Legislature to vote on possible tax cut

By JASON STEIN

Friday, June 8, 2007 2:12 AM CDT

Lee Newspapers

MADISON -

State Rep. Robin Vos, a member of the Legislature's budget committee, said he could seek a vote as early as today on a plan to cut state income taxes by $177.8 million during the next two years.

The plan, praised by an aide to the top Assembly Republican leader, drew opposition from Senate Democrats who pointed out a practical problem - adopting the cut without other action would leave the state's main account some $210 million in the hole under the budget committee's two-year spending plan for the state.

The proposal by Vos, R-Caledonia, would provide a 1 percent decrease in the income tax rates for all taxpayers in the state. For a state taxpayer with a median yearly income of $30,200, the proposal would cut their taxes by a modest $12, the state Department of Revenue found.

It comes as the Joint Finance Committee on which Vos sits prepares to finish its work on Gov. Jim Doyle's proposed $58.2 billion budget with a series of votes on the parts of Doyle's budget proposal that increase taxes on cigarettes and hospitals along with state spending for medical coverage for the poor.

"We all know the income tax is the one most closely associated with economic growth," Vos said, adding that his proposal would help taxpayers interested in "investing in business or buying something for their family or saving for retirement. That's what we want to be encouraging."

Doyle has his own proposal - income tax deductions for families to pay for child care, health care and college tuition expenses, spokesman Matt Canter said. But Canter said Doyle hadn't taken a position yet on the Vos proposal, saying it was "too early to speculate."

Tax burden

on Wisconsin

Carrie Lynch, spokeswoman for budget committee co-chairman Sen. Russ Decker, D-Schofield, said that Republicans hadn't shown where the state could make compensating cuts in proposed spending.

"We can't pass a budget that has a giant hole out there like that," Lynch said.

Vos said Republicans have already proposed budget cuts and he would be willing to compromise by delaying the start of his plan from the current retroactive date of Jan. 1 of this year.

He acknowledged that if introduced today, his budget amendment would likely be defeated on a deadlocked vote, with eight Republicans and eight Democrats on the committee voting for and against the measure along party lines. Bob Delaporte, a spokesman for Assembly Speaker Mike Huebsch, R-West Salem, said the proposal was being seriously considered for inclusion in the version of the budget that will be passed out of that house later this summer. Huebsch has said the budget passed by Assembly Republicans won't raise taxes and will include tax cuts.

"If you lower the tax burden on everyone in Wisconsin, you make a climate that makes people want to stay in Wisconsin," Delaporte said.

The proposal would lower the tax rate on the state's lowest income bracket from 4.6 percent to 4.554 percent and on the highest income bracket lower the rate slightly more - from 6.75 percent to 6.683 percent.

The proposal's effect on wealthier taxpayers also would be greater in part because of their higher incomes. The Department of Revenue found that taxpayers in the top 1 percent of the state, with average incomes of $603,000 a year, would save $394 under the plan.

$177.8 million would be added to deficit

The budget committee's changes to Doyle's budget proposal in recent weeks have left a $32.3 million hole in the state's main account that will have to be made up through cuts in proposed spending or increases in taxes, said Bob Lang, director of the Legislative Fiscal Bureau. The proposed income tax cut would add an estimated $177.8 million to that deficit in the main account.

But when all the state's accounts are figured in, the budget committee actually has a $129.5 million surplus over Doyle's proposal, Lang said.

The news on the Vos proposal came as the nonpartisan Wisconsin Taxpayers Alliance released figures Thursday that showed that Wisconsin had dropped from sixth to eighth in the ranks of the highest taxed states in the country - a drop that was mainly due to rising taxes in other states, the report found.

State and local taxes claimed 12.13 percent of personal income in Wisconsin in 2004-2005, down from 12.18 percent in 2003-2004, according to the analysis of U.S. Census Bureau data.

UW-Madison economist Andrew Reschovsky said it was better to include state and local fees in the comparison as well, because those are generally lower in Wisconsin. Under that combined measure, Wisconsin ranked 20th in 2004-2005, down from 14th in the previous year.

In other action today, the budget committee is expected to vote on a proposed $1.25-per-pack increase in the state cigarette tax and a $415 million tax on hospitals that have been proposed by Doyle. The money raised by the taxes would go toward Medicaid programs for the poor.

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