Planned spending in the recently enacted 2017-19 state budget departs from recent patterns in two important ways. First, general fund expenditures rise 8.8% over the two years, the largest biennial increase since 2009-11 (12.1%). Second, much of the increase is for school aid, which has grown less in recent years. K-12 aid will grow 8.3% over two years, the largest biennial jump since 2005-07 (9.0%). These are two important findings from a new review of the 2017-19 state budget, “Decisions Made, Questions Deferred,” from the Wisconsin Taxpayers Alliance (WISTAX).

State general fund appropriations are budgeted to increase from $15.9 billion in 2017 to $16.6 billion in 2018 and to $17.4 billion in 2019. Over half of all general fund expenditures go, not to fund state services, but to aid local governments, WISTAX noted. Another 26% aids individuals and organizations, particularly Medicaid for the poor and disabled. State operations, including the U.W. System, consume the remaining 24%.

The state’s largest expenditure is for K-12 school aid, which grows significantly over the next two years. School aids are rising 3.4% ($187.4 million) this year and 4.7% ($264.3 million) in 2019 to $5.9 billion. School aids rose 5.6% and 3.9%, respectively, during the prior two biennia. Nearly all of the additional dollars are directed into a relatively new “per pupil” aid, rather than into the much larger equalization aid formula; this is a major shift in school funding.

Two other areas claim the bulk of remaining new spending. The budget uses income and sales taxes to reduce property taxes. It eliminates the state levy for forestry programs ($90 million annually) and the personal property tax on machinery, tools, and parts ($74 million); increases the school levy credit by $87 million per year, and raises the lottery credit by shifting $48 million of general fund taxes to pay lottery expenses.

As with prior budgets, Medicaid expenditures are growing. General fund spending on the program totals $6.1 billion over two years, a 4.9% increase.

Senate Republicans on Thursday unveiled a tax reform bill that breaks with the House in significant ways. If the House Republican bill was a first draft of tax reform, the Senate bill is the first rewrite.

Here are the key differences between the Senate and House bills.

State and local taxes 

The Senate bill will entirely repeal the deduction for state and local taxes, making no exception for property taxes. The House bill would allow deductions up to $10,000 for property taxes.

Home mortgage interest deduction

The Senate would keep in place the deduction for newly purchased homes up to $1 million while the House plan would cut the threshold to $500,000.

Popular tax credits and deductions

The Senate would keep in place a variety of popular tax credits and deductions that would have been eliminated by the House tax bill released last week. It preserves tax credits and deductions for adoption, medical expense, teacher expenses, and student loan interest.

Tax brackets

The House bill would condense the number of tax brackets to four: 12 percent for income up to $90,000; 25 percent for income up to $260,000; 35 percent for income up to $1 million; and 39.6 percent for income over $1 million.

The Senate bill would establish seven tax brackets at 10 percent, 12 percent, 22.5 percent, 25 percent, 32.5 percent, 35 percent and 38.5 percent for the nation’s highest income earners.

Estate tax

The Senate bill would double the estate-tax exemption for wealthy estates from $11 million to $22 million per couple (or from $5.5 million to $11 million per individual) while the House bill would repeal the estate tax entirely.

Corporate tax rate

The Senate would cut the corporate tax rate to 20 percent, like the House would, but delay its implementation until 2019 to reduce the projected cost of the bill over ten years. The House would cut the corporate tax rate next year.

Pass-through businesses

The Senate would establish a 17.4 percent deduction for pass-through businesses based on the Section 199 domestic manufacturing deduction that would lower the effective tax rate for small businesses in the top tax rate to slightly more than 30 percent, according to Senate Finance Committee aide.

The House bill, by contrast, would have established a 25 percent rate for pass-through companies but would only make 30 percent of their revenue eligible for that rate and tax the other 70 percent as wages under the individual tax rate. That would result in a blended rate for many small businesses between 35 percent and 38 percent.

Assembly Speaker Robin Vos is creating a new committee in the Wisconsin State Assembly that will focus on building better international relations in order to attract foreign investment in Wisconsin.

The Assembly Committee on International Affairs and Commerce is tasked with developing policy initiatives to promote international trade, communication, tourism and investment.

“Wisconsin is competing on a world stage and we want our state to be in the best possible position to grow more family-supporting careers,” said Speaker Vos. “I’m confident that Rep. (David) Steffen will do an excellent job leading the new standing committee.”

The committee’s main goal is to help more Wisconsin companies and farmers achieve international success.

For years, Republicans have argued that federal taxes and spending levels are too high. Now, with a Republican president and majorities in the House and Senate, it’s time to back those words with action. On Thursday, Congress released its plan for the first major tax code overhaul since 1986.

The Tax Cuts and Jobs plan would reduce the number of federal tax brackets from seven to four, and cut tax rates in almost every bracket. It would nearly double the standard deduction and eliminate most other deductions, including the personal exemption. Individuals earning up to $90,000 annually would now be taxed at a rate of 12 percent – down from 25 percent today.

The corporate tax rate would drop from 35 percent – the world’s highest – to 20 percent.

It also creates a new special tax rate for S-corps, sole proprietorships, and pass-throughs at 25%. That’s meant to protect small businesses from paying the higher individual income tax rates. Pass-through entities are now the most common business form in the country, and more than half of Wisconsin’s workforce is employed by a pass-through business.

Under current law, the earnings of businesses organized as pass-throughs are taxed under the individual income tax code, rather than the corporate code. As a result, many individuals see their business earnings taxed under the highest-possible 39.6 percent rate.

Besides the significant tax rate reductions, the plan would eliminate many itemized deductions.The authors estimate that the number of taxpayers itemizing their deductions would fall to fewer than 10 percent, from about one-third today. That’ll add up to significant savings from simplification alone. Perhaps most significantly, federal taxes will be so simple that Americans can file them on a form the size of a postcard.

The estate tax, also known as the death tax, would be repealed in six years. For now, the size of the exemption would double.

The plan would eliminate the federal alternative minimum tax, also known as the AMT. Most other deductions, including those for medical expenses, student loan interest, and state or local income or sales tax, would be eliminated.

All told, the proposal would amount to a $1.51 trillion net tax cut over ten years. If passed, the major changes would generally be effective for tax years beginning after 2017.

Speaker Robin Vos (R-Rochester) is announcing the restructuring of the Assembly Committee on Ways and Means. The committee has been tasked with undertaking comprehensive tax reform.

“Wisconsin taxpayers and businesses have suffered for far too long under an overly burdensome tax code that doesn’t work for families, retirees and job creators,” said Speaker Vos. “This restructured committee will tackle real reform in a transparent process that will give the public ample input in developing a new tax code that is fair and simple with lower rates.”

I have appointed three new Republican members to the committee: Reps. Rob Hutton, Bob Kulp and Shannon Zimmerman. Rep. Mark Spreitzer is joining the committee on the minority side.

“Since 2011, Republicans have provided more than $8 billion in tax relief in Wisconsin, and eliminated several taxes and entire tax brackets,” said Speaker Vos. “However, our work is far from over, and I’m pleased that Rep. Macco and his committee can continue this important effort for Wisconsin taxpayers.”

Speaker Vos has asked the committee to take its time with the massive task and make recommendations before the end of next year in order to be considered in the next biennial budget.

Yesterday, the Wisconsin Department of Transportation (WisDOT) applied for the U.S. Department of Transportation 2017-18 Infrastructure For Rebuilding America (INFRA) grant. WisDOT is seeking a grant to support the construction of a vital portion of the I-94 North-South expansion project that encompasses Foxconn’s manufacturing development and some of Wisconsin’s other fast-growing employers. The

“The I-94 North-South corridor plays a key role in the local and regional economy of southeast Wisconsin,” said Dave Ross, secretary for the Wisconsin Department of Transportation. “With new businesses investing in this region such as Foxconn, Amazon, Uline and Northwestern Mutual, WisDOT is looking to ensure that the transportation of goods and passengers throughout this region meets business and individual needs.”

The I-94 North-South expansion project stretches 36 miles from the city of Milwaukee past the Wisconsin/Illinois state line. Manufacturers and shippers move more than $90 billion in goods to and from businesses in this corridor to major national and international markets. The surrounding economic area in southeast Wisconsin is a major contributor to the state’s manufacturing sector, which is home to the second highest percentage of manufacturing employment among all U.S. states.

WisDOT is seeking an INFRA grant, which would allow for the completion of the I-94 North-South project by 2021, rather than 2032, to support the large-scale development that will have very positive impacts on region and state economies. The final phase is needed to complete the remaining project, improve safety, and to facilitate existing and projected traffic. The completed North-South project will provide safe and efficient travel to help facilitate new job and economic development opportunities for the region.

Department of Workforce Development (DWD) Secretary Ray Allen today announced the launch of enhanced features on WisConnect, the state’s premier source for internships available at InternshipWisconsin.com. He invited all college students and Wisconsin employers to register today and develop profiles on the free, mobile-responsive site.

“Hundreds of college students and employers have already started to use WisConnect since we launched this new site during the summer, and we look forward to even more activity as peak internship recruitment season approaches,” Secretary Allen said. “The cutting-edge tools we are rolling out today will help match student talent with internship opportunities, and provide more tools to support the important work of our college and university career counseling partners.”

DWD launched WisConnect over three months ago to help employers meet their workforce needs by growing tomorrow’s talent today through internships. With studies showing the value of internships in attracting, training and retaining college students during and after graduation, WisConnect serves as an important tool to support a robust talent pipeline in Wisconsin.

Highlights of added features for students and employers include:

• Enhanced logic to support stronger and more targeted matches between students and employers
• Tools for students and employers to search opportunities or candidates by metro area
• Ability for employers to select multiple industry types for their profile
• Functionality for employers to search students by specific unviersity or technical college
• Ability for students to search internship opportunities by company, job type, desired major and industry
• Additional custom features such as flagging postings or student profiles for quick retrieval.