Gov. Scott Walker laid out his Blueprint for Prosperity this week and promptly called the Legislature into session to consider his proposed package of $504 million in income and property tax cuts.
The governor says he also wants a $35 million investment in worker training programs.
Walker said his administration’s “bold reforms” had produced a windfall of $911 million in unexpected surplus, and he said that money should go back to those who created it.
“This additional revenue should be returned to taxpayers because it’s their money,” Walker said. “When I travel the state, people don’t tell me that they want to keep sending more money to Madison. They don’t tell me that taxes are too low or even that taxes are just right. Overwhelmingly, people across the state tell me that one of the best ways to fuel the economic recovery is to reduce their tax burden.”
More specifically, Walker said his plan would put more than $800 million back into the hands of taxpayers through property and income tax cuts and withholding changes.
Property taxes would be reduced by more than $406 million – more than four times larger than the property tax relief the state enacted last year, Walker said. According to administration estimates, the typical homeowner would see a $101 reduction on their next property tax bill.
In addition, Walker wants to reduce income taxes by almost $100 million – all of it achieved by reducing the lowest income tax bracket from 4.4 percent to 4 percent. A family making $40,000 would save about $58, the governor said.
On the front end, the state would reduce withholding for state income taxes by $322.6 million. Walker said that would let Wisconsinites keep more of their paychecks, put more money in the hands of consumers, and stimulate the economy. A typical family of four would take home about $58 more each month.
The governor’s plan would stash more than $100 million in the state’s rainy day fund, increase the Wisconsin Fast Forward program by $35 million to focus on three new areas of worker training, including spending for technical colleges to eliminate waiting lists in high demand fields like manufacturing, agriculture, and information technology and spending for programs helping people with disabilities enter the workforce.
“We are living in historic times here in Wisconsin,” Walker said. “The days of billion dollar budget deficits, double-digit tax increases and major job loss are over, and because we made the tough, but prudent, decisions over the last three years, we have led ourselves into a new era of financial responsibility and continued investment in Wisconsin’s priorities. There is more work left to be done, but our state now finds itself on much stronger footing than it did just three years ago.”
Republicans ranging from the party’s big-business wing to small-business advocates to the Tea Party grassroots hailed Walker’s proposal.
Officials at Wisconsin Manufacturers & Commerce said the tax cuts would stimulate job creation. WMC president and CEO Kurt R. Bauer said that’s what happens when people spend their money rather than send it to state government.
“For too long, Wisconsin has had an unfortunate national reputation as a very high tax state,” Bauer said. “Walker’s plan continues Wisconsin’s positive transformation and will help make businesses more competitive, which will help create and retain jobs.”
Bauer also said the Governor made the right move by reducing state withholding of income taxes by $322 million.
“When government collects too much money, it is too easy for those funds to be used for government spending increases,” he said. “Our economy will be in much better shape with nearly $800 million in tax cuts and withholding changes putting spending power into the hands of our citizens instead of Madison bureaucrats.”
Small business groups, too, liked the message. The National Federation of Independent Business says the property-tax proposal shows the governor hasn’t lost his focus on improving Wisconsin’s economy for small businesses.
“For many small businesses the property tax is their single biggest tax burden,” said NFIB state director Bill Smith. “The governor’s initiative would free up business capital for investment and encourage more consumer confidence, which is what small businesses need most.”
Smith said the investments in worker training would be important, too, because a significant percentage of its member companies report having a hard time finding qualified workers to fill open jobs.
“We got a big pool of available workers but some don’t have the skill set to match the demand,” he said. “We’re very pleased that he focused on the manufacturing sector because workers with technical skills are badly needed and that’s traditionally been the path to the middle class for many Wisconsin families.”
Tea Party conservatives found a lot to like in the State of the State as well.
Americans for Prosperity state director David Fladeboe said the plan would continue to move the state forward.
“Taxpayers in this state deserve to have their hard-earned money returned to them as soon as possible,” Fladeboe said. “Our economy is improving because of the pro-growth tax cuts in last year’s state budget and another round will continue us on the path to prosperity.”
Democrats say plan is irresponsible
Democrats by and large said the tax cut plan was irresponsible because it would grow an already significant structural deficit. Senate Democratic leader Chris Larson of Milwaukee launched a tour of several cities, pounding away on Walker’s plan to increased the structural deficit by nearly 14 percent.
Giving the Democrats weekly radio address, Larson said the state should take a balanced approach to the surplus, using it both to reduce the $725 million structural deficit and to focus on job creation with investments in education and job training, and true middle-class property tax relief.
“We must invest in our children, ensuring they all have an equal opportunity to succeed,” Larson said. “Strong public schools are the first step toward a long-term stable economy. We also need to make higher education a path to the middle class, not a path to a mountain of debt. We must take action to jumpstart Wisconsin’s economy now. After falling from 11th to 37th nationally in job growth under Gov. Walker, we must work together to create family-supporting jobs.”
AARP also urged the governor to help what it called the state’s most vulnerable by investing in government programs. The group said it had hoped Walker would have placed a greater emphasis on providing long-term relief for those most impacted by the recession.
“A better prioritization would have been to use this revenue to meet current obligations, such as the Medicaid shortfall and immediate coverage for low-income childless adults,” AARP Wisconsin president Sam Wilson said. “In addition, we should invest wisely in our communities by expanding cost-effective programs like Family Care and bringing back Homestead Tax Credit indexing.”
Wilson said the budget surplus presents a great opportunity for Wisconsin not only to invest in the future but also to pay down debt and restore programs that were cut during the last budget cycle.
“Many of our state’s most vulnerable citizens have been hardest hit by the recent economic downturn,” he said. “Those who were hurt the most in the recession should be helped most by the recovery. By making responsible investments we can put our state on more stable financial footing that will benefit all Wisconsinite.
Other responses and GOP skepticism
Disability advocates liked what they heard from the governor, especially his emphasis on improving employment rates for those with disabilities.
People First Wisconsin said Walker’s plan, which would call on both state government and Wisconsin businesses to tap into the state’s vast pool of potential workers with disabilities who want to work, is good news.
“We want people with intellectual disabilities to be working in their community,” Cindy Bentley, executive director of People First Wisconsin, said. “We want people to have meaningful jobs and also making a decent wage. We do not want people with intellectual disabilities to be working in segregated facilities or living in segregated settings. We want them living and working in their community.”
Lisa Pugh, policy coordinator with Disability Rights Wisconsin, said Wisconsin can take targeted steps toward significantly increasing its employment rate for people with disabilities, which currently stands at 18.7 percent, compared with a 68.3 percent rate for the general working-age adult population.
Efforts like setting employment performance targets in state programs, changing state use contracting policies so for-profit businesses that employ people with disabilities can participate, and developing business-to-business mentorships are all steps the state can take to improve employment rates, Pugh said.
“With the governor’s announcement, Wisconsin has an opportunity to become a model state employer while working with the business community to significantly increase our overall employment rate of people with disabilities,” Pugh said.
Finally, though they were keeping comments muted, a hint of discontent among some GOP senators surfaced in media reports.
The complaint centered around the size of the tax cut and its impact on the structural deficit. Walker’s plan would grow the deficit by $100 million give or take.
But Walker and his supporters say that estimate does not include new revenue growth caused by the tax cuts, and they point to healthy revenue projections that would more than wipe out the $100 million increase in the shortfall.
Richard Moore may be reached at email@example.com