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Wisconsin Republicans Pass Plan to Cut Income Taxes by 15% on Average

Income taxes would be cut across the board by $3.5 billion under a plan passed Thursday by Republicans who control the Wisconsin Legislature’s budget-writing committee, a proposal that Democrats assailed as being skewed to benefit the wealthy.

Under the income tax cut, which is retroactive to Jan. 1, 2023, the average reduction would be 15% for all filers or $573, Republicans said. The state would still go from four to three brackets, with the lowest rate dropping to 3.5% and the highest rate being 6.5%.

Democratic Gov. Tony Evers, who had proposed a tax cut primarily benefitting low and middle-income earners, criticized the GOP plan.

Evers “believes that when we deliver tax relief, it should be real, responsible and targeted to the middle class,” his spokesperson Britt Cudaback said on Twitter. “The GOP is doubling down on tax breaks for wealthy millionaires and billionaires instead of prioritizing relief for working families.”

The largest percentage point drop comes at the highest rate, paid by married couples who earn more than $405,550 or single people making more than $304,170. That rate would drop from 7.65% to 6.5%. The middle two brackets would collapse so all married couples earning between $9,210 and $202,780 would pay 4.4%. The lowest rate for the poorest taxpayers would drop only slightly, from 3.54% to 3.5%.

The income tax cut will be paid for by tapping the state’s projected $7 billion surplus. Republicans also devoted $622 million to keep property taxes in check.

Republicans swiftly rejected a Democratic amendment to their plan that would have kept the highest rate at 7.65%. The amendment would not have otherwise changed what Republicans proposed.

“You had a choice between regular Wisconsinites and rich people, and you chose rich people,” Democratic Rep. Tip McGuire said.

Some Republicans, including Senate Majority Leader Devin LeMahieu, had wanted even deeper cuts. LeMahieu proposed moving to a flat income tax rate of 3.25% by 2026, saying the state surplus offered a “once-in-a-lifetime opportunity” to make generational tax reform. But fellow Republicans balked at that plan, which would have cost nearly $5 billion over two years.

Wisconsin’s total tax burden, which is total taxes measured as a share of personal income, fell to its lowest point in more than 50 years in 2022, according to the Wisconsin Policy Forum. It also found that that in recent years, Wisconsin income tax rates have declined more for higher income earners than they have for those with lower incomes.

Overall, however, when compared to national averages, rates in Wisconsin are higher for higher incomes and lower for lower incomes.

Republican Rep. Terry Katsma said the cuts were designed to keep Wisconsin competitive with neighboring states with lower rates, like Illinois, which has a flat tax of 4.95%.

“We have to be competitive with the states around us,” Katsma said.

But Democrats objected, saying the tax plan would make the state less competitive when combined with GOP budget decisions to end funding for child care programs and cut spending for the University of Wisconsin.

“Those issues were ignored, denied, for this, what they came out with today, which was primarily a tax cut for the very wealthy,” McGuire said.

“They are making Wisconsin a place that is unattractive and inhospitable to women and to families,” said Democratic Sen. Kelda Roys.

The last state budget, passed by the Republican Legislature and signed by Evers in 2021, cut income taxes by more than $1 billion.

The GOP plan, which was added to the larger state budget on Thursday, must pass both the Senate and Assembly before it goes to Evers. Both chambers will likely vote to pass the budget bill next week. Evers can then make changes with his line-item veto power before signing the two-year spending plan into law.

Source : usnews