Wisconsin numbers look good but crisis loomsThe state Department of Administration recently released revised revenue estimates with tax revenues projected to outperform previous estimates.
By: By State Sen. Mary Lazich, Superior Telegram
The state Department of Administration recently released revised revenue estimates with tax revenues projected to outperform previous estimates.
Within a Nov. 20 letter to Gov. Scott Walker and members of the legislature, Administration Secretary Mike Huebsch wrote the state budget is in a “much stronger position than two years ago.”
The department’s numbers reveal the state ended fiscal year 2011-12 with a positive balance of $342.1 million. This is welcome news in light of the $3.6 billion projected budget deficit we faced at the beginning of 2010. It also means that, unlike previous years, the legislature will not have to come into session in January and immediately try to fix the previous session’s budget.
Revenue from existing taxes are expected to grow as the economy continues its emergence from the recession.
DOA estimates revenues for 2012-13 at $13.762 billion, a $248 million increase from FY 2011-12, and $374 million more than previous estimates.
The next two fiscal years also are expected to have revenue growth, with DOA projecting state revenue at $14.280 billion for 2013-14 and $14.783 billion for 2014-15 fiscal years.
According to DOA, the increased revenues are a result of “economic activity, not proposed general tax law changes,” and forecasts moderate growth in Wisconsin’s economy over the next two fiscal years. Also built into the estimate is the assumption that Congress’ inaction will restore state and federal estate taxes.
Enthusiasm over these new numbers should be tempered.
DOA notes revenue projections are difficult to make, and the economic outlook is far from certain. Events overseas, in Europe and Asia, and the impending fiscal cliff could dramatically change the landscape.
For the moment, we enjoy good news. Wisconsin’s GDP grew 1.1 percent during 2011 and is forecast to grow 1.7 percent during 2012. While those are modest numbers, we are moving in the right direction. If we can avoid economic setbacks on the national and global levels, Wisconsin has a state budget in place to continue sustained economic growth.
The battle over the fiscal cliff is looming, and President Obama and Democrats are set on trying to solve our nation’s deficit problem by taxing the rich more and more.
There are two glaring problems with this approach. The first is the rich described by Democrats include much more than the Warren Buffets of the country. It also includes many small business owners reporting their business income with personal income taxes.
Recent reports estimate there are roughly 941,000 high-income small businesses. These are not all Wall Street moguls and hedge fund managers. They are hardworking people that incurred risk and put their heart and soul into their business. For them, every dollar taken in taxes is less money to expand operations or hire a new employee.
If the president’s plan targets only the extremely wealthy, evidence suggests it would fail to boost government revenue. We can learn a lesson from Britain.
After the 2009-10 tax year, the British government raised the tax rate on those making more than £1 million, about $1.6 million, from 40 percent to 50 percent. The move was expected to give a much-needed boost to government coffers. Instead, as was recently reported in the Telegraph, tax revenue from the top bracket dropped by £7 billion.
How did this happen? The answer, unsurprising to many conservatives, is the dramatic tax increase caused those with money to flee. Britain had 16,000 people in its top tax bracket during 2009-10, and after the tax increase, that number dropped to 6,000 people.
While those of us at the state level do not have a vote regarding the upcoming fiscal cliff, we do have a state budget to balance. Last session we turned a $3.6 billion deficit into a projected surplus, while holding the line on tax increases. As a member of the Joint Committee on Finance, we must remember these lessons as we begin working on the next state budget.
If you have comments on this or any other issue, contact me at Sen.Lazich@legis.wisconsin.gov, www.senatorlazich.com, Senator Mary Lazich, State Capitol, P.O. Box 7882 Madison, WI 53707 or 800-334-1442.
State Sen. Mary Lazich is a Republican representing New Berlin.