A key Republican lawmaker is renewing efforts to repeal Wisconsin’s alternative minimum tax, which mostly applies to the state’s high earners, and Senate Majority Leader Scott Fitzgerald has signaled broader support for the move among GOP lawmakers.
Rep. Dale Kooyenga, vice chairman of the budget-writing Joint Finance Committee, said Thursday that he’s proposing to repeal the tax through a broader tax package that would be revenue-neutral — meaning any tax cuts would be offset by corresponding revenue increases.
Eliminating the tax would cost the state about $26 million a year, he said.
The package also would reduce the so-called marriage penalty in the income tax code and overhaul the state sales tax on hotel rooms.
The latter move would generate additional revenue, Kooyenga said.
Kooyenga, R-Brookfield, unsuccessfully pushed to repeal the alternative minimum tax two years ago. The tax is meant to ensure filers with large amounts of tax deductions or exclusions pay a minimum amount of income tax.
This time, Fitzgerald, R-Juneau, has indicated broader support for the move, telling the Milwaukee Journal Sentinel that GOP lawmakers are working to eliminate the tax.
Kooyenga said fellow Joint Finance member Sen. Howard Marklein, R-Spring Green, is working with him on the proposal.
The changes would come as GOP lawmakers are moving ahead with controversial education measures in the state’s next budget.
The Joint Finance Committee has approved a $250 million state funding cut for the University of Wisconsin system and expanding private-school vouchers.
Democratic Rep. Chris Taylor of Madison, also a member of the Joint Finance Committee, said the fact that the tax cuts are gaining momentum as education cuts are advancing shows Republican lawmakers are out of touch.
“It shows where their priorities are,” Taylor said. “Their priorities are giving very wealthy people more tax cuts.”
But Kooyenga framed his proposal as a means to simplify Wisconsin’s tax code. “We’re not pushing for tax cuts. We’re pushing for a tax cleanup,” he said.
A spokeswoman for Gov. Scott Walker didn’t respond to an inquiry about where he stands on the proposal.
A spokeswoman for Assembly Speaker Robin Vos, R-Rochester, said he was out of town and unavailable to comment.
The state’s alternative minimum tax applied to 27,807 filers in 2013, according to the state’s nonpartisan Legislative Fiscal Bureau.
About three-fourths of those filers made at least $200,000 a year.
While acknowledging the alternative minimum tax primarily affects high earners, Kooyenga said his broader package would increase the standard deduction for married tax filers. That would be a tax cut for middle-income taxpayers, he said.
The hotel-room sales tax overhaul would aim to ensure the state collects the tax on the full cost of hotel rooms, Kooyenga said.
He said the current statute is “sloppily written” and, in many cases, causes the sales tax only to be collected on a portion of the cost of a hotel room.
Wisconsin is one of six states with an alternative minimum tax. The others are California, Colorado, Connecticut, Iowa and Minnesota.
There’s also an alternative minimum tax at the federal level.
Todd Berry, executive director of the nonpartisan Wisconsin Taxpayers Alliance, said many more taxpayers including small-business owners became affected by the state alternative minimum tax after lawmakers and Walker passed manufacturing and agriculture tax credits in 2013.
Berry said that, whatever one’s view on taxing the wealthy, the alternative minimum tax requires taxpayers to comply with a parallel tax system. Eliminating it would simplify the tax code, Berry said.
“I just don’t think you should have to comply with two income tax laws,” Berry said.