Experts see no big gain for economy, taxpayers in Scott Walker's budget proposal

2013-02-22T10:55:00Z Experts see no big gain for economy, taxpayers in Scott Walker's budget proposalDEE J. HALL | Wisconsin State Journal | dhall@madison.com | 608-252-6132 Journal Times

Gov. Scott Walker's proposed income tax cut is likely too small to help individual taxpayers or the Wisconsin economy but could be large enough to harm the state's future fiscal soundness, according to experts reacting Thursday to the governor's 2013-15 budget.

However, some said the cut would send a positive signal, echoing the governor's budget address on Wednesday.

"The message sent by this cut to businesses and workers will hopefully help keep our best and brightest here, which can only improve the state's economy and overall quality of life," said Mike Ford, research director of the free-market Wisconsin Policy Research Institute.

The two-year spending plan calls for a state income tax cut averaging $106 for a family of four earning $80,000 a year. That's about $2 per week.

For low-income taxpayers, the cut is even more miserly: An estimated $2 a year for those earning less than $21,000, according to an analysis by the Institute on Taxation and Economic Policy done for the Wisconsin Budget Project. That analysis also showed the wealthiest taxpayers, those earning $374,000 or more, would see a cut of $285.

"The governor has argued that by putting more money in people's hands, the tax cuts will spur economic growth in Wisconsin," said Andrew Reschovsky, a UW-Madison professor of public affairs and applied economics. "There is no evidence that the tax cut will do much to encourage growth and job creation."

Mark Schug, a UW-Milwaukee professor emeritus who now consults in the area of economic education, agreed such a cut is not likely to be an economic boost.

"I do tend to think that the income tax reduction is not sufficient," Schug said.

Walker spokesman Cullen Werwie said the proposed tax cut is modest because "we had to work within the constraints of our budget to get tax relief to middle-class families."

Wisconsin's state income tax rate ranks among the top 10 for households earning between $40,000 and $150,000 a year, according to a study cited by state budget officials Wednesday. Walker's proposal for a roughly 2 to 3 percent state income tax cut would return a projected $343 million to state income taxpayers over the next two years.

The Republican governor has said he would use the state surplus, expected to be $442.7 million by June 30, to pay for the cuts. But beginning in 2016, Walker's budget projects negative balances.

Reschovsky warned that while returning the state's surplus to taxpayers may sound like a good idea, it could leave the state vulnerable if the national economy takes another downturn.

"The budget surplus ... is a one-time event, attributable to last year's budget lapse, and to somewhat more robust revenue growth than initially forecast," Reschovsky said. "Reducing income tax rates provides a permanent reduction in the flow of tax revenue in Wisconsin. The result will be the expansion of the state's structural deficit."

Todd Berry, executive director of the Wisconsin Taxpayers' Alliance, said he is puzzled by Walker's apparent about-face on the deficit, which the governor repeatedly cited in the last budget cycle as justification for large unpopular cuts to education and increases in the amount public employees must contribute to their pension and health plans.

"They (Republicans) spent a lot of political capital — think the protests at the Capitol — but they improved these (budget) numbers," Berry said. "It's just ironic that they seem so quick to give up all these improved measures of fiscal health. ... It seems somewhat short-sighted."

"The return of the structural deficit is concerning," Ford agreed. "The hope is that a continued economic recovery will ensure its return is only temporary."

And that, said Berry, is largely out of Walker's hands.

"Generally speaking, it's going to be the national economy, global economics and global events that are going to affect state economies," he said. "It's very hard to do anything very substantive on the state level because there are much larger forces at work."

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(12) Comments

  1. drizzit
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    drizzit - February 23, 2013 4:40 pm
    I agree with your comments that we should convert ALL state employees to 401Ks, and have them pay what the private sector does for contribution, and healthcare, and Social Security. They should pay what the private sector does. These people paid a pittance, and I mean super small percentages, and we saved billions. We'd be in the BLACK, and be able to bring in all the jobs with these simple changes. The million dollar union bosses would start another war, but I say bring it on. These leeches have been stealing for decades. They give themselves raises through their liberal concubines in the legislature, and these back room deals need to end. State employees could get paid more, and good ones would get paid more. The bad ones would have to be retrained, and we would be the top state in the union. Teachers could get six figures like their union bosses, and we can do this.
  2. drizzit
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    drizzit - February 23, 2013 4:32 pm
    Scott Walker saved more Union jobs than any other state. He supports all jobs while the Democrats are doing everything to hurt private sector Union jobs at every turn. Mining is just one example where we make the equipment, and have raw material which is a win win. Democrats will lie to the very end, but we will see who really supports Unions as the Liberals block Union jobs. They want to block any jobs to make Walker look bad, but Superman will beat them back and their Kryptonite.
  3. drizzit
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    drizzit - February 23, 2013 4:28 pm
    This is the first time in decades that we'll see tax relief for the middle-class, homeowners, and the private sector. I'm so pleased that we have representatives who are mathematically inclined. he Journal Times can pull their Socialist econ experts in, but we know the truth. The guy balance the budget, and got us a gigantic surplus in one year. The media should be praising the guy, but their liberal hate just wants to hinder progress. He created so many jobs we only have a 6% unemployment. Compare that to Michigan, and Detroit to Milwaukee. You'll see what Democrats have done in Michigan, and still want in Wisconsin. Democrats literally have set up every roadblock they can to economic security, and have even threatened Walker, and his family. Walker is our Superman that we've been waiting for.

    I love my Gov!!!!
  4. Urban Pioneer
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    Urban Pioneer - February 23, 2013 2:59 pm
    Now is the perfect time to introduce 401K 's for all new State employees, and the local Govt. can expand this as well. Most of the candidates the Alderman forum agreed, and supported these for NEW employees. Since we had so many folks retire in the past 2 years It's perfect. They'll no longer be required to join Unions, there is no reason they should be required to engage in the outdated Pension system.

    I strongly urge Fitzgerald and Vos to at least double the Income Tax cut, from what the Gov proposed. These are the kinds of actual big ideas that show the GOP is looking out for all the taxpayers.

    If we run a shortfall later on down the road we can combine spending cuts with increasing the SALES tax slightly. The pressure to keep the sales tax lower that affects both poor and wealthy at the same rates will be strong enough to pressure spending reductions.
  5. Blindman
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    Blindman - February 22, 2013 5:36 pm
    I think you just proved who the real "fool" is.
  6. Liam
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    Liam - February 22, 2013 4:47 pm
    Poor little granny grits.
  7. Liam
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    Liam - February 22, 2013 2:19 pm
    No thank you . I want the surplus to be distributed/payed back among the 5 million Wisconsinites that overpaid. Gov. scott walker keeps steeling from the citizens of Wisconsin.
  8. granny grits
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    granny grits - February 22, 2013 10:08 am
    OK, so you hate higher education, state employees and all unions. It sounds like you want everyone to come down to your level of achievement. How very sad for you and those around you.
  9. Gearhead
    Report Abuse
    Gearhead - February 22, 2013 8:02 am
    "The governor has argued that by putting more money in people's hands, the tax cuts will spur economic growth in Wisconsin," said Andrew Reschovsky, a UW-Madison professor of public affairs and applied economics. "There is no evidence that the tax cut will do much to encourage growth and job creation."

    More money in the private sector is always a good thing. Andrew, where is YOUR evidence that higher taxes encourage growth and job creation?
  10. ggodmuls
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    ggodmuls - February 22, 2013 6:09 am
    "The budget surplus ... is a one-time event, attributable to last year's budget lapse, and to somewhat more robust revenue growth than initially forecast," Reschovsky said. "Reducing income tax rates provides a permanent reduction in the flow of tax revenue in Wisconsin. The result will be the expansion of the state's structural deficit."

    The structural deficit would be reduced if salaries, and benefits of State employees were cut to align with the realities of the post peak oil 21st. C economy. BAU is over, and endless growth is gone.

    Raise the retirement age for State workers and end defined pension plans. Limits on medical treatments need to be set.

    Ending the luxurious life at the UW System would be a great help!

    An entire overhaul of the economy is needed. Good luck with the current Federal Reserve system where debt=wealth. What happens to your assets when fiat dollars become worthless.

    Until the public employee unions are confronted and the gravy train ends, Wisconsin will continue to wither.

    ALSO - Start taxing State retirees who move out of State with their State paid pensions. Tax 'em an extra 10% to give them an incentive to stay. End the looting by the public employees.
  11. Liam
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    Liam - February 22, 2013 4:15 am
    Wake up Wisconsinites.
  12. Liam
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    Liam - February 22, 2013 4:13 am
    Gov. scott walker is nothing more then a mindless fool. He has had his script written for him by the GOP/Kotch bro./Clown sykes/Clown wagner etc. Without these Clowns he is a lost little child. All of you fools that think he is working on your behalf will have a huge hangover when you wake up.
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