Empower Wisconsin | Sept. 7, 2022
MADISON — Gov. Tony Evers never met a tax he didn’t like — with the exception of Wisconsin’s tax on “forgiven” student loan debt.
It’s an interesting position for Evers, who has pushed huge tax hikes and whose administration argued for a tax on small businesses that received federal Paycheck Protection Program loans.
Evers has effusively praised President Joe Biden’s constitutionally suspect student loan redistribution scheme that would wipe out at least $10,000 in debt from borrowers earning less than $125,000 a year. The debt transfer will cost American taxpayers hundreds of billions of dollars.
Said discharged debt is considered taxable income under Wisconsin tax law. That means a tax liability of potentially hundreds of dollars — compared to the thousands of dollars in taxpayer-funded debt relief for the approximately 700,000 Wisconsin residents with existing student loans.
Wisconsin is one of 13 states that doesn’t conform to the federal tax code, according to the Washington, D.C.-based Tax Foundation. Thirty-seven states eliminated tax liability on student loans debt as part of federal COVID-19 relief.
Evers doesn’t believe Wisconsinites who have their student loans forgiven should be penalized with more income taxes, spokeswoman Britt Cudaback told the Milwaukee Journal Sentinel. The governor, however, is cool with Wisconsinites who didn’t go to college or don’t have student loan debt picking up the tab for the forgiveness initiative.
The governor was quick to stand up for the “oppressed,” the college loaners who stand to get a free ride via federal taxpayers. But where was he when his Department of Revenue looked to stick it to PPP loan recipients early last year?
It took a bill by Republican lawmakers to stop the Evers administration from taxing those forgivable loans. The legislation was led by Sen. Roger Roth (R-Appleton), who is running for lieutenant governor.
As Empower Wisconsin first reported in January 2021, the Evers administration quietly moved to tax PPP loans, an action that ran counter to the intent of the federal legislation. A state Senate amendment aligned Wisconsin tax code with the federal government’s so that state tax collectors weren’t able to collect an estimated $480 million on the loans to businesses.
“Gov. Tony Evers and the Department of Revenue are looking to skim the federal money that came down to our small businesses so they can grow the coffers in Madison,” Roth said at the time.
The goal of PPP was to provide businesses with a financial lifeline to keep them operating — and paying their employees — in the COVID-19 pandemic and lockdowns issued by governors like Evers, not to create a tax burden for those receiving the funds.
Evers’ Department of Revenue, agreed with the IRS, which sought to tax the loans. So, some 90,000 Wisconsin businesses — the vast majority small businesses — faced an additional $450 million in taxable liability at the state level.
How could the Evers administration defy the federal tax code on PPP? Because it’s a separate taxing system. Same situation with Wisconsin’s tax on Biden’s student loan forgiveness initiative.
The Republican-controlled Legislature passed an amended bill in late February 2022, that aligned Wisconsin’s tax codes on PPP with the federal government’s — curtailing any tax liability.
Evers, seeing the political writing on the wall, signed the bill. He tried to take credit for the tax savings, but his Department of Revenue Secretary Peter Barca complained tax relief for small businesses would create a “tax liability for the state.” Barca called it a “double benefit” for PPP recipients.
But the governor jumped at the chance to deliver a “double benefit” for student loan debtors who would, if Evers had his way, receive as much as $20,000 in loan relief while escaping a tax liability on that taxpayer-funded “forgiveness.”
““I’m a Republican,” state Rep. Adam Neylon of Pewaukee told WTMJ4 in Milwaukee, “but this might be the first tax break that I would oppose.”