in Wisconsin increased by 43 percent between 2008 and 2010. Nearly one out of five children in Wisconsin livedi n poverty in 2010. In Milwaukee County, one out of three children lived in poverty.
Although child poverty is increasing across the country, Wisconsin's rate is increasing faster than the national average.
For more information, check out today's post at the WCCF blog, and keep an eye out for upcoming posts addressing related topics.
Tamarine Cornelius
Today's WCCF post examines the spike in child poverty in Wisconsin. The number of children living in poverty in Wisconsin increased by 43 percent between 2008 and 2010. Nearly one out of five children in Wisconsin livedi n poverty in 2010. In Milwaukee County, one out of three children lived in poverty.
Although child poverty is increasing across the country, Wisconsin's rate is increasing faster than the national average.
For more information, check out today's post at the WCCF blog, and keep an eye out for upcoming posts addressing related topics.
Tamarine Cornelius
Wednesday, September 21, 2011
Committee Considers $27 Million Per Year Tax Cut
The Senate Committee on Public Health, Human Services, and Revenue held a public hearing today on a bill (SB 160) that would reduce state tax collections by an estimated $27 million per year, starting with tax year 2012. The tax cut would result from making state income tax treatment of capital losses on investments consistent with federal law. The bill is authored by Senator Kedzie, co-authored by Rep. Ott, and there are seven co-sponsors.
Under current state law, the maximum amount of net losses (after comparing gains and losses from various investments) that may be deducted from income each year is $500, whereas the federal limit is $3,000. Net losses that exceed the state or federal cap may be carried forward and used as offsets against capital gains in future years (or deducted against other income, up to the level of the cap). Beginning on January 1, 2012, SB 160 would “federalize” the state cap on capital losses by raising it to $3,000.
Senator Kedzie was the only person who testified at the hearing, which was just scheduled a few days ago. In light of the bill’s significant price tag (see the DOR fiscal estimate), I’ll be somewhat surprised if it advances very far through the legislative process, but sometimes the Legislature addresses that hurdle by delaying or phasing in a tax cut and pushing all or most of the cost into future fiscal years. We’ll provide updates on the bill if it is approved by the Senate Committee that held today’s hearing.
Jon Peacock
Under current state law, the maximum amount of net losses (after comparing gains and losses from various investments) that may be deducted from income each year is $500, whereas the federal limit is $3,000. Net losses that exceed the state or federal cap may be carried forward and used as offsets against capital gains in future years (or deducted against other income, up to the level of the cap). Beginning on January 1, 2012, SB 160 would “federalize” the state cap on capital losses by raising it to $3,000.
Senator Kedzie was the only person who testified at the hearing, which was just scheduled a few days ago. In light of the bill’s significant price tag (see the DOR fiscal estimate), I’ll be somewhat surprised if it advances very far through the legislative process, but sometimes the Legislature addresses that hurdle by delaying or phasing in a tax cut and pushing all or most of the cost into future fiscal years. We’ll provide updates on the bill if it is approved by the Senate Committee that held today’s hearing.
Jon Peacock
Friday, September 16, 2011
Searching for Bright Spots in the New Wisconsin Job Creation Figures
Wisconsin lost 2,300 jobs in August, according to the figures that came out yesterday. This marks the second month in a row that Wisconsin has lost jobs. (You can read some of our commentary on past jobs figures here, here, and here.)
Governor Walker has made much of his pledge to create 250,000 private sector jobs in Wisconsin. Between January and August 2011, the number of jobs in the private sector rose by only 18,300. At that pace, it will take nearly seven years to add 250,000 jobs. With new evidence the economic recovery may be slowing, we should be prepared for more months with negative job creation figures.
It’s clear that overall, the Wisconsin economy is adding jobs more slowly than anyone would like. But how are individual industries doing? Are some adding jobs faster than others? To find out, I compared jobs figures for August 2010 and August 2011 (which are preliminary and subject to change) to identify any potential bright spots in the Wisconsin economy.
Unfortunately, even the good news is mixed. The industry in Wisconsin that added jobs at the fastest rate over the last year is what the U.S. Bureau of Labor Statistics refers to as “arts, entertainment, and recreation.” This category includes a wide variety of people working in businesses related to tourism, recreation, and leisure, including receptionists, security guards, groundsworkers, janitors, cashiers, and food service workers.
Governor Walker has made much of his pledge to create 250,000 private sector jobs in Wisconsin. Between January and August 2011, the number of jobs in the private sector rose by only 18,300. At that pace, it will take nearly seven years to add 250,000 jobs. With new evidence the economic recovery may be slowing, we should be prepared for more months with negative job creation figures.
It’s clear that overall, the Wisconsin economy is adding jobs more slowly than anyone would like. But how are individual industries doing? Are some adding jobs faster than others? To find out, I compared jobs figures for August 2010 and August 2011 (which are preliminary and subject to change) to identify any potential bright spots in the Wisconsin economy.
Unfortunately, even the good news is mixed. The industry in Wisconsin that added jobs at the fastest rate over the last year is what the U.S. Bureau of Labor Statistics refers to as “arts, entertainment, and recreation.” This category includes a wide variety of people working in businesses related to tourism, recreation, and leisure, including receptionists, security guards, groundsworkers, janitors, cashiers, and food service workers.
Wednesday, September 14, 2011
What the American Jobs Act Would Mean for Wisconsin
President Obama has announced his American Jobs Act, a package that includes $447 billion in tax cuts and new spending aimed at increasing employment and upgrading infrastructure across the country.
Here’s what the American Jobs Act would mean for Wisconsin, in dollar amounts and numbers of jobs supported. The figures are taken from materials posted by the White House.
Continuation and expansion of the payroll tax cut: President Obama has proposed extending and expanding a temporary decrease in individual payroll taxes. This provision would give a $1,580 tax cut to a typical Wisconsin household with an income of $51,000.
President Obama has also proposed temporarily reducing payroll taxes paid by employers. This would cut payroll taxes for 110,000 small businesses in Wisconsin.
Here’s what the American Jobs Act would mean for Wisconsin, in dollar amounts and numbers of jobs supported. The figures are taken from materials posted by the White House.
Continuation and expansion of the payroll tax cut: President Obama has proposed extending and expanding a temporary decrease in individual payroll taxes. This provision would give a $1,580 tax cut to a typical Wisconsin household with an income of $51,000.
President Obama has also proposed temporarily reducing payroll taxes paid by employers. This would cut payroll taxes for 110,000 small businesses in Wisconsin.
Monday, September 12, 2011
How Solid Is the State’s Projected Budget Balance?
New Budget Project Report Cautions Lawmakers Not to Count on a Significant Balance in the Next Budget
Sometime in the next week or two, the Wisconsin Department of Revenue will release a new Quarterly Economic Outlook report. That report will include revised assumptions about economic growth, which could look considerably different than the growth projections contained in the May report that was used as the basis for increased revenue projections in the 2011-13 budget. (A Bloomberg article today illustrates the downward revisions in the latest national economic projections.)
The Wisconsin Budget Project released a new issue brief today that examines some of the implications of the 2011-13 budget for the state’s fiscal health in the following biennium: What’s Passed Is Prologue: Looking Ahead to 2013-15. The new brief cautions legislators not to make plans for using state tax revenue before taking a much closer look at the soon-to-be-revised economic projections, as well as some of the political developments that could turn a projected balance into a structural deficit in the 2013-15 budget.
The Budget Project issue brief examines assumptions underlying projections that Wisconsin’s budget will be in the black in 2013-15. It concludes that the some of those assumptions, such as restoration of the state estate tax, are unlikely to come to pass, which makes the fiscal picture for the next biennium less rosy than some lawmakers have suggested. Those sorts of political assumptions will become even more important if the new quarterly economic report indicates slower growth over the next two years than was previously assumed.
Jon Peacock
Sometime in the next week or two, the Wisconsin Department of Revenue will release a new Quarterly Economic Outlook report. That report will include revised assumptions about economic growth, which could look considerably different than the growth projections contained in the May report that was used as the basis for increased revenue projections in the 2011-13 budget. (A Bloomberg article today illustrates the downward revisions in the latest national economic projections.)
The Wisconsin Budget Project released a new issue brief today that examines some of the implications of the 2011-13 budget for the state’s fiscal health in the following biennium: What’s Passed Is Prologue: Looking Ahead to 2013-15. The new brief cautions legislators not to make plans for using state tax revenue before taking a much closer look at the soon-to-be-revised economic projections, as well as some of the political developments that could turn a projected balance into a structural deficit in the 2013-15 budget.
The Budget Project issue brief examines assumptions underlying projections that Wisconsin’s budget will be in the black in 2013-15. It concludes that the some of those assumptions, such as restoration of the state estate tax, are unlikely to come to pass, which makes the fiscal picture for the next biennium less rosy than some lawmakers have suggested. Those sorts of political assumptions will become even more important if the new quarterly economic report indicates slower growth over the next two years than was previously assumed.
Jon Peacock
Friday, September 9, 2011
Researchers Ask, Did the Stimulus Work?
As the economic recovery continues to flounder, policymakers are coming to some sort of consensus that action is needed to help address the nation's economic ills. What's missing so far is a consensus on what form that action should take. President Obama's plan, which he announced last night, includes a combination of tax cuts and spending aimed at providing a temporary boost to the economy. Republicans have indicated a willingness to consider some aspects of his proposal.
Given that lawmakers are going to be debating the best way to drag the economy out of its current funk, now is a good time to scrutinize the track record of the last significant effort to jumpstart the economy. More than two years have passed since the federal Recovery Act was put into place in 2009, and researchers have had time to study the effects of the stimulus and determine whether the results were worth the cost.
One such study is the Congressional Budget Office’s quarterly evaluation of the impact of the Recovery Act, the most recent of which was released at the end of last month. The report determined that the Recovery Act had the following effect during April to June 2011, compared to what would have happened had there been no stimulus:
Given that lawmakers are going to be debating the best way to drag the economy out of its current funk, now is a good time to scrutinize the track record of the last significant effort to jumpstart the economy. More than two years have passed since the federal Recovery Act was put into place in 2009, and researchers have had time to study the effects of the stimulus and determine whether the results were worth the cost.
One such study is the Congressional Budget Office’s quarterly evaluation of the impact of the Recovery Act, the most recent of which was released at the end of last month. The report determined that the Recovery Act had the following effect during April to June 2011, compared to what would have happened had there been no stimulus:
- Increased the Gross Domestic Product by between 0.8 and 2.5 percent,
- Lowered the unemployment rate by between 0.5 and 1.6 percentage points, and
- Increased the number of people employed by between 1.0 and 2.9 million.
Thursday, September 8, 2011
New Census Data Show Wisconsin has Lean Public Sector
Wisconsin had a leaner public sector than all but 11 states in 2010, a new report by the Wisconsin Budget Project shows. Wisconsin has long had fewer state and local government employees than the national average, according to U.S. Census Bureau data.
State and local government employees – including those working as teachers, corrections guards, highway workers, police officers, and firefighters – make up about one out of every seven workers in Wisconsin.
State and local government employees – including those working as teachers, corrections guards, highway workers, police officers, and firefighters – make up about one out of every seven workers in Wisconsin.
In 2010, Wisconsin had 50.5 state and local government full-time equivalent (FTEs) workers per thousand state residents, compared to 53.7 nationally. Wisconsin has had fewer government workers per capita than the national average since at least 1993, as shown in Fig. 1.
Wednesday, September 7, 2011
Wisconsin’s Cuts to Schools are Among the Nation’s Largest
The cuts to Wisconsin schools are among the largest in the country, a new report shows. The Center on Policy and Budget Priorities compared cuts in state education funding, and found that Wisconsin topped the list of the states with the largest cuts as measured on a per student basis. In 2012, the state of Wisconsin will provide $635 per student less for public K-12 schools than in 2011. The analysis compared figures from the 24 states for which figures on education spending were readily available.
Compared to other states, Wisconsin also ranks high in the percent change in education spending per student. Behind only Illinois and Texas, Wisconsin’s decrease in state support represents a cut of 10.0% per student between 2011 and 2012. Wisconsin is expected to spend 11.9% less per student in 2012 than four years earlier, in inflation-adjusted dollars.
Compared to other states, Wisconsin also ranks high in the percent change in education spending per student. Behind only Illinois and Texas, Wisconsin’s decrease in state support represents a cut of 10.0% per student between 2011 and 2012. Wisconsin is expected to spend 11.9% less per student in 2012 than four years earlier, in inflation-adjusted dollars.
Tuesday, September 6, 2011
How to Keep Up with the Wisconsin Budget Project
Do you want to keep up with developments on state, local, and federal budget issues? The Wisconsin Budget Project now offers several ways that you can follow our work:
- Subscribe to the Wisconsin Budget Project Blog to make sure you never miss a post. You can subscribe via email or RSS feed.
- Follow the Wisconsin Budget Project on Facebook or Twitter (@WIBudgetProject).
- Sign up to receive our monthly Revenue Matters e-newsletters.
- And, of course, check out our website at http://www.wisconsinbudgetproject.org/.
Monday, September 5, 2011
New Report Examines Joblessness in Wisconsin
Each year around Labor Day the Center on Wisconsin Strategy (COWS) releases a report called the State of Working Wisconsin. This year’s update of that annual report is different because it focuses on the unemployed and underemployed.
There’s been some good press coverage of the report (see, for example Judy Newman’s article in the State Journal or John Schmid’s article in the Journal Sentinel). In case you missed those articles, today’s blog post summarizes some of the key findings about the increased rates of unemployment and underemployment and the disparate impact of the job shortage in this state.
Friday, September 2, 2011
New National Jobs Numbers Have Worrisome Implications for State Economy and State Budget
Most economists seem to be divided into two camps. Some think the nation is beginning to slide into the second trough of a double-dip recession. Many of the rest say it’s not that bad (at least in the short run) – but we’re in for a long period of very high unemployment and a relatively flat GDP (gross domestic product), which some have suggested could look like Japan's "lost decade."
Perhaps there's a third camp that's a bit more optimisitic, but nearly all the economists seem to agree that we won’t see a strong recovery any time soon. That’s very worrisome for the U.S. economy and the federal budget, and it also makes me worry about the state budget. The WI Department of Revenue hasn’t issued its quarterly “economic outlook” report for the summer, but it’s likely to be coming out in the next few weeks, and most of the recent news points to much less optimistic projections than the ones we saw in DOR’s spring quarterly report.
The downward revisions in the latest national economic forecasts will no doubt affect the next state forecast, and that could eventually lead to a reestimate of state tax revenue. Coming on top of the slightly negative tax collection figures released by DOR today, more pessimistic assumptions about economic growth nationally and in Wisconsin could have significant fiscal implications.
Perhaps there's a third camp that's a bit more optimisitic, but nearly all the economists seem to agree that we won’t see a strong recovery any time soon. That’s very worrisome for the U.S. economy and the federal budget, and it also makes me worry about the state budget. The WI Department of Revenue hasn’t issued its quarterly “economic outlook” report for the summer, but it’s likely to be coming out in the next few weeks, and most of the recent news points to much less optimistic projections than the ones we saw in DOR’s spring quarterly report.
The downward revisions in the latest national economic forecasts will no doubt affect the next state forecast, and that could eventually lead to a reestimate of state tax revenue. Coming on top of the slightly negative tax collection figures released by DOR today, more pessimistic assumptions about economic growth nationally and in Wisconsin could have significant fiscal implications.
Revenue Collections Slightly Under Forecasted Levels for 2011
New state revenue collection figures for fiscal year 2011 were released today. The new figures from the Department of Revenue, which are still preliminary, are slightly shy of the amounts that had previously been forecasted for 2011.
In May 2011, the Legislative Fiscal Bureau predicted that the state would take in $12.924 billion in General Purpose Revenue (GPR) collections for fiscal year 2011. The actual collections, as indicated by the preliminary figures released today, were $12.912 billion. That’s 0.1 percent below the Fiscal Bureau’s earlier estimate, or roughly $13 million.
In May 2011, the Legislative Fiscal Bureau predicted that the state would take in $12.924 billion in General Purpose Revenue (GPR) collections for fiscal year 2011. The actual collections, as indicated by the preliminary figures released today, were $12.912 billion. That’s 0.1 percent below the Fiscal Bureau’s earlier estimate, or roughly $13 million.
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