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UW study finds tax cut would have wide positive impact

Empower Wisconsin | Feb. 25,  2020 

By M.D. Kittle 

MADISON — As Gov. Tony Evers mulls over whether to sign or veto a Republican tax/debt relief package, a new report shows the positive impacts would be deep and wide. 

About 2 million taxpayers would benefit from the nearly $250 million income tax cut, according to the analysis, conducted by Junjie Guo and Noah Williams of the University of Wisconsin’s Center for Research on the Wisconsin Economy (CROWE). The study finds the average annual tax cut would be about $100. Nearly all taxpayers in the middle income range — about 940,000 filers — would get a tax cut. 

More so, the study finds, low income tax filers would benefit most through after-tax income. 

CROWE’s numbers are in line with Legislative Fiscal Bureau figures released earlier. 

Last week, the Republican-controlled Legislature passed the bill, which includes a nearly $250 million income tax cut, $45 million in personal property tax reductions for business, and approximately $100 million to buy down state debt. The bill passed on party-line votes, with just two Democrats in the Assembly and none in the Senate supporting the tax relief package. 

The tax cuts and debt payments would be drawn from the state’s $620 million projected surplus. 

Evers wants to use $250 million in surplus money for public school funding, with about $130 million dumped into the state education funding formula for property tax relief. 

Late last week he seemed to be leaning toward vetoing the Republican tax cut plan. 

As the UW study shows, the GOP bill raises the maximum deduction to $23,170.

More so, the standard deduction phases out at a slightly lower rate of 19.46 percent, so more households would be eligible for the standard deduction and the accompanying savings that go with it. 

Ultimately, the expansion of the standard deduction reduces the effective marginal rates (each additional level of income), providing “work incentive for some low-to-middle-income taxpayers …,” the study found. So, the government can’t take more under the so-called progressive tax system because a taxpayer earns a bit more. 

Republican-led tax cuts have topped $13 billion over the past nine years, according to the Fiscal Bureau. 

“Those tax cuts have been useful in essentially preserving and lengthening the recovery we’ve had,” Williams, co-author of the analysis said. “A good case can be made that the reduction in taxes has helped sustain the recovery we’ve seen in Wisconsin’s economy really since 2011.” 

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