Wisconsin legislators passed the largest income tax cut in state history this week as part of the new budget. The budget approved this week with bipartisan support in the Wisconsin Assembly and Senate cuts the second highest of the state’s four income tax rates from 6.27% to 5.3%.
The income tax rate cut, made retractive to January 1 of this year, is projected to provide $2.4 billion in tax relief over the next biennium. In addition to the income tax relief cut included in the budget, Wisconsin lawmakers also approved legislation that eliminates the tangible personal property tax.
If Governor Evers signs the budget into law, the income tax cut passed by Wisconsin lawmakers will be the tenth state income tax cut enacted this year. The other states where income tax cuts have passed in 2021 are New Hampshire, Oklahoma, Nebraska, Idaho, Iowa, Louisiana, Ohio, Montana, and Arizona. North Carolina legislators are in the process of passing a new budget that includes what would be the eleventh state income tax cut of 2021.
“The full Legislature has now passed the most conservative budget in a generation turning Governor Evers’ bloated, political document into a responsible, bi-partisan success story for our state,” Wisconsin Senate Majority Leader Devin LeMahieu said in a press release following the budget’s passage. “In addition to a transformational $3.4 billion tax cut, the Legislature made targeted investments in every essential function of state government including significant new money to schools, frontline healthcare workers, and a fully-funded transportation system all while maintaining historically low state spending.
“Reducing the 6.27 percent rate to 5.3 percent is a pro-growth change that would benefit individuals, families, and pass-through businesses,” Katherine Loughead, an economist with the Tax Foundation, writes about the tax relief recently approved in Wisconsin. “This reduction builds upon recent reductions to the two lower rates. (The lowest rate was reduced from 4 percent to 3.54 percent, and the second-lowest rate from 5.84 to 4.65 percent, between 2018 and 2020.)”
A week that began with Ohio legislators approving an income tax cut that is the largest in Buckeye State history ended with Wisconsin legislators passing a budget that did likewise in the Badger State.
“The Legislature, instead of following Governor Evers’ lead to dramatically increase taxes, decided instead, to cut taxes,” notes Brett Healy, president of the MacIver Institute. “In fact, the Legislature has proposed the largest tax cut in state history.”
“So, starting from Gov. Evers’ $1.12 billion TAX INCREASE and moving to a $3.4 billion TAX CUT proposed by the Legislative Republicans shows you the fundamentally different approach to government Democrat Tony Evers has compared to Republicans in the Legislature,” Healy adds.
“2021 is shaping up to be a banner year for state tax relief,” said Grover Norquist, president of Americans for Tax Reform. “With Wisconsin being the latest state where lawmakers are returning surplus revenue to constituents in the form of permanent income tax relief and North Carolina lawmakers poised to do likewise, millions of Americans are about to receive significant state tax relief at the same time that President Biden and congressional Democrats are pushing massive federal tax hikes. To see the contrasting approaches to governing and public policy, one needed only look at the difference between what is happening in Washington versus what it happening in Republican-run state legislatures.”