Cash keeps rolling in: Wisconsin tax collections 8.6% higher than estimated
Gov. Tony Evers called on the GOP-led Legislature to use a portion of the surplus to cut taxes, reduce fuel prices by repealing the state's minimum markup on gas and cap insulin co-pays at $35.
MADISON — State tax collections continue to outperform previous expectations, setting up an election-year battle between Democratic Gov. Tony Evers and the Republican-led Legislature over how and when to spend Wisconsin's growing budget surplus.
General fund tax collections for fiscal 2022, which concluded June 30, came in at more than $20.5 billion, or 5% higher than the previous fiscal year, the state Department of Revenue reported last week.
That's $1.6 billion, or 8.6%, higher than previously estimated in January, according to the nonpartisan Legislative Fiscal Bureau. At that rate, the state Department of Revenue estimates, the state could end up with a $5 billion surplus by next summer thanks in large part to increased tax collections.
While the projected surplus provides a host of options for state lawmakers, disagreements have already arisen over what to do.
Evers last week renewed his call to the GOP-led Legislature to use a portion of the surplus to cut taxes, reduce fuel prices by repealing the state's minimum markup on gas and cap insulin co-pays at $35.
Assembly Speaker Robin Vos, R-Rochester, and Senate Majority Leader Devin LeMahieu, R-Oostburg, called Evers' proposal "a tax gimmick" to benefit the incumbent governor's Nov. 8 election matchup with Republican Tim Michels. GOP leaders have their sights set on unseating Evers this fall, with plans of passing their own tax cuts next legislative session under a Republican governor.
Republicans, who control the state Assembly and Senate, have largely rejected Evers' legislative initiatives in the past, including a proposal earlier this year to use a portion of the surplus to send $150 checks to every Wisconsinite and allocate more funding to schools, as well as for child care and caregiver tax credits. Republicans immediately ended a special session called by Evers to take up the measures in March.
Republicans noted that Evers criticized a similar plan offered by Republican former Gov. Scott Walker in 2018. Walker offered a $100-per-child tax credit that year before losing to Evers in the November election.
Collections last fiscal year were significantly higher than previously estimated for individual income taxes and corporate income/franchise taxes, Fiscal Bureau Director Bob Lang wrote in a recent report. Collectively, the two taxes comprise more than $1.5 billion, or almost 96%, of the higher tax collections last fiscal year.
What's more, withholding table changes directed by the revenue department in January were expected to result in a 6.4% drop in withholding tax collections over the last six months of the fiscal year. In fact, withholding collections were 4.1% lower in that span, the Fiscal Bureau said.
Final general fund tax collections, as well as state department revenues and expenditures for the previous fiscal year, will be published in mid-October.
Wisconsin closed out the 2021 fiscal year with about $1.73 billion in the budget stabilization fund, a rainy day fund to be tapped in times of emergency, marking the largest amount in state history and more than five times the fund's balance at the end of fiscal 2018.
A change to state law two decades ago required lawmakers to deposit half of excess tax revenues into the rainy day fund until the fund reached 5% of spending. Most recent estimates showed the rainy day fund at 8.4% of state spending, meaning none of the latest tax collections will be transferred into the emergency fund.
An April report titled "Flush with Cash: Wisconsin's Growing Financial Reserves," released by the Wisconsin Counties Association's nonpartisan research arm, proposed that the state's rainy day fund should be increased to around 15% to better handle a future economic downturn.
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