Remember when Gov. Tony Evers said there would be no tax increases? (He told me so. Really.)

Then Evers proclaimed that $1.3 billion in tax increases aren’t really tax increases.

The Badger Institute evaluates Evers’ 1.3 billion lies:

With the release of his first biennial budget, introduced as Senate Bill 59, Wisconsin’s new Governor Tony Evers (D) has proposed dozens of miscellaneous tax changes. While the budget  offers targeted income tax cuts for certain low- and middle-income taxpayers, these cuts are far outweighed by tax increases elsewhere, such as business taxes and excise taxes. Taken as a whole, these changes would make Wisconsin’s tax code more complex and less neutral, missing an opportunity to provide tax relief within the context of pro-growth structural reform.

Individual Income Tax Changes

The most notable of the proposed individual income tax changes is the creation of a credit to reduce tax liability for individuals making less than $100,000 and families making less than $150,000. This proposal comes as no surprise, as Gov. Evers campaigned on a 10 percent tax cut for taxpayers with income below those thresholds, but the budget provides new details about the credit’s structure.

Under the proposal, a “Family and Individual Reinvestment” or “FAIR” credit would be available only to taxpayers with Wisconsin adjusted gross income (WAGI) below $100,000 (single filers) or $150,000 (married filing jointly). This nonrefundable credit would be claimed after most other credits are applied, reducing tax liability by 10 percent or $100 ($50 for married taxpayers filing separately), whichever is greater. This credit would begin to phase out once income reaches $80,000 (single filers) or $125,000 (married filers), phasing out completely at $100,000 and $150,000, respectively. Expected to cost $833.5 million over two years, this credit would become Wisconsin’s second-largest individual income tax credit after the School Property Tax Credit.

The budget also proposes increasing the Earned Income Tax Credit (EITC). Currently, Wisconsin taxpayers who are eligible to claim the federal EITC may claim a percentage of the federal credit against their state tax liability. The refundable state credit is offered at 4 percent for families with one child, 11 percent for families with two children, and 34 percent for families with three or more children. The governor’s proposal would increase the credit to 11 percent for families with one child and 14 percent for families with two children, while keeping it at 34 percent for families with three or more children.

Further, the budget would create a new child and dependent care credit in lieu of Wisconsin’s existing “subtraction for child and dependent care expenses.” Taxpayers eligible for the federal child and dependent care tax credit would be eligible to claim 50 percent of the same amount on their Wisconsin tax return.

Beyond that, the governor’s budget would replace a scheduled across-the-board income tax rate reduction with a rate reduction to the lowest bracket only. Following the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc., Wisconsin began requiring online retailers to collect and remit Wisconsin’s sales tax. In December 2018, Act 368 was signed into law, allocating any increased revenue from “out-of-state retailers” collected between October 1, 2018 and September 30, 2019 to across-the-board individual income tax rate reductions. The Wisconsin Department of Revenue has projected an estimated $60 million increase in online sales tax collections during that period, which would allow for a 0.04 percentage point rate reduction to each of Wisconsin’s four marginal income tax rates in tax year 2019. However, the governor’s budget proposes changing that law so only the 4 percent income tax rate, which applies to only the first $11,760 in marginal taxable income, would be reduced.

Finally, the budget proposes changes to the tax treatment of capital gains. Wisconsin’s tax code allows a 30 percent deduction on net capital gains for assets held for more than one year (for farm assets, it’s 60 percent of net capital gains). This income is excluded from a taxpayer’s capital gains tax basis to help ensure investors are taxed on their real gains, not their nominal gains. This exclusion is currently available to all investors, but the governor’s proposal would limit the exclusion so it can only be claimed on capital gains income when a taxpayer’s combined noncapital gains income and capital gains income is below $100,000 (single filers) or $150,000 (married filers).

The aforementioned changes would provide income tax relief to low- and middle-income taxpayers, but would do so by narrowing the tax base, making the tax code less neutral, and adding unnecessary complexity to the income tax system. It’s important to keep in mind that Wisconsin already offers numerous income tax credits and deductions to provide targeted tax relief to low- and middle-income residents. Provisions like the refundable EITC and refundable homestead credit allow many lower-income Wisconsin residents to receive a net income tax refund. The sliding-scale standard deduction, available only to those with incomes less than $103,500 (single) or $121,009 (married), reduced tax collections by $857 million in FY 2018. With provisions like these already exclusively benefiting low- and middle-income residents, the introduction of a new credit into the mix would be duplicative and further complicate tax filing. A simpler, more neutral approach to individual income tax relief would be to reduce tax rates within the existing framework, or better yet, reduce tax rates while creating a more growth-friendly tax structure.

Business Tax Changes

The governor’s budget includes tax changes that would impact businesses in certain industries. Specifically, the proposal would make the nonrefundable Manufacturing and Agriculture Credit (MAC) less generous while making the refundable Research Credit more generous.

Wisconsin’s MAC is a nonrefundable credit available to pass-through businesses and traditional corporations and can be claimed in an amount equal to 7.5 percent of income derived from manufacturing or agricultural activities, not to exceed a business’s total tax liability. In the governor’s proposal, the credit for manufacturers could be claimed against only the first $300,000 in income derived from manufacturing activities in a year. However, the proposal would not impose a cap on the amount of the credit that can be claimed by agricultural producers. Capping the manufacturing portion of the MAC would increase taxes on manufacturers by an estimated $516.6 million over two years.

Meanwhile, the proposal would make Wisconsin’s refundable Research Credit more generous. Currently, this credit can be claimed on amounts equal to 11.5 percent of a taxpayer’s expenses related to research and development activities in Wisconsin. If the credit amount exceeds tax liability, a tax refund can be claimed in amounts up to 10 percent of the total credit value. Under the governor’s proposal, the refundable portion of the credit would be increased so claimants could receive a refund up to 20 percent, rather than 10 percent, of the credit value.

These tax changes would further accentuate the unequal tax treatment of different industries under Wisconsin’s income tax laws. Instead, policymakers ought to consider how Wisconsin’s high corporate and individual income tax rates detract from the state’s attractiveness as a location for business investment. Ultimately, broad-based, low-rate taxes create the most favorable environment for business investment and growth across all industries.

Sales Tax Changes

Also included in the budget is a proposal to subject two new business inputs to the sales tax. An ideal sales tax system excludes business inputs, not to give businesses a special tax break, but to prevent tax pyramiding. When business inputs are subject to the sales tax, the costs of production rise, and much of the intrinsic sales tax burden gets passed along to consumers in the form of higher retail prices. Wisconsin already properly excludes most business inputs from the sales tax, so handpicking certain inputs for taxation would be a step in the wrong direction.

Further, this proposal would require online marketplace facilitators to collect and remit sales taxes on behalf of third-party sellers who use these platforms to connect with customers. Current Wisconsin law requires remote sellers who make $100,000 worth of sales or 200 transactions in-state to collect sales taxes from buyers and remit those taxes to the state. The purposes of this de minimis threshold is to allow a safe harbor for remote sellers making only occasional sales in a state.. In instances in which sales tax is not collected at the point of sale, the consumer is responsible for calculating the sales tax owed and remitting that amount to the state. Unsurprisingly, compliance is notoriously low, as many consumers assume a sales tax is only owed when collected at the point of sale. Several states have enacted laws requiring marketplace facilitators to collect sales taxes as a way to boost compliance with state sales and use tax laws. The governor’s budget estimates this would increase collection of taxes already owed by $93.9 million over two years.

Marijuana, Tobacco, and Vapor Tax Changes

Governor Evers’ proposal also includes changes to various excise taxes, including taxes on tobacco, vapor, and medical marijuana products.

Currently, Wisconsin’s cigarette tax is 12.6 cents per cigarette, or $2.52 for a pack of 20., the 12^th highest cigarette tax in the country. Other tobacco products, like chewing tobacco, are generally taxed at 71 percent of the manufacturer’s list price. The governor’s budget proposes imposing taxes on e-cigarettes and vapor products at 71 percent of the manufacturer’s list price, regardless of whether said vapor products contain nicotine. Under this proposal, Wisconsin would follow Minnesota and the District of Columbia in having one of the highest vapor taxes in the country.

The governor’s proposal would also raise additional revenue by taxing “little cigars” like cigarettes, and by creating a medical marijuana program, with sales taxes and a 10 percent excise tax levied on medical marijuana.

Transportation Tax Changes

The governor’s transportation tax proposals would put a greater emphasis on user taxes and fees while reducing reliance on general tax revenue to fund transportation. Most notably, the plan would increase the gas tax by 8 cents per gallon and begin indexing it for inflation. Currently, the state-levied gas tax totals 32.9 cents per gallon (cpg), including a 30.9 cpg excise tax and a 2 cpg tax on underground storage of fuels. Wisconsin’s 32.9 cpg gas tax has remained constant since 2006, but the value of the tax has declined in real terms every year since 2003. Additionally, as vehicles become more fuel-efficient, fewer gallons of gas are needed to travel the same distance, further eroding the value of the gas tax.

To offset some of the gas tax increase, the governor’s proposal would eliminate the minimum markup on motor fuels. Currently, Wisconsin’s minimum markup law requires gasoline retailers to raise the price of gasoline 9.18 percent above the wholesale price. This Depression-era law was originally designed to prevent retailers from using predatory pricing to defeat their competitors and gain a monopoly, but there is little evidence price gouging would occur absent a minimum markup law.

Dan O’Donnell:

Lisa Neubauer is a Democrat. About that there can be no question. It’s not a stretch to say that Democratic politics is her life and has been for, well, pretty much her entire life.

One of her very first jobs was as a legislative aide to Democratic State Senator Fred Risser. She married Democratic State Assembly member Jeffrey Neubauer, who later served as chairman of both the Wisconsin Democratic Party and Democratic President Bill Clinton’s campaign in Wisconsin.

Democratic politics is such a part of the Neubauers’ lives that their daughter Greta followed them into the family business and now holds her father’s seat in the Assembly’s 62nd district.

The Neubauers, like many active Democratic families, have given generously to Democratic politicians, groups, and, of course the Democratic Party itself. “Generously” might actually be a gross understatement: Since 1992, they have given more than $92,000 to Democratic politicians, $7,300 to various Democratic Party committees, and $6,900 to former Senator Russ Feingold’s Progressives United political action committee for a staggering total of $105,660 in Democratic donations.

According to Wisconsin Campaign Finance Information System (CFIS) records, $27,490 of that was in the name of Lisa Neubauer–including eight separate donations totaling $8,100 to former Democratic Governor Jim Doyle.

A little over a year after the last of those donations, Doyle appointed her to the Wisconsin Court of Appeals even though she had no prior judicial experience. Four months after the appointment, her husband Jeffrey donated an additional $250 to Doyle and then gave him a further $500 in 2009.

As an appellate court judge, Lisa Neubauer is expected to adhere to Wisconsin’s Code of Judicial Conduct, which explicitly provides that “no judge or candidate for judicial office or judge-elect may…make or solicit financial or other contributions in support of a political party’s causes or candidates.”

Naturally, she claims that her massive Democratic donations stopped the second she was appointed to the bench, but that isn’t entirely true. She and her husband kept right on donating to Democrats. She just made sure her husband signed the checks.

Jeffrey Neubauer is of course unbound by any obligation to be politically neutral and may donate to any candidate he wishes, but the $29,245 he has given to state candidates and $31,775 he has given to federal candidates since Lisa became a judge rather obviously came from her, too.

Think about it logically: The Neubauers are both lifelong Democrats who have given to the same candidates and committees right up until the moment that Lisa became a judge. At that point, all of the donations from the Neubauers were in Jeffrey’s name only.

Did lifelong Democrat Lisa suddenly stop supporting Democrats? Of course not.  She just couldn’t donate to them anymore without violating the Code of Judicial Conduct so she made sure her husband signed all of the checks.
Through this loophole, Judge Neubauer has continued to be one of the larger Democratic donors in Wisconsin without ever raising questions about judicial misconduct.

Is it possible that Jeffrey Neubauer made dozens of donations totaling more than $50,000 without his wife’s knowledge or prior consent? Sure, but as anyone who has ever been married will attest, it isn’t particularly likely.

These are her donations just as much as they are his, and they present a significant conflict of interest in both her current role as Chief Justice of the Wisconsin Court of Appeals and the position on Wisconsin’s Supreme Court that she is currently seeking.

On September 19th, Jeffrey Neubauer made a $5,000 donation to then-gubernatorial candidate Tony Evers. On November 5th, he donated another $5,000.

How likely is it that he donated $10,000 in two months without telling his wife or without his wife agreeing to an expenditure that large in such a short period of time? It’s about as likely as either a Governor Tony Evers policy or Governor Tony Evers himself never ending up in a case before the Wisconsin Supreme Court.

It is a virtual certainty that if elected to the Court, Lisa Neubauer will be tasked with deciding the constitutionality of an Evers policy and will hear cases to which Evers in his official capacity will be a party. How likely will it be that she will able to decide those cases impartially given her and her husband’s substantial financial support of a party before her?

The Code of Judicial Conduct provides that “a judge shall recuse himself or herself in a proceeding when the facts and circumstances the judge knows or reasonably should know establish [that]…the judge has a personal bias or prejudice concerning a party or a party’s lawyer.”

If the party is the State of Wisconsin, its lawyer very well may be Attorney General Josh Kaul. On June 4th, Jeffrey Neubauer donated $500 to his campaign. On October 21st, he donated another $1,000.

These donations plainly demonstrate the extent of Judge Neubauer’s biases and indicate in the clearest possible terms how she will rule in any case involving Evers, Kaul, her daughter Greta (to whom her husband understandably donated $1,100) or the laws and policies they enact and support.

Lisa Neubauer is a Democrat. About that there can be no question. There can be and should be, however, significant questions about her impartiality in any cases involving her fellow Democrats, especially those to whom she and her husband have donated more than $100,000.

And there can and should be significant questions about the manner in which the Neubauers have been for a decade skirting Wisconsin’s Code of Judicial Conduct regarding political activity and potential conflicts of interest.

This is especially pertinent given Judge Neubauer’s decade-long refusal to list on her mandatory ethics reporting form customers of her husband’s former business, Kranz, Inc. As a result, it is nearly impossible to determine whether she would have had a conflict of interest in literally hundreds of cases that have come before her; cases in which her and her husband’s financial interest could have been directly impacted.

Her excuse? Listing her husband’s clients might help his competitors to poach them. In other words, her personal and financial interests trumped the interests of open, transparent government and ethical judicial behavior.

Even though she is bound by the Code of Judicial conduct to list potential conflicts and recuse herself from cases involving those conflicts, Judge Neubauer refused because of its potential impact on her family’s income–income that she and her husband used to donate to Democrats in direct contravention of yet another ethical guideline.

Lisa Neubauer is a Democrat, after all, and a rather brazen one at that.