Republicans roll out revised tax cut plan: $2.9 billion on income, retirement taxes

NOW: Republicans roll out revised tax cut plan: $2.9 billion on income, retirement taxes

OAK CREEK, Wis. (CBS 58) -- A group of Assembly Republicans on Tuesday introduced a proposal for cutting income taxes and largely eliminating taxes on retirement income.

GOP leaders said at a press conference they believed this revised plan, amounting to $2.9 billion in cuts, would satisfy Democratic Gov. Tony Evers' call for more targeted cuts.

The new GOP plan seeks to revive some of the tax cuts Republicans rewrote into the state budget this spring.

Wisconsin has four income tax brackets. For single filers, here's how those brackets break down, along with the tax rates prior to the new budget:

  • $280,950 and more: 7.65%
  • $25,520-$280,950: 5.3%
  • $12,760-$25,520: 4.65%
  • $0-$12,760: 3.54%

Evers signed off on Republicans' move to lower the third-highest bracket's rate from 4.65% to 4.4%, as well as lowering the fourth bracket to 3.5%.

Republicans had also moved to lower the highest bracket's tax rate to 6.5% and the second-highest bracket down to 4.4%. Evers vetoed that portion of the cuts; he argued too much of the savings would've gone to the wealthy, and his administration maintained the cuts risked the state losing its share of American Rescue Plan Act funding, totaling about $2.5 billion.

Tuesday, Republicans unveiled a proposal to once again lower the second-highest bracket from 5.3% to 4.4%. Under that cut, a single filer making $50,000 per year would pay $2,200 in state income taxes instead of $2,650.

"What you're seeing today is we heard Governor Evers' message," Assembly Speaker Robin Vos (R-Rochester) told reporters. "We wanted to make sure we offered a tax cut that he would sign."

The GOP plan also would exempt taxes on retirement income up to $100,000 for individuals and up to $150,000 for married filers.

"We need to look at how we are making ourselves more competitive," State Rep. Nik Rettinger (R-Mukwonago) said. "And ensuring that people are laying down their roots here, and they're staying for a long time."

Last month, Evers told reporters in Montello he was willing to negotiate a more targeted tax cut with Republicans.

"If there's some way to make sure that the middle class gets a large cut, bring it on," Evers said on July 17. "If it's all gonna be about the 11 wealthiest people in the state receiving an average of $1.8 million of less taxation, that is not gonna make it."

Evers' spokesperson, Britt Cudaback, responded to questions about Evers' past comments by referring to a memo issued by the Department of Administration, which operates under the executive branch.

The Aug. 28 memo concluded the state could only sustain additional net tax cuts of up to $113 million next year and $319 million in the following year without risking the federal government recouping Wisconsin's share of American Rescue Plan Act (ARPA) money.

The memo cited language in the rescue plan that bans states from using federal relief money to offset tax cuts. 

Cudaback also pointed to the $1.2 billion tax cut plan Evers included in his 2023-25 budget proposal. It limited income tax cuts to single filers making $100,000 or less and married couples making up to $150,000. 

In addition to those cuts, Evers proposed scaling back the state's manufacturing and agriculture tax credit, capping the credit at $300,000. Such a move would've generated new tax revenue that cancelled out the income tax cuts.

Can states actually lose their ARPA money over tax cuts?

When asked if they've explored whether the cuts would risk the state having to repay its ARPA funds, Republican lawmakers at Tuesday's press conference indicated they were ready to call Washington's bluff.

"I know that other states- there's many, many states that are cutting taxes," State Rep. Terry Katsma (R-Oostburg) said. "And it has not been an issue there at all."

Whether the tax offset provision is even enforceable is unclear. 

In January, the 11th Circuit Court of Appeals sided with 13 states who filed a lawsuit challenging those conditions. The federal appellate court upheld a permanent injunction against the tax provision. 

"We hold that the condition imposed by the Rescue Plan’s offset provision is not ascertainable and does not provide 'clear notice' about how to comply with it," the court decision read. "Rendering it unconstitutional."

When asked about the case, Cudaback referred to Evers' line-item veto message, in which he said the possibility of federal recoupment was "a risk to the state that I am unwilling to take."

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