Tax cut plan fails to address outdated homestead credits

CAPITOL NEWSLETTER
Matt Pommer  Wisconsin Newspaper Association

Republican legislative leaders say everyone will benefit from the income tax cuts in the pending state budget, but senior citizen groups say some citizens could miss out.

At issue are the homestead tax provisions of the income tax code. The program is aimed at providing low-income citizens with a measure of property tax help. The program was devised more than 40 years ago as an answer to the state constitutional requirement of uniformity in property taxes.

Four groups have jointly urged the Legislature to increase the homestead tax credit and adjust it annually for inflation. The appeal came from the AARP, Wisconsin Alliance for Retired Americans, Coalition of Wisconsin Aging Groups, and Council on Children and Families.

They warned that some 750,000 tax filers wouldn’t benefit from rate reductions developed behind closed doors by GOP members of the Joint Finance Committee “despite many statements to the effect that the tax package would help all Wisconsin taxpayers.”

These 750,000 citizens pay other kinds of taxes and typically pay a higher percentage of their earnings in state and local taxes than the richest five percent of Wisconsinites, the groups said. The information was based on a research paper by the non-partisan Legislative Fiscal Bureau.

Over the last 10 years, inflation has taken its toll on the actual tax relief provided by the homestead program, the groups added.

The average value of the credit has fallen by 27 percent and the number of people eligible for the credit has declined as the incomes of the poor have edged upward. The value of the maximum credit is down 37 percent.

The income ceiling to participate in the homestead program is $24,800 – some 20 percent less in inflation adjusted dollars, they said. The groups also noted the current state budget had reduced the state earned-income tax credit which is targeted to help the working poor.

“Although adjusting the homestead credit is our first choice for helping low- income families benefit from the tax-cut package, we think this is also an appropriate time to reverse at least a portion of the cut in the Earned Income tax Credit,” the groups added.

The tax cut portion of the budget bill package – put at $651 million – was created behind closed doors by key Republicans on the budget committee. The majority of the money will benefit those with adjusted gross incomes of more than $100,000 annually.

Republicans say that’s expected because a large portion of the personal income- tax receipts come from well-to-do citizens. The legislative tax cut package is about twice as much as proposed by Gov. Scott Walker.

Drafting major tax changes behind closed doors prevents individuals and citizen groups like these four not-for-profit organizations from having their voices heard while decisions are still fluid. Business groups, which regularly back Republican politicians at election time, seemed to have had their voices heard.

Hours after the GOP tax plan was unveiled, business groups issued statements touting the plan. Among those quickly praising the effort were Retail Merchants Federation, Realtors, Wisconsin Manufacturers and Commerce, the Metropolitan Milwaukee Association of Commerce, Wisconsin Independent Businesses, and Americans for Prosperity.

The budget won’t be completed until both houses of the Legislature pass it and Gov. Walker signs the measure – probably in July.


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