Tax cut to help private school families, flood victims

Proponents say change in line with federal moves

MADISON – Flood victims, private school families and all state income taxpayers could benefit, but taxes might rise for those with moving expenses or season tickets for UW or Marquette games, under a plan to help Wisconsin conform to new federal tax changes.

In general terms, the proposal would raise some business taxes and then use the money to give individuals a broad $100 million-a-year income tax cut that was proposed by Gov. Scott Walker last year but dropped at the time by GOP lawmakers.

Rep. Dale Kooyenga (R-Brookfield) and two other lawmakers want the state’s tax laws to better mirror the federal tax changes signed by President Donald Trump in December. That will make it easier for both businesses and individuals to file their taxes, Kooyenga said.

The tax cuts and increases in the bill

would basically balance out, leaving the state with the same amount of money for public services.

“This is as palatable as tax changes come. This is a must-pass plan,” said Kooyenga, who’s working on the bill with Rep. John Macco (R-Ledgeview) and Sen. Howard Marklein (R-Spring Green).

There’s relatively little time left in the legislative session for lawmakers to approve the measure. Walker, Senate Majority Leader Scott Fitzgerald (R-Juneau) and Assembly Speaker Robin Vos (R-Rochester) had no reaction to Kooyenga’s proposal Friday.

Senate Minority Leader Jennifer Shilling (D-La Crosse) was unimpressed, pointing out that in recent years the state has agreed to billions of dollars in tax cuts and subsidies for businesses like Foxconn Technology Group of Taiwan.

“This doesn’t provide the long-term tax relief that Wisconsin working families are asking for,” Shilling said in a statement.

Most of the tax changes deal with how businesses are treated under the tax code. But a few rewrite the state’s individual income tax law to match changes made at the federal level.

For instance, Congress and Trump changed tax-free college savings plans known as 529 accounts to allow parents to use them to pay tuition at private elementary and secondary schools.

But Wisconsin law currently doesn’t allow that, making it difficult if not impossible for parents here to use accounts such as the EdVest college savings plan for high school expenses.

Kooyenga’s proposal would change state law to allow that, having little immediate effect on state taxes but modestly lowering them in future years.

Among other changes to adopt federal rules, state taxpayers would:

❚ No longer be able to deduct their moving expenses on their income taxes. If employers pay those expenses, taxpayers would also have to report those payments as income. Together those two provisions would increase state taxes by $15 million.

❚ Be able to pay for flood damage by withdrawing money early from their retirement accounts without paying the usual tax penalty. That would only apply to residents in eight North Woods counties affected by severe storms in July 2016 and 10 western Wisconsin counties hurt by storms and flooding in September 2016.

❚ No longer be able to deduct certain season ticket costs for university sporting events.

Peter Christianson, a Madison retiree with Badgers season tickets, said he was unhappy that Congress dropped the federal tax deduction for those tickets. But Christianson, a former lobbyist, said he isn’t surprised or unhappy that state lawmakers want to keep the tax code simple by adopting the federal change.

“That’s what they should do. They should conform to the extent that they can,” he said of state officials. “It wouldn’t make any sense for us not to.”

Overall, the changes being made would increase taxes on businesses in the state by just under $100 million a year. But Kooyenga said businesses would still get some benefits because it would take less time and effort to prepare their taxes.

Rather than keep that extra money, Kooyenga said he would like to adopt Walker’s proposed individual income tax cut, which would lower tax rates by one-tenth of 1 percentage point in the bottom two income brackets and apply those two brackets to more of tax filers’ income.

This move would decrease the taxes on a four-person family with a yearly income of $85,859 by about $70 in 2018.