According to a memo released by the nonpartisan Legislative
Fiscal Bureau last week, Gov. Scott Walker’s proposed budget would result in structural deficit of $664 million.
A deficit is not the end of the world – Wisconsin is no stranger to unbalanced budgets. And Walker deserves credit for finally balancing the state’s budget, even if he didn’t do so in the most responsible manner. It would be a shame to allow the state to slip back into a cycle of budget deficits because of Walker’s ill-advised tax cut.
Walker’s tax cut, which would cost the state a total of $343
million, has been discussed previously on this page, so I’ll refrain from delving
into the details too much. Suffice to say the cut, which would average $83
per person, is unlikely to have a major positive impact on the economy. The
extra cash would certainly be nice, but it probably won’t jumpstart
the economy. Further, according to a reportreport by the Wisconsin Budget Project,
the wealthiest Wisconsinites would receive a disproportionate share of the tax
cut.
The fact is, even on its own, this tax cut is not great
policy. The people who stand to benefit the most from it – the wealthy – are
less likely to put it back into the economy by spending it. If Walker is dead
set on doing something with this money, there are better options, like
improving the state’s infrastructure (or, dare I say, restoring more of the
University of Wisconsin System’s funding).
However, the reality of the situation is that with a
projected deficit, the tax cut is at odds with Walker’s stance against budget
deficits. This has not gone unnoticed by state Republicans. Sen. Richard Gudex,
R-Fond du Lac, called the deficit “ridiculous,” according to the Wisconsin
State Journal. It seems state Democrats and Republicans have finally found
something they can both oppose.
Walker has countered criticism of the deficit by claiming
that increased revenue growth – presumably from higher tax revenues generated
by more economic activity – would offset the projected deficit. The idea behind
is agreement is that, as the economy expands, people’s incomes will increase,
and everyone will pay more in taxes, thus increasing the government’s total
revenue stream.
This seems unlikely. In case you haven’t been keeping score
at home, Wisconsin has slipped to a pitiful 44th in job creation
among states. Walker’s claim that revenue growth will increase is entirely
dependent on Wisconsin’s economy expanding, and a huge part of that is job
creation. While the economy is certainly growing, I wouldn’t want to bet it on
it growing fast enough to erase a $664 million deficit.
Unfortunately for Walker, Republicans’ goals of decreasing
taxes and balancing budgets are not complimentary – in fact, they’re exactly
the opposite. Hopefully Walker realizes this, and opts for fiscal
responsibility.
Joe Timmerman ([email protected]) is a sophomore majoring in economics and math.
