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Biz Beat: Walker budget has few surprises

Biz Beat: Walker budget has few surprises

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From a business perspective there weren't a lot of surprises in Gov. Walker's new budget proposal.

Frankly, the Republican governor didn't have a lot of wiggle room to offer up sweeping new incentives or major tax breaks to the private sector.

"It's not as bad as we feared," says Jack Norman, research director of the liberal Institute for Wisconsin's Future.

In fact, the Walker budget actually maintains two major tax hikes from the Doyle Administration that some observers thought might go: the combined reporting system for taxing corporate profits earned in Wisconsin and a higher income tax bracket for the wealthiest individuals.

These items, along with a recovering economy, are credited with the increase in state revenue collections over the past year. Collections are projected to grow by another $1 billion or nearly 4 percent over the next two years, helping to ease the budget crunch.

The budget does allow companies to reduce their tax burdens by allowing them to write off losses over a longer period, a move projected to save businesses $46 million over the next two years.

And as Norman notes, the new budget also includes another $82 million in specific business tax cuts, including an expanded exclusion for capital gains on investments made in Wisconsin. The Legislature previously approved $117 million in Walker-backed tax cuts, including credits for companies that hire more employees and deductions for health savings accounts, a program that largely benefits those earning over $100,000.

On the other end of the wealth spectrum, the Walker budget reduces by $41.3 million the Earned Income Tax Credit and by $8.1 million the Homestead Tax Credit, two programs that benefit lower-income individuals.

"What Walker is doing is lowering taxes on the wealthiest and raising them on the poorest," says Norman.

Still, the $200 million in tax cuts referenced by Norman are pretty small given the $14 billion in annual GPR spending under the Walker budget. State spending over the next two years goes up just 1.3 percent, according to the budget document.

Todd Berry president of the more conservative Wisconsin Taxpayers Alliance, praises the governor for trying to reign in spending. But he says the state will actually end the next biennium with a bigger deficit than it started.

Using GAAP or generally accepted accounting principles, the state deficit will grow from -$2.96 billion to -$3.02 billion over the next two years, according to the budget document.

"That's the only number that really matters," says Berry.

The budget does include new limits on property tax increases. Walker estimates the controls would save the owner of a home valued at the state median price of $161,300 about $736 in property taxes over the next two years.

But Berry says that doesn't mean property taxes will necessarily go down. "Nobody is going to get a property tax reduction," he says. "They just won't go up as fast."

Berry also notes the state continues to rely heavily on borrowing. Interest payments on some $10 billion in long-term debt is now the third largest single item in the state budget behind general school aids and medical assistance. By 2013, the state will spend $5 billion annually on school aids, $2 billion on medical assistance and $1.3 billion on debt service.

The better news, Berry says, is that Walker's budget does cut the so-called structural deficit - the estimated gap between current revenues and expenditures - to less than $100 million in fiscal year 2013-14 and less than $250 million by the end of the 2013-15 biennium.

Under Doyle's last budget, the structural deficit increased to nearly $2.5 billion.

Walker, who campaigned on putting more money into roads, does follow through on that promise by shifting $95 million in general revenue into the transportation fund. His budget also directs sales tax dollars from vehicle sales into the road fund, a move Berry questions.


"I find the earmarking of sales tax dollars to be troubling," he says, explaining that sales taxes normally go into the general fund.


Norman is more bothered by a cut of 5 percent at the Department Revenue, including a reduction of 78 staffers. He says more aggressive tax collections helped the state pocket an additional $41 million in revenue last year.

"We were making strides in collecting back taxes but that is getting cut back," says Norman.

One agency that gets a major spending boost is the Department of Tourism. The tourism marketing budget will increase from $9.9 million in the current fiscal year to $12.5 million and $15 million over the next two years.

Along those lines, the governor is recommending the Wisconsin Arts Board and the film production tax credit be transferred to the Department of Tourism.

Over the next months, legislators will review Walker's budget, with a final vote expected by summer. Expect more details to trickle out over the next few weeks.











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