Middle and upper class senior citizens are expected to receive tax breaks of about $118 million next year despite the current budget crisis facing the state of Wisconsin.
The Department of Revenue reported Tuesday that around 228,000 income tax returns for seniors would be reduced by an average of $518 because of tax cuts on Social Security benefits.
These cuts come as a result of 2005 budget legislation where both Democrats and Republicans worked on phasing out Social Security benefit taxing. A partial veto from Gov. Jim Doyle sped up this relief, eliminating these taxes completely for 2008.
Previously, Wisconsin was one of only 15 states that taxed Social Security benefits to varying degrees. Single taxpayers whose income is less than $25,000 and married taxpayers whose income is less than $32,000 were already exempt.
Also, for many years, a senior had to be at least age 65 to be eligible to receive full Social Security benefits. Beginning with people born in 1938 or later, however, that age will gradually increase to 67 for those born after 1959.
Brian Pleva, spokesperson for Assembly Minority Leader Rep. Jeff Fitzgerald, R-Horicon, said the goal of these tax cuts is to put more money directly into the hands of struggling seniors instead of ineffective programs.
“It’s basically a philosophy that if seniors have more money in their pockets, they’re going to be better off,” Pleva said.
Pleva added that seniors having more money would help the economy significantly because they can spend more money and help struggling businesses. He added that reversing these tax breaks would definitely be the wrong thing to do.
Pleva dismissed criticism that this was an irresponsible budget practice, saying many states do not tax Social Security benefits and this would put Wisconsin on a more level playing field with other states that attract seniors, like Florida and Arizona.
“We cannot compete with their weather, but the least we can do is compete with their tax climate,” Pleva said.
Dale Knapp, research director for Wisconsin Taxpayers Alliance, agreed the Legislature should not delay this tax break because the amount is “small compared to the size of the deficit,” which is projected to be $5.4 billion.
Knapp added that as Social Security benefit taxes have already been exempted for lower income individuals, these new reductions would have a minimal stimulus effect on the state economy.
Rep. Kim Hixon, D-Whitewater, said while this tax exemption was passed before the state faced a huge budget deficit, the Legislature probably wouldn’t change it now.
“It may not be the best time for [the tax break] as far as the state is concerned, but for those people it will benefit it is a good time,” said Hixon.
Hixon added he thought the revenue lost by enforcing these tax breaks would not seriously affect the economy and that the money was best put into seniors’ hands.