State GOP tax proposal would save wealthy $1 billion

MADISON - Most taxpayers in Wisconsin would see some savings under an Assembly GOP tax cut package, and upper-income earners — those who currently pay the most income taxes — would eventually save $1 billion, a new analysis has found.

The report from the nonpartisan Legislative Fiscal Bureau found that along with other policy changes, the flat income tax proposed in the Republican plan would cut taxes by a net amount of $2.7 billion by 2029 — the year it would be fully phased in.

More than one-third of those tax cuts — or just over $1 billion — would go to taxpayers earning $300,000 or more a year.

Rep. Dale Kooyenga (RBrookfield), the lead sponsor of the tax bill, rejected criticism of its substantial cuts for the wealthy, saying that it would help keep those taxpayers from moving to other

states.

“You can always manipulate those tables to tell a class warfare story,” he said.

Kooyenga’s broad proposal has a number of provisions, but at its center, the plan drops higher tax rates on higher income earners and goes to a single rate of 3.95% on all income and all taxpayers. Currently, state income tax rates run from 4% for the lowest paid workers to 7.65% for married couples making more than $326,330 a year.

Rep. Gordon Hintz (D-Oshkosh), a member of the Legislature’s budget committee, said going to one income tax rate was unfair to middle-class and lower-income people.

“The simplicity of the flat tax masks the inequality of it,” he said. “It’s really a tax giveaway to the wealthiest individuals.”

For a taxpayer making between $40,000 and $50,000 a year, the average tax cut by 2029 would be $402 a year.

In all, just under twothirds of the 3.1 million tax filers in Wisconsin would see a cut in their taxes by that year.

But more than 1 in 10 taxpayers would actually see their taxes rise by an average of $54. Most of those tax increases would be on workers making less than $60,000 a year.

Kooyenga said Tuesday was the first time that he had seen tables showing the effect of his plan on taxpayers of different income levels. He said he wanted to avoid tax increases on families of modest means.

“We are very open to making adjustments to make sure there’s as many winners as possible,” Kooyenga said.

In addition to the flat tax, the proposal would:

Eliminate the alternative minimum tax, which is aimed at ensuring upper-income tax filers don’t end up largely avoiding taxes through deductions and other methods.

Drop the state’s married couple credit, property tax and rent credit and working families credit.

Reduce the 5% itemized deduction credit to 3% in 2019 and 2% in 2020.

Eliminate provisions allowing the gains from the sale of some stocks and real estate to be excluded from the state capital gains tax.

Assembly Minority Leader Peter Barca (DKenosha) said that the proposal would help the wealthy more while putting more of the tax increases on lower and middle-income families.

“Once again this gives the lion’s share of the benefits to those at the top end of the economic ladder,” Barca said.

The bill would also increase the taxes that drivers pay on fuel, cutting the 32.9-cent-pergallon gas tax by 4.8 cents, but then applying the state’s 5% sales tax to gas. Drivers would pay 7.2 cents more per gallon of gas when prices are at $2.40 per gallon, according to the Fiscal Bureau.

Backers of the plan argue the changes to the state’s minimum markup law could help to counteract that increase in fuel taxes by lowering the amount that gas stations are required to raise the sale price of fuel over their own costs.