The Wisconsin Department of Revenue emphasized Gov. Scott Walker’s proposed income tax cut would largely benefit the middle class Tuesday, a characterization Democrats disagreed with.
Department of Revenue Secretary Richard Chandler said although all taxpayers benefit from the proposed tax cut, the middle class benefits the most percentage-wise. He defended the income tax cut proposal at his department’s budget briefing in the Legislature’s Joint Finance Committee.
The tax cut is necessary to bring the state closer to the national average, as individual income taxes in Wisconsin are currently 26 percent higher, Chandler said.
“Taxes will be reduced for all taxpayers, whether you’re paying in that first bracket or whether you’re in one of the higher brackets,” Chandler said. “All taxpayers will see decreases … but the majority of the relief is dedicated to the middle class.”
The proposed $343 million tax cut over the next two years reduces the bottom three of five tax rates. The bottom tax rate for an individual includes income less than $10,750, the second lowest is $21,490 and the third bracket is $161,180, according to DOR.
Sen. Alberta Darling, R-River Hills, JFC co-chair, said Walker’s definition of the middle class includes people making between $35,000 and $100,000.
According to the Legislative Fiscal Bureau, 49.2 percent of the tax cut’s total dollar amount would go to those making above $100,000. Rep. Cory Mason, D-Racine, said that shows the tax cut is not as helpful to the middle class.
“That seems to be askew if the goal really is to help those people making $35,000 to $100,000 – to have half of it go to the top 20 percent,” Mason said.
But Chandler said the top 20 percent has about 51 percent of the state’s total adjusted income and currently pays 61 percent of income taxes.
He said it was important to put all of those numbers into context.
“The smaller percentage of relief, if applied to a very large existing tax liability, may mean a larger dollar reduction for some people above the middle class than middle class taxpayers,” Chandler said. “That’s just because they’re paying at a very high tax level.”
The average family of four making $80,607 would get a tax cut of $212 over the next two years, which Democrats have said is not even enough to pay for a Taco Bell meal every month.
Sen. Bob Wirch, D-Pleasant Prairie, said DOR’s proposed budget is also unfair to low-income taxpayers, while holding back on enforcement for large companies due to fear of business uncertainty.
“It sounds like it’s open season on low-income taxpayers in this state,” Wirch said.
Earlier in the day, Department of Administration Secretary Mike Huebsch had also highlighted the proposed tax cut, calling it the first across-the-board tax cut since 1999, when Walker served in the Assembly. He said that was only possible because of Walker’s “prudent” fiscal decisions two years ago.
Rep. Jon Richards, D-Milwaukee, said Walker has a long way to go to bring the state back, noting a Bureau of Labor Statistics report this week that ranked Wisconsin at 44th in job creation.
