15% Average Income Tax Cut: In a significant development, Wisconsin Republicans, who maintain control over the state Legislature, have successfully passed a plan to reduce income taxes by $3.5 billion. The proposed tax cuts, which would result in an average reduction of 15% for all filers or $573, have drawn both support and criticism from various quarters.
The income tax cut plan, retroactively applicable from January 1, 2023, aims to streamline the tax structure from four brackets to three. The lowest tax rate would be lowered to 3.5%, while the highest rate would be set at 6.5%. These changes are expected to simplify the tax system and potentially benefit a wide range of taxpayers.
However, the Republican tax proposal has faced criticism from Democrats, who argue that it predominantly favors the wealthy. Governor Tony Evers, a Democrat, had proposed an alternative tax cut plan that primarily focused on providing relief to low and middle-income earners. In response to the GOP plan, Evers expressed disappointment, stating that it prioritizes tax breaks for the affluent rather than targeting relief for working families.
Debates Over the Income Tax Cut
Under the Republican plan, the largest percentage point drop would occur in the highest tax bracket, affecting married couples earning over $405,550 or single individuals making over $304,170. Their tax rate would decrease from 7.65% to 6.5%. Additionally, the middle two tax brackets would be consolidated, resulting in a 4.4% rate for all married couples with incomes between $9,210 and $202,780. The lowest tax rate for the lowest-income taxpayers would see a slight reduction from 3.54% to 3.5%.
To finance the income tax cuts, the Republicans intend to tap into the state’s projected $7 billion surplus. In addition to the tax cuts, Republicans have allocated $622 million to keep property taxes in check. This funding approach has drawn criticism from opponents who argue that the tax plan, combined with budget decisions to cut childcare programs and reduce spending for the University of Wisconsin, could negatively impact the state’s competitiveness and hinder support for families.
The previous state budget, passed in 2021 by the Republican-controlled Legislature and signed by Governor Evers, had already included income tax cuts totaling over $1 billion. The current GOP plan, which has been incorporated into the larger state budget, must now undergo approval in both the Senate and the Assembly before reaching Governor Evers. It is expected to pass in both chambers, after which Evers will have the power to exercise his line-item veto authority to make changes before signing the two-year spending plan into law.
