Speaker Vos wants to use surplus to incentivize local governments to innovate, address waning workforce

 

MADISON Wis. (CBS 58) -- Assembly Speaker Robin Vos is willing to invest more money into local governments next legislative session, but there's a catch.

Vos floated using a portion of the record $6.6 billion projected surplus to incentivize municipalities that address workforce challenges and waning population growth.

"My hope is that we can do something that focuses on innovation and sharing services," Vos said in an interview with CBS 58. "We have a demographic challenge in this state. We don't have net migration and if we keep doing the same old, we are going to have a massive tax burden for our kids or will have a dramatic reduction in services."

Research from the nonpartisan Wisconsin Policy form has warned for many years there's an "impending storm" on the horizon with a decline in the number of working-aged individuals living in Wisconsin.

The report detailed the impact of the retiring baby-boom generation and how it will have significant effects on Wisconsin’s economy over the next 30 years.

Vos said he's concerned Wisconsin is not doing enough to attract large companies. One of his priorities for the 2023-2024 Legislative session is finding ways to encourage corporations to move to the state, and in return receive an incentive.

"I want to have a fairly large increase in funding local governments based on innovation. We are in talks to do that right now," Vos said.

Implementing a flat tax to make Wisconsin more competitive with neighboring states is an idea Vos said he's in favor of.

Nine states, including Illinois, Indiana, and Michigan all have a flat income tax rate. Many offer their own deduction or exemption to help reduce the tax burden as some Wisconsin economists have warned a flat tax could disproportionately impact low to middle-income earners.

Senate Majority Leader Devin LeMahieu (R-Oostburg) suggested adjusting standard deductions to "make sure everyone receives tax cuts" when he signaled support for a flat tax in November. He proposed starting near the lowest rate, 3.54% over the next two to four years to move the state towards a flat tax.

If the Republican-controlled Legislature passed a flat tax proposal, it's unlikely to become law. Gov. Tony said he would likely veto that bill if it reached his desk. He prefers cutting income taxes by 10% for middle-income individuals and families. Evers is expected to include his tax cut plan in his 2023-2025 state budget proposal.

Shared Revenue

In addition to tax cuts and finding ways to attract more businesses to the state, Vos proposed changing the way the state shares funding with local governments, known as shared revenue.

He suggested using 1% of the state sales tax to replace share revenue, meaning as sales taxes increase funding for local governments does too. It's an idea Evers is hesitant to support.

"At the end of the day when you specifically tie something to a sales tax you're rolling the dice a little bit," Evers said.

Evers said he much rather allow municipalities, such as the City of Milwaukee, the ability to impose a 1% sales tax increase to address funding shortfalls.

For years Milwaukee officials have advocated for raising the sales tax but Vos said he won't do so unless he sees reforms. When asked what reforms are needed, Vos said changes to Milwaukee's pension system is a start.

Milwaukee Mayor Cavalier Johnson and Milwaukee County Executive David Crowley said last month they are both working on ways to reduce county and city pension costs in part of their lobbying efforts at the state Capitol to convince Republicans to raise their sales tax.

It comes as the city is nearing a fiscal tipping point that could lead to major cuts in services on top of the looming pension costs. Projections show the city’s underfunded pension liability now exceeds $1 billion.

Vos said Milwaukee is likely the only municipality he'd make a deal with.

"They might be the one special case we are open to, but again, if it's just about more revenue with no reforms that's never going to happen."