House Passes Budget with Huge Spending Cuts for the Poor and Tax Cuts for the Rich

Ryan Budget Would Drive a Giant Wedge into the Growing Gap between the Rich and Poor

More evidence of the widening divide between the rich and poor was reported in a March 25^th New York Times article.   It noted that 93 percent of income growth in 2010 (relative to 2009) went to the top 1 percent of taxpayers, those with at least $352,000 in income. That amounted to an average single-year pay increase of 11.6% for each of those households.  (See The Rich Get Even Richer.)

Yet despite all of the evidence of the growing income divide, and of the role of government policy in that divergence, the Ryan budget plan seeks to drive a wedge into that gap and make it far wider.  In a March 21 statement, the president of the Center on Budget and Policy Priorities, Robert Greenstein, described the Ryan plan as “Robin Hood in reverse — on steroids.”  Greenstein went on to say of the Ryan plan:

In Wisconsin, Taxes are a Purple Issue

Wisconsin state and local taxes have been marching downward for years, regardless of which political party is in power. The most recent figures from the Census Bureau on state and local taxes are from 2009, so there is no information yet as to how the Republican domination of the Governor’s office and legislature have affected state and local taxes.

But if history repeats itself, the change in political parties won’t make much difference in the amount of state and local taxes Wisconsin residents pay. That’s because for the years 2006 through 2009, the share of income devoted to taxes in Wisconsin dropped steadily, even as political control of the state legislature flipped from red to blue.

A Look at Wisconsin's Job Growth (Rose-Colored Glasses Optional)

New jobs figures released last week show that Wisconsin’s economy added jobs at a slow pace in February 2012. Last month, 8,300 new jobs were created in Wisconsin: 4,000 in the private sector and 4,300 in the public sector. February figures are preliminary and will be revised next month.

Administration officials noted that Wisconsin has created private sector jobs for two months in a row, and that Wisconsin’s unemployment rate, at 6.9 percent, remains well below the national average of 8.3 percent.

But taking off the rose-colored glasses, we can see that it is unrealistic to expect that Wisconsin will create 250,000 new private sector jobs by 2015, as the Governor pledged. Between December 2010 and February 2012, Wisconsin’s economy added just 8,100 new private sector jobs, as shown by the chart below. If Wisconsin’s economy continues to add new private sector jobs at this pace, Wisconsin wouldn’t add 250,000 new jobs until the end of Governor Walker’s 9th term in office. In pursuit of job creation, Governor Walker and the Legislature have hiked taxes on working families, undercut the state’s commitment to education, and rolled back support for local communities.

Tax Revenue Drops Sharply in February, Now Up Just 2.4% for the Fiscal Year

DOR Attributes Sharp Drop to Increased On-line Filing

The Department of Revenue (DOR) released February tax collection data today, and the numbers are discouraging.  Compared to the same month of 2011, the February tax collections were down by $56 million or 12.3 percent last month!  Most of the sources of revenue fell in February, but the total drop results primarily from a decline of $54 million in individual income tax collections last month – a decrease of 57 percent compared to February of last year!   

DOR says the drop-off can be explained by the fact that 70,705 more people filled their returns electronically last month than in the same month of 2011.  Early filers are generally owed refunds, so the use of electronic filing to speed up that process cut sharply into the net individual income tax collections.  For the full fiscal year, individual income tax collections are still up by 2.4 percent, and the same is true for total tax collections from all sources.

Length of Unemployment Benefits to Drop Sharply in April and Probably Again in Late May

Despite Little Job Growth, Drop in Unemployment Rates Triggers Shorter Jobless Benefits

The long-term unemployed can currently receive up to 86 weeks of jobless benefits in Wisconsin – including 26 weeks of regular state unemployment insurance (UI) benefits, then up to 47 weeks of federally-financed Emergency Unemployment Compensation (EUC), followed by up to 13 weeks of federally-funded Extended Benefits (EB). However, the federal benefits are ending or phasing down in some states with lower unemployment rates, and the maximum period of federally-funded benefits in Wisconsin (now 60 weeks) is likely to drop in three steps to just 28 weeks in September.

DWD announced this week that the decline in Wisconsin’s unemployment rate in recent months means that eligibility for the 13 weeks of Extended Benefits will end on April 7. EB will no longer be available in Wisconsin after that date (although there’s a remote chance EB could resume later – if there’s a significant increase in the state’s average unemployment rate). In addition, eligibility for EUC benefits in Wisconsin is likely to contract by June and will fall again in September.

This blog post examines why jobless workers are losing a significant portion of their unemployment benefits in Wisconsin, and how they are being hurt by a falling unemployment rate, even though the number of jobs in Wisconsin doesn’t seem to be growing.

Analyzing the Ryan Roadmap 2.0

CBO Figures Indicate that Much of Federal Government Would Cease to Exist by 2050

House Budget Committee Chairman Paul Ryan unveiled a budget blueprint Tuesday to reduce the federal deficit while sharply reducing taxes. It would do that by slashing most of what the federal government does – including safety net programs for the poor, such as Medicaid and food stamps, as well as Pell Grants and a number of other programs that the President has promised to protect.

After reviewing an analysis by the Congressional Budget Office (CBO) released Tuesday, the Center on Budget and Policy Priorities (CBPP) concluded:

“Ryan’s new budget plan specifies a long-term spending path under which, by 2050, most of the federal government aside from Social Security, health care, and defense would cease to exist.   …CBO shows that total federal spending would fall by 2050 to the lowest level since 1950, when Medicare, Medicaid, most federal funding for education, highways, and environmental protection, and various other significant federal activities did not exist.”

The End of a Wild Ride: Legislative Session Wraps Up

The Wisconsin Legislature concluded its session last week, a session that began in January 2011. This means that the Legislature will probably not meet again until January 2013, unless the Governor calls a special session of the Legislature. (Both houses of the state Legislature will hold a limited floor period for about 10 days starting in late April, to tie up any loose ends.)

This legislative session included passage of the state’s controversial budget repair bill, which severely restricted collective bargaining rights for public sector unions. During this session, the Legislature also passed the state’s biennial budget, which raised tuition for college students while handing out large tax breaks for multi-state corporations.

More recently, the Legislature had been considering a number of bills and constitutional amendments, some of which we’ve been keeping tabs on here on the Wisconsin Budget Project blog. To become a law, a bill must pass both houses of the Legislature in the same session and then be signed by the Governor. Proposed constitutional amendments must be passed by both houses of two consecutive Legislatures and approved at a statewide referendum.

Here is the status of end-of-session legislation that we have previously highlighted on this blog:

New School Meal Figures Reflect Increased Child Poverty

New data released Monday by the Department of Public Instruction (DPI) show yet another increase in the percentage of students meeting the income requirement to receive free or reduced-price school meals in Wisconsin's public schools – marking the eighth consecutive year that the percentage has increased. The DPI data for the 2011-12 school year show that 353,339 students in the state were identified as being eligible for free- or reduced-price meals – an increase of 7,155 students or 2.1 percent compared to the previous school year.

We’ve noted on previous occasions that Census Bureau data show that child poverty has  increased sharply in Wisconsin in recent years, but the most recent Census figures are from 2010. The school meal statistics were collected in October 2011, and although they don’t conclusively prove that poverty is still growing, they certainly reflect the long increase in economic hardship and indicate that it does not appear to be abating.

Another Look at Wisconsin’s Job Trends (and the Potential Political Implications)

Journal Sentinel Article Charts the WI, National and Midwest Job Trends

In case you haven’t seen today’s Journal Sentinel, it has a very good article by Craig Gilbert about the employment trends in Wisconsin – including some great graphs comparing job trends in our state with our neighbors and the national data.  It shows very dramatically how Wisconsin has trailed the rest of the nation in job creation over the last year, and also the rest of the upper Midwest. 

"The Case of the Missing $96 Billion in Corporate Taxes"

A blog post yesterday by Citizens for Tax Justice (CTJ) noted that the U.S. Treasury Department’s latest monthly statement contains the startling news that Treasury has slashed by 28 percent the amount that it expects to collect in corporate taxes in 2012, from $333 down to $237 billion.

“With such a dramatic revision, one might expect that lagging corporate profits or a sudden economic disruption is to blame. In reality however, corporate tax revenue continues to limp in spite of the fact that corporate profits have rebounded to record highs.  If corporate profits are not behind this $96 billion drop in expected corporate tax revenue, then what is?”

CTJ cites two explanations – the practice of multinational corporations to move profits offshore, and corporate tax breaks for accelerated depreciation.  It’s important to understand the corporate tax trends and underlying factors before the President and Congress tackle corporate tax reform and potentially pass up an opportunity to use those reforms to reverse the sharp drop in this important but dwindling revenue source.   

Read more in the CTJ blog post.  

Jon Peacock

Revised Proposals for Changing BadgerCare Would Save $36.5 Million GPR

JFC Meets Wednesday to Review Modifications to Cost-cutting Plan

The Joint Finance Committee (JFC) is scheduled to meet this Wednesday to review revisions that the Department of Health Services (DHS) has recommended in its plans for cutting the cost of BadgerCare. The changes to the plan approved by the JFC in November were made by DHS as a result of the negotiations it is engaged in with federal officials in the state’s effort to get a waiver of provisions in the federal health care reform law requiring states to maintain current eligibility standards, procedures and premiums.

The new summary and analysis released late today by the Legislative Fiscal Bureau indicates that the revised plan would reduce state General Fund spending by about $36.5 million GPR.   Although that is substantially less than the $90.2 million GPR estimated savings from the initial DHS plan, it is more than enough to close the Medicaid shortfall after it was revised downward in January. (The cost-savings projections noted above do not include the potential savings from a separate DHS proposal that would create a new BadgerCare coverage plan, with reduced benefits and much higher co-pays.)

Read more about the proposed BadgerCare changes in today’s WCCF Blog post.

Jon Peacock

Wisconsin on Pace to Create 250,000 New Jobs by 2056

Wisconsin’s economy is growing so slowly it could take the state nearly half a century to create the 250,000 new private sector jobs that Governor Walker pledged -- if job growth continues at the average rate since the end of 2010.

New figures released today show that between December 2010 and January 2012, Wisconsin gained a paltry 6,000 jobs in the private sector. To be on track to create 250,000 jobs over four years, Wisconsin would have had to gain jobs at a pace eleven times that fast. The chart below shows how far off pace Wisconsin is from the goal of creating 250,000 new private sector jobs.

Credits for “Angel Investors” Could Be Expanded, but the Devil is in the Details

Should the state give special tax breaks to investors who sink money into start-up businesses?  That’s a question the state Assembly is scheduled to take up next Tuesday, when it will consider a bill that would extend an income tax credit currently in place for “angel investors.”

Right now, angel investors get a state income tax credit of up 25 percent of the investments they make in new business ventures in Wisconsin, as long as the businesses meet certain requirements. Angel investors seek higher returns on their money than is available from traditional investments. These investors often bridge the gap between the self-funded stage of a business and the phase at which venture capitalists become involved.

Currently, the state has set aside $47.5 million in tax credits to be available to angel investors. At the current rate of use, that money will run out in 2013. The state Assembly is considering legislation (AB 601) which would increase the amount of credits available for investors. An amendment to the bill has been offered which would cap the amount of credits available at $100 million, up from the current level of $47.5 million.

A Budget Issue on Which the President and Wisconsin Republicans Can Agree

Earmark Transparency Bill Passes Easily in WI Senate, Moves to Assembly

In an unusual display of broad, bipartisan agreement, the Wisconsin Senate voted 30-3 Tuesday in favor of a bill that would require biennial budget bills to be accompanied by reports listing all the earmarks in the bill.  SB 114, which now moves on to the Assembly, also prohibits budget conference committees from adding earmarks.  At the national level, President Obama has pushed for similar legislation. 

Earmark transparency is the kind of "good government" issue that often draws rhetorical support from lawmakers and citizens across the political spectrum, but which is likely to run up against a wall of unspoken resistance that protects the status quo.  That's not to suggest that there aren't some legitimate questions and concerns about whether this seemingly straightforward requirement will always be practical and effective, but there's growing sentiment for allowing more sunlight to shine on the budget process.    

Businesses Unable to Benefit from Tax Credits Because Business Taxes are Too Low !?!

Assembly Debates Bill Today Allowing Corporations to Transfer Their Tax Credits

For many years, corporations complained that Wisconsin’s corporate taxes could discourage new businesses from locating or expanding in our state.  Now we have a very different complaint.  Some businesses are grumbling that new enterprises in Wisconsin don’t have enough tax liability to be able to take advantage of tax credits offered to induce corporations to locate or expand here!   Apparently, some people think this is a problem for those businesses.

A bill that is scheduled for an Assembly vote today, AB 376, would address this “problem” by granting the Wisconsin Economic Development Corp. the option of letting companies transfer up to 85% of their potential income tax credits to another taxpayer.  A recent article in the Janesville Gazette by Jim Leute explains the perspective of some Rock County businesses who support transferable tax credits, and it also reports on a couple of concerns that have been raised about the legislation.

Senate Committee Endorses Constitutional Constraints on State and Local Revenue and Spending

The Senate Committee on Judiciary, Utilities, Commerce, and Government Operations held an executive session today, March 5, on a proposed amendment to the Wisconsin Constitution to create a number of permanent restraints on state and local revenue and expenditures.  The proposal, Senate Joint Resolution 48, was recommended by the committee on a vote of 3-2.

Assembly Votes Tuesday on another School Voucher Bill

Special Needs Voucher Legislation among Four Disability Bills on Tuesday Assembly Calendar

The Assembly is scheduled to vote on Tuesday on four important bills relating to people with disabilities.  Among them is AB 110, which is intended to allow parents of students with disabilities to use vouchers to attend private schools.   Like other voucher bills, it takes money out of public schools, exacerbating their fiscal challenges by leaving less money for the vast majority of students with disabilities who remain in public schools.   

Advocates for people with disabilities are opposing AB 110 because of the effect on public and the private schools “are not required to have special education or related service staff available and do not have to develop new IEPs [Individualized Education Program] each year.  If the Assembly passes AB 110, it could harm parents and students with disabilities.”