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Wisconsin unemployment rate ties record low of 3%

The state's unemployment rate continues to trend lower than the national average of 4.2%, but the latest figures underscore that the state's ongoing workforce challenges appear to be a lingering issue despite improving jobless numbers.

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Wisconsin's unemployment rate dropped to 3% last month, according to preliminary data, matching the state's previous record low set back in November 2018, the Wisconsin Department of Workforce Development reported Thursday, Dec. 16.

Wisconsin's unemployment rate continues to trend lower than the national average of 4.2%, but the latest figures underscore that the state's ongoing workforce challenges, which were present before the onset of the COVID-19 pandemic, appear to be a lingering issue despite improving jobless numbers.

In hopes of addressing the labor shortage, Gov. Tony Evers on Thursday announced more than $6 million in grant funding to Madison Area Technical College to support individuals seeking work in conservation and construction, as well as child care providers to help parents enter the workforce. At the same time, conservatives and several state business organizations unveiled a proposal to eliminate the state's income tax in an effort to bolster the economy and make Wisconsin more attractive to out-of-state talent.

Wisconsin reported adding 10,200 nonfarm jobs and 12,300 private-sector jobs last month, according to data provided by the U.S. Bureau of Labor Statistics. The state's labor force participation rate was unchanged from the 66.4% reported in October.

The state last reported a 3% unemployment rate back in November 2018, while preliminary estimates have trended as low as 2.8% before revisions. DWD will update the state's official unemployment rate for November next month.

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DWD chief economist Dennis Winters said the economy has seen a decent recovery from the pandemic across all sectors, including leisure and hospitality, which was hardest hit by COVID-19. The sector was down about 10% in terms of jobs after losing close to 50% during the early stages of the pandemic.
Despite the positive trend, Winters said the state is still about 100,000 jobs below where it was before the pandemic. The state's aging population has caused the workforce to flatten out over time and it threatens to shift downward by as early as 2035, he added.

"We need solutions to this, but it's a trend that's been going on for some time," Winters said.

Workforce grants

During a press event at MATC Thursday, Evers announced $2.9 million in grants to the college to support child care professionals and address the state's shortage of day care offerings, which has been attributed to the state's labor shortage by preventing parents from entering the workforce.

"This grant will help us eliminate barriers to top-notch child care and family-sustaining wages," MATC President Jack Daniels said. "This project will provide our diverse communities with educational resources that will pay dividends for generations to come."

The Democratic governor also announced $3.3 million to support "Operation Fresh Start," a job training and education program that aims to help young people enter careers in construction and conservation.

The grants are part of $130 million in federal stimulus funds Evers allocated in July to help connect unemployed people with work opportunities with hopes of addressing ongoing workforce shortage challenges across the state.

Evers on Dec. 13 announced almost $60 million would be directed to 12 regional projects, including MATC's "Operation Fresh Start" program. Evers plans to announce a second round of funding next year.

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Tax changes proposed

A new report from the conservative Center for Research on the Wisconsin Economy written by Noah Williams, an economics professor with UW-Madison, proposes a different approach to make Wisconsin more attractive to job seekers — eliminating Wisconsin's income tax, which is the oldest in the nation.

The report, titled "Fundamental State Tax Reform: Eliminating the Income Tax in Wisconsin," also proposes increasing the state's general sales tax from 5% to 8% to cover the reduction in tax revenue caused by striking the income tax.

While widely praised by conservatives on Thursday, others have raised concern over a proposal to eliminate a progressive income tax while increasing a regressive sales tax.

"Increasing the sales tax to make up for a cut in income taxes shifts the responsibility for paying taxes away from the rich and powerful, and onto the backs of people with low and moderate incomes," Tamarine Cornelius, director of the Wisconsin Budget Project, said in a statement. "We can't create broad-based prosperity for Wisconsin by raising taxes on the families who can least afford it, just to pay for tax cuts for the rich."

Williams estimates the proposal would lead to an average net tax cut of about $1,700 per household and boost the state's economy by about $28 billion over a five-year period. Employment is expected to increase by 6.9%, or about 175,000 jobs, under the proposal.

"This report shows how to cut taxes all around, but especially for middle class families and small business owners," CJ Szafir, president of the conservative Institute for Reforming Government, said in a statement. "The reform would be a game changer for Wisconsin. More take home pay. Higher employment. Higher GDP growth. It would be a win all around."

However, Ross Milton, economist in the La Follette School of Public Affairs at UW-Madison, noted that the CROWE report points out that the proposed tax changes would also result in a 12.6% reduction in state tax revenue.

"They're assuming that doesn't have any effects on the economy and I think that in other states that have tried dramatic tax cuts in short periods of time, big cuts to state revenue are a drag on the economy and are frankly very unpopular," Milton said of the report. "Even if that's beneficial in the long run, it's going to have some short-term costs."

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Patricia Mayers, spokesperson for the Wisconsin Department of Revenue, said in an email department economists noted that CROWE's report is unclear on how the state would provide relief to certain filers that receive refundable income tax credits like the veterans and surviving spouses tax credit. Officials also noted that repealing the income tax would provide little to no income relief to low-income earners while hitting them with a sales tax increase.

"Changing the balance between income, sales and property taxes is often discussed across the country, but an outright repeal of one of the major tax types is less common and can lead to instability in a state's revenue portfolio and unintended consequences," according to the DOR email.

Rep. Barbara Dittrich, R-Oconomowoc, who sits on the Assembly Committee on Ways and Means, tweeted that she is "a huge fan" of eliminating the income tax. The committee's chairman Rep. John Macco, R-Ledgeview, and vice chairman Rep. Robert Wittke, R-Wind Point, said in a statement they look forward to discussing the proposal.

The proposal also received praise from former Republican Gov. Scott Walker, who touted eliminating the income tax during an interview Thursday on WISN conservative talk radio.

"This just has a ripple effect that I think is going to be unbelievably positive," Walker said.

Asked about Walker's support of the proposal during a press event in Milwaukee, Evers replied, "Wasn't he governor for eight years and had a Republican Legislature that whole time?"

"He could've done that himself," Evers said of the proposal to eliminate the income tax. "I promised a middle-class tax cut when I ran for this office, and we were successful with a 15% income tax cut."

Walker floated the idea of eliminating the state's individual and corporate income taxes, paired with a sales tax increase, back in 2013. The liberal Wisconsin Budget Project estimated at the time that such a tax shift would mean the bottom 80% of taxpayers would be paying more in taxes, while taxpayers in the top 1% would see cuts averaging almost $44,000.

The state budget signed this year brought down the income tax rate from 6.27% to 5.3% for income between about $24,000 and $263,000 a year, or between $32,000 and $356,000 for married filers. Taxpayers who make more than that still benefit from that tax rate reduction.

The income tax is 3.54% on the first $12,000 of taxable income for individuals or $16,000 for married filers. For income between about $12,000 and $24,000, and married filers making between about $16,000 and $32,000, the income tax rate is 4.65%.

© 2021 The Wisconsin State Journal

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