Tony Evers, GOP lawmakers clash over how to fund competing middle-class tax cut plans

Gov. Tony Evers and Republican legislators touted competing plans Tuesday to cut taxes for middle-class Wisconsinites, while jousting over Evers' call to pay for the cuts by curtailing a tax break for large manufacturers.

Evers unveiled some details of his plan Tuesday. It addresses his campaign pledge to revamp the state's income-tax code by giving a 10 percent tax cut to working- and middle-class filers, while increasing taxes for manufacturers making more than $300,000 annually.

GOP lawmakers, meanwhile, pressed their plan for a similar middle-class tax cut that could get a vote in the Assembly as soon as next week. They aren't proposing any offsetting increase in taxes, so their cut would draw down the state's general fund reserves.

State Assembly and Senate committees held a joint public hearing on the GOP proposal Tuesday. Its lead sponsor, Assembly Speaker Robin Vos, R-Rochester, hailed the plan while calling Evers' proposal to cap the manufacturing tax credit a "poison pill" for Republicans.

"We are not going to raise taxes — period," Vos said. "We are not going to raise taxes especially on our job creators when we have a huge budget surplus."

The GOP tax cut is similar to a middle-class tax cut Evers proposed during the campaign, giving an average income-tax cut of $170 to about 2 million tax filers, most of them middle class.

The plan would reduce state tax collections by about $490 million in the second and final year of the next state budget cycle. That includes an ongoing tax reduction of $338 million plus a one-time cost of $152.1 million to account for the timing of the change.

Evers said Tuesday that “I cannot support a plan that has no plan for funding in the future."

"Our plan is better," Evers said. "It utilizes circumstances that would allow us to cut those taxes and have that cut be permanent going forward."

Details outlined

The average filer under Evers' plan would see a tax cut of $225, according to Rep. Chris Taylor, D-Madison. It would:

• Create a new 10 percent nonrefundable tax credit for single filers making less than $80,000 and for married-joint filers making less than $125,000. The credit would phase out for single filers with incomes between $80,000 and $100,000 and for married-joint filers with incomes between $125,000 and $150,000.
• Expand the state Earned Income Tax Credit, which applies to low-income working filers, for families with one or two children.
• Cap the manufacturing tax credit at $300,000 of annual income. Farmers, who currently can claim the credit, would not be affected by the change.

The Assembly GOP plan, meanwhile, would increase the standard deduction on the state income tax effective in 2020.

Even as Democrats slammed Republicans for not offering an ongoing way to fund their plan, Evers has explained how he'll pay for only part of his proposal. It would reduce state revenue by about $892 million over the next budget cycle.

More than half of that — about $518 million — would be covered by rolling back the manufacturing credit. That still leaves about $374 million unaccounted for over two years.

Rep. Daniel Riemer, D-Milwaukee, said Democrats hope to take up the tax cut during the budget process, where they can balance the expense with other priorities, such as potential Medicaid expansion, which would provide increased federal funding.

In total, filers making less than $150,000 would see a reduction of $437 million in income taxes in tax year 2019, according to an analysis of the plan provided by Evers' office. About 2 million filers would see a reduction, according to an Evers spokeswoman.

Vos said last month he wants to advance the plan apart from the state budget. But it's much more likely the debate will occur as part of the upcoming state budget deliberations because Evers can veto a standalone bill.

Evers also confirmed what his chief of staff Maggie Gau revealed last week — that his plan for the next state budget will close the so-called "dark store loophole" that allows big-box retail stores to lower their property tax bills.

Evers plans to submit his state budget proposal Feb. 28.

Evers weighs in on Northam

Also Tuesday, Evers said he thinks embattled Democratic Virginia Gov. Ralph Northam should resign.

Northam faces broad pressure from his party to step down after the emergence of a photo on his 1984 medical school yearbook page of someone in blackface and another person in a Ku Klux Klan hood and robe.

Northam first apologized for the picture, acknowledging he was in the photo. A day later he took it back, telling reporters he was certain it wasn't him in the photo — but admitting he wore blackface decades ago to look like Michael Jackson for a dance contest.

"I don't know anybody that could agree with what he did, but I can't imagine how he could govern under these circumstances," Evers said.