Legislative Republicans Want Income Tax Rate Cut Paid for with Tax Code Tweaks

Legislative Republicans are contemplating an income tax cut paid for with tweaks to the state tax code as part of their end-of-session legislative sprint.

Rep. Dale Kooyenga, R-Brookfield, said Friday he is working on a bill that would make changes to Wisconsin’s tax code to conform with the recent changes in federal tax law.

If the state doesn’t make changes to its own tax law, state taxpayer income will be based on federal law prior to the tax law changes Congress and President Donald Trump recently passed.

If the state adopted all of the changes in federal tax law, it would reduce state tax revenues by $315 million, the fiscal bureau reported in a memo this week. The memo identified 41 different changes in state law that would be needed to conform with federal law, with 26 of the changes generating additional revenue and the others reducing tax collections or having a minimal impact.

Kooyenga said the changes to the state tax code being proposed would result in a net increase in tax collections of roughly $90 million. He wasn’t able to provide a list of which changes would be included and which wouldn’t.

To offset that tax revenue increase, he said the bill would likely include adoption of the income tax rate reduction Gov. Scott Walker proposed in his 2017-19 budget but Republicans ultimately rejected.

“This isn’t big sexy tax reform, this is maintenance of the tax code,” Kooyenga said. “We’ve got to make this easier for businesses and individuals.”

Walker’s income tax cut proposal would have reduced the lowest marginal tax rate from 4 percent to 3.9 percent and reduced the second-lowest rate from 5.84 percent to 5.74 percent while expanding the amount of income covered by that bracket by $30,000.

The income tax cut would cost about $100 million a year, according to the Legislative Fiscal Bureau. Walker’s office estimated the cut would save $139 over two years for a median-income, four-person family making about $86,000 a year.

Walker spokesman Tom Evenson said his office and the Department of Revenue were reviewing the proposal.

“We appreciate the legislators for putting this proposal forward,” Evenson said