Editorial: Save minimal tax cut, avoid deficit

6:50 PM, Apr. 13, 2013  |  Comments
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Gov. Scott Walker wants to make good on a campaign promise, but the consequences of doing so are greater than the reward.

During his campaign for governor, Walker promised to ease the state tax burden. He's making good on that promise in his 2013-15 biennial budget - a $343 million proposal to cut tax rates for the three lowest income tax brackets.

That translates into a tax savings of $212 over two years for a typical family of four earning about $80,000 a year. That provides minimal relief. Using the state's example, the $212 breaks down to $106 a year, or about $2 a week.

It's difficult to ever argue against tax cuts, but we urge legislators and the governor to reconsider this proposal because of the small return to the taxpayer compared with the impact on the state's deficit.

Two years ago, the state faced a projected $3.6 billion deficit and addressed through a budget repair bill that included the contentious Act 10 - which ended collective bargaining from most state employees - as well as cuts to school aids in the 2011-13 biennial budget and other belt-tightening measures. The state is now projected to have a $487.7 million surplus this year, according to the Wisconsin Taxpayers Alliance, a nonpartisan, nonprofit policy research organization.

But Walker's proposed $68 billion budget would increase general fund spending 3.3 percent next year and another 3.3 percent in 2015. Meanwhile, revenues will increase 3 percent a year without the middle class tax cut and 2.6 percent with it. In other words, our spending will exceed our revenues by about $190 million a year, according to the Taxpayer Alliance.

After correcting prior administrations' structural imbalance, Walker wants to return money to taxpayers but in doing so create a structural deficit.

From a philosophical standpoint, we cannot support a tax cut made possible by the sacrifices of others two years ago when Walker and Republicans warned of the dire consequences of the deficit. To turn around and so quickly spend that surplus is irresponsible.

Richard Chandler, secretary of the state Department of Revenue, told Press-Gazette Media last month that the deficit would be small and "very manageable," with the "middle class getting the bulk of the relief" from the tax reform.

"We think it's something that's really helpful in making Wisconsin's tax climate competitive," he said. Currently the state's individual income tax rate is 26 percent more than the national average.

Part of the premise of the tax relief is that the cost of it will have less of an impact on the deficit because it will help grow the state economy and create jobs.

But that's not happening, according to the latest numbers, and Wisconsin ranks 44th in the U.S. for private sector job growth.

Blame whomever you want for lagging job creation, but the simple fact is it's not happening. And experts contend the tax rate cuts would not do enough to improve it.

Meanwhile, schools were hit with $800 million in aid cuts two years ago and a 5.5 percent reduction in spending. Walker's current budget allocates adding only $129 million in general school aid, but that money would go to lower property taxes, not to the schools to help with the education of our young.

Given that school districts are struggling to maintain existing buildings, retain teachers and administrators, and keep up with the pace of technology, it would make sense to move more resources in that direction rather than a meager $2 a week tax cut for taxpayers in three lowest tax brackets.

Or, the state could hold onto that tax cut and not sink back into the cycle of structural deficits that marked budgets in the last decade.

We understand Walker's impulse to give money back to the taxpayers but the state is not out of the woods budget-wise and it would be unwise to celebrate too early. Fund the needed services, like schools, but don't go overboard with keeping campaign promises.

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