A little less taxing

The Milwaukee Journal Sentinel reports that a tax cut deal will be finished today:

Republicans reached a compromise late Tuesday on Gov. Scott Walker’s more than $500 million tax cut proposal, agreeing to $38 million in spending cuts in the final piece of a deal that paves the way for a key committee vote on Wednesday.

Along with two other modest changes, the cuts to take place in the next budget beginning in July 2015 were enough to win over a remaining Senate GOP holdout who had balked at passing tax cuts that would leave the state in a worse financial position in the future. The deal will preserve all of the property and income tax cuts that Walker proposed after new projections last month found the current state budget would finish in June 2015 with a $1 billion surplus. …

The deal would also keep a chunk of the surplus— more than $100 million — in the state’s main account rather than shifting it to a rainy-day fund. It would also drop a proposed sales tax exemption added by Assembly Republicans last week for construction companies doing work for local governments and churches. …

By Tuesday morning, the number of GOP holdouts in the Senate had come down to Sen. Rob Cowles (R-Allouez), who backed Walker’s tax cuts but was seeking an additional $38 million cut in state spending in the next budget to help pay for them. …

A lapse is a technical term in the state budget. It would amount to requiring agencies in the Walker administration to return that amount of money to the state’s main account during the fiscal year ending in June 2016.

The agencies could do that by dialing back their authorized spending or taking cash from separate pots of money that have built up over time.

Fitzgerald said the Walker administration was initially reluctant about the lapse, which can make it more difficult for agencies to budget because it introduces a level of uncertainty about what their actual spending will be. …

Republicans hold an 18-15 advantage in the Senate, but Sen. Dale Schultz (R-Richland Center) and all Senate Democrats are widely seen as no votes on the tax cuts. If they vote against the tax cuts, Cowles and every other GOP senator must vote for the bill to assure its passage. …

The move — and the additional $38 million cut — would also lower the shortfall expected in the 2015-’17 state budget under one way of estimating what is known as the structural deficit.

Before the new projections of unexpected new tax money last month, that shortfall had been estimated at about $707 million for the next two-year budget. Walker’s proposal would increase that projected shortfall by roughly $100 million to $807 million.

With the additional $38 million cut, the package would lower the expected shortfall to less than $660 million for the next budget.

First: Good for Cowles for insisting on more spending cuts. Even with the tax cuts, government in Wisconsin spends too much and taxes too much. (In addition to government’s other faults too numerous to list here.) There is no problem Wisconsin faces that more tax dollars will fix. The next time a unit of government in Wisconsin provides value that even matches your tax dollars will be the first time.

The aforementioned Schultz claims that no constituent of his told him they want tax cuts. (Which is a false statement, provably so if Schultz read his Senate district’s newspapers.)

In addition to their usual ranting about tax cuts for the “rich” (that is, those who actually pay income taxes), Democrats have been hypocritical about the issue of the rainy day fund, as Media Trackers reminds us:

On February 11, the state Assembly approved a $504 million property and income tax cut. The measure, promoted by Walker in his January state of the state address, also makes a payment of $117 million to the budget stabilization fund, better known in political vernacular as the “rainy day fund.”

While two Democrats joined a united Republican caucus in passing the tax cut, most Democratic members of the Assembly voted against the plan. More than a few Democrats publicly complained that the tax cut was irresponsible because more revenues were not deposited in the rainy day fund.

Rep. Penny Bernard-Schaber (D) called the tax cut package an “irresponsible and reckless plan.” As if on cue, other Democrats also called the measure “irresponsible.”

“When are we gonna stop doing irresponsible election year gimmicks?” Rep. Cory Mason, a Democrat from Racine, complained on the Assembly floor.

“Democrats believe we should take a balanced approach to the projected surplus,” Minority Leader Peter Barca said in a press statement outlining his side’s plan to double Walker’s requested contribution to the rainy day fund.

Barca subsequently expressed horror when Republicans voted down his plan and voted for what he called an  ”irresponsible election-year ploy.”

What Barca, Mason and other Democrats are conveniently ignoring is just how much money Walker and legislative Republicans have put into the rainy day fund. Today, the fund has more money in it than at any other time since its creation in 1985.

According to the Legislative Fiscal Bureau, the rainy day fund had $279.3 million in it as of January 16, 2014. If the Senate agrees with Walker’s tax cut package, the $117 million sent to the fund in that legislation will boost the reserve to $396.3 million.

That’s a far cry from when Gov. Jim Doyle, a Democrat, took $57 million out of the fund in 2008, leaving it with only $1.3 million.

Prior to the 2001-2003 budget, which established a funding mechanism for the rainy day account, the fund had a paltry $35 in it: a testament to the abundant political intentions that led to its creation and the lack of political will to meaningfully fund it.

The leftwing Wisconsin Budget Project on January 15th called on Walker and lawmakers to spend the budget surplus on yet more government programs. After Walker announced his tax cut, the group blasted him for not earmarking more money for the rainy day fund. Calling tax cuts a “shortsighted move” they said lower taxes “could come back to haunt the state during future economic downturns.”

While throwing together a chart that claims the state needs around $2.25 billion in a rainy day fund, the group never credited Walker with growing the account far more than his predecessors in either party.

The tax cut remains too small because it doesn’t even match the $2.2 billion tax increase Doyle enacted in the late 2000s. That tax increase didn’t solve the state’s fiscal problems of the time, but it did wreck the state’s economy. The tax cut is not larger because Walker and legislative Republicans have refused to make actual cuts — not merely decreases in increases, but a budget in which the last number, total spending, is less than the previous budget’s number — probably because they want to remain in power.  So this apparently is as good as Wisconsinites will get, and better than yet another Democratic tax increase.

 

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