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Capital City Sunday: Tax revenue windfall sparks new budget debate

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MADISON (WKOW) -- As legislative Republicans draw closer to re-writing Democratic Gov. Tony Evers' budget, the funding process gained a massive new layer this week.

The Legislative Fiscal Bureau's revised tax revenue projections now have Wisconsin set to collect about $4.4 billion more than previously thought.

Republicans view it as an opportunity to enact expansive tax cuts. Senate Majority Leader Devin LeMahieu (R-Oostburg) said GOP leaders were looking at a variety of possible changes.

"It gives us an opportunity to give that money back through a combination of income tax reductions, property tax reductions, and credits to small businesses," LeMahieu said. "Maybe like eliminating the personal property tax."

Evers said he was not interested in discussing tax cuts until Republicans commit more money to school districts.

Legislators were warned this week in an updated memo from the fiscal bureau that the state could miss out on as much as $2.3 billion in federal relief for schools.

Guidelines under the American Rescue Plan Act require states spend the same percentage of their budget on education as they had in recent years in order to qualify for the aid.

Federal officials have notified the legislature part of their education plan, putting $350 million in the state's rainy day fund for possible future education spending does not count.

"The bottom line is before we talk about tax cuts, we have to have legislature kind of figure out this budget," Evers said. "They are under resourcing all sorts of people, especially our K-12 schools and our University of Wisconsin System."

Bracket Buster

LeMahieu said he was interested in exploring the idea of eliminating one of the state's income tax brackets.

"We're looking at simplifying the tax code, moving toward a flatter tax and we're not exactly sure what that's gonna look like yet, maybe down to three brackets instead of four," LeMahieu said. "But reductions in all levels of income."

UW-Madison tax policy expert John Witte said cuts to the state's income tax rates would bring the state more in line with other states; its top tax rate of 7.65% is the 10th-highest in the country.

"Lowering those rates would not be something that would be completely out of the park here to get us more in line," Witte said.

Witte said while he believed a reduction in income tax rates was reasonable, he did not buy the explanation that eliminating an entire bracket would make the process more simple for taxpayers.

"That argument is totally bogus," Witte said. "You shouldn't buy that one bit because, one, people now, Turbo Tax figures that out so fast, you don't even know what brackets are being used."

Stacked Week in the Legislature

The budget-writing Joint Finance Committee is scheduled to take up taxes on Thursday. First, it will set funding for the Department of Health Services at its next meeting Tuesday.

In between, the Assembly has scheduled 14 hours of debate for about 30 bills scheduled for votes in a jam-packed session Wednesday.

The subjects scheduled for some of the most debate include measures banning transgender girls from playing on girls' sports teams at the K-12 and college levels.

Another bill would prohibit businesses from requiring people to show proof they've received the COVID-19 vaccine in order to receive a service or access to an event.

Evers has indicated he will ban both the trans sports and vaccine passport bills. The governor said he's unsure which of the police reform bills he will sign; a number of measures are set to go before the Assembly Wednesday.

The bills include measures placing a limited ban on police use of chokeholds, requiring officers to take a psych exam before being hired, providing grant money for body cameras, and mandating departments report their use-of-force incidents as well as their use of no-knock warrants.

Some Democratic members have said the bills don't go far enough, with a pair of lawmakers releasing a separate set of proposals.

Evers said he preferred the bills brought forward in a special session he called last summer but added he hadn't made any decisions on the bills before the Assembly.

"It's gonna be a difficult decision to make, I will tell you that," Evers said. "You know, it's kind of the idea, is weak tea better than no tea at all? And that's something I'll be weighing."

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A. J. Bayatpour

Capitol Bureau Chief

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