CHICAGO — Wisconsin Gov. Scott Walker plans to outline tax cut proposals in his Tuesday state of the state address.
Walker says the proposals will be affordable due to
"The days of billion-dollar deficits and double-digit tax increases are over, and we have led ourselves into a new era of financial responsibility and continued investment in Wisconsin's priorities," Walker said in a statement. "The additional revenue should be returned to taxpayers because it's their money, and my administration will work with the Legislature to determine the most prudent course of action."
Walker is expected to propose a mix of property and income tax reductions that could include changing state withholding tables so taxpayers see a more immediate effect of the changes. The final plan has not been announced.
Walker's first two-year budget for the fiscal years 2012-2013 slashed local government and school aid to help close a $3 billion deficit. With the state's structural deficit and tax collections improving, Walker last year included a $650 million income tax cut in his $68 billion 2014-2015 budget. He then added a $100 million property tax cut through a change in school aid formula after the state closed out fiscal 2013 last June with a higher than expected ending balance.
Democrats at the time countered that any additional revenue should go to makeup previous cuts, cut the state's ongoing structural deficit, or go into the state's reserve.
Democrats again are expected to press Walker and his fellow Republicans, who control the Legislature, to spend some of the funds for education, health care, and other services like job training.
"As Wisconsin job growth continues to lag behind our Midwestern neighbors, Gov. Walker and his GOP allies in the legislature have been given an opportunity to put the $800 million that was stolen from Wisconsin children's education back into classrooms across our state," Senate Democratic Minority Leader Chris Larson said in a statement. "The state's short term gain is on the backs of Wisconsin's children."
The non-partisan Legislature Fiscal Bureau's report from director Robert Long Thursday projected an ending balance at the close of the current budgetary biennium of $1.04 billion. That's $912 million more than the previous estimate of a $130 million balance. The increase is due primarily to an $893 million increase in estimated tax collections as well as lower than expected spending.
Nearly $400 million of the surplus is expected in the current fiscal year that runs through June 30 and $500 million is expected in fiscal 2015. Under law, half of the higher than expected ending balance would flow to a reserve if no changes are made that impact tax collections. Any tax cuts would impact the amount available for the state's reserve which currently holds $279 million, according to the bureau.
State sales and use tax revenues are estimated at $4.6 billion this year and $4.8 billion in fiscal 2015. That's up 5.2% in the first year and 3.8% in the second year. The estimates are $142 million higher in the first year and $208 million higher in the second year than the previous estimates.
State individual income tax revenues are estimated to generate $7.4 billion this year and $7.8 billion next year. Those are up a combined $265 million over prior estimates.
Fitch Ratings and Standard & Poor's assign AA ratings to the state's general obligation debt while Moody's Investors Service rates it Aa2. The state last year received a first-time rating from Kroll Bond Ratings Agency of AA also.
