Governor Walker has proposed an income tax cut that would benefit the highest earners the most, and would result in insignificant tax cuts for low-income Wisconsinites.
The Governor has been talking about his plans for an income tax cut for several weeks now, but the details of his proposal were revealed just last night, when Walker unveiled his two-year budget recommendations. He has proposed reducing the tax rate for three of the five income tax brackets, as shown in the table below. (The income amounts reflect the brackets for a married couple filing jointly; most of the brackets are lower for people filing singly or as head of household.)
|Income amount||Current tax rate||Proposed rate|
|Income over $14,000 and below $28,000||6.15%||5.94%|
|Income over $28,000 and below $211,000||6.5%||6.36%|
|Income over $211,000 and below $310,000||6.75%||No change|
|Income above $310,000||7.75%||No change|
If you’re among the fortunate Wisconsinites who have an annual income of more than $211,000 (after all deductions and exemptions) and you’re concerned you won’t enjoy any of the tax cut, you needn’t worry! You’ll actually get the largest cut, $300, because the tax rate will be reduced for all of your income up to the $211,000 level.
The estimated cost of the tax cut is $342 million over the two year budget period. To put that amount in context, that is more than the state plans to spend on the entire Wisconsin technical college system over that period.
Governor Walker has described the tax cut as benefiting the middle class, but most of the dollars will go to the pockets of the best-off. Fifty-four percent of the tax cut will go to the top 20% of tax filers, according to an analysis of the proposal by the Institute on Taxation and Economic Policy. The bottom 20% of taxpayers would get just 1% of the tax benefit.
In dollar amounts, people at the bottom of the income ladder will receive virtually no benefit from the income tax cut. The lowest 20% of tax filers would receive a tax cut of just $2 a year. People in the top 1% of filers would average a tax cut of $285.
The distribution of benefits could have been much worse; it would have skewed much more heavily in favor of upper income tax filers if the rates for the upper income tax brackets had also been reduced. However, even an income tax rate cut aimed at income below about $220,000 primarily helps people near the top, since they get the full benefit. Read more in this Capital Times article by Mike Ivey.
For more, go to www.wisconsinbudgetproject.org.