State Legislature Sends $2.1 Billion Tax Relief Package to Governor Evers

Yesterday, the state Senate today sent a $2.1 billion GOP tax relief package to Governor Tony Evers.

The biggest ticket item in the package was AB 1020, which would expand the amount of income covered by the state’s second-lowest tax bracket of 4.4%. For married joint filers, the second-lowest tax bracket covers income between $19,090 and $38,190 under current law. AB 1020 would expand that to a cap of $150,000, and it would require the Department of Revenue to update withholding tables by July 1. LFB projects the change would reduce individual income tax collections by $1.2 billion in fiscal year 2024-25 and $751.9 million annually after that. The 2024-25 impact includes a one-time cost of $439 million to update withholding tables.

AB 1023 would expand the state credit for child and dependent care expenses to 100% of the credit claimed on a filer’s federal income tax return. Currently, the state credit equals up to 50% of the federal credit. It would reduce individual income tax collections by $72.9 million annually, beginning in 2024-25, according to the Legislative Fiscal Bureau. The Senate signed off 29-3 after the Assembly backed it 92-4.

The other pieces of the package include:

*excluding the first $75,000 of retirement income subject to state taxes for those 65 and older. For married joint filers, the bill would exempt the first $150,000. AB 1021 would cover payments from pensions and retirement plans such as a 401(k). It wouldn’t apply to retirement income already exempt from current state law, such as a distribution from a Roth IRA. The proposal would reduce taxes by $658.2 million in 2024-25 and $472.4 million annually thereafter. The average decrease would be $1,582 per filer.

Social Security benefits, federal pension payments for military and government employees, and income from certain public retirement systems are already exempt from calculating a filer’s adjusted gross income. State law also exempts the first $5,000 in income for those 65 and over with an adjusted gross income of less than $15,000 or $30,000 for married joint filers.

*increasing an existing nonrefundable tax credit for married couples to $870 from $480. AB 1022 would reduce taxes by $169 million in 2024-25 and $160.9 million annually after that, with an average decrease of $338.