— Business advocates in the state are applauding the Legislature’s Joint Finance Committee for advancing a plan to cut income taxes by $3.5 billion, as well as the recent repeal of the personal property tax.
Bill Smith, state director in Wisconsin for the National Federation of Independent Business, noted the majority of small businesses file individual income tax returns. In an interview Friday, he said 77 percent of NFIB Wisconsin’s more than 10,000 members are organized as pass-through entities, and pay taxes based on the individual income tax rate.
While most of those businesses aren’t in the highest income tax bracket, which would receive the most generous tax break under JFC budget plan, Smith said “it is critically important” to reduce the top rate. He said the move would stimulate private investment, as businesses that retain more capital are more likely to invest those dollars into equipment and benefits and wages for employees.
The JFC plan now goes to the full Legislature, also controlled by Republicans. After that, Dem Gov. Tony Evers would have to OK it as part of the overall two-year state budget. Some Dems are urging Evers to veto that top rate income tax cut if he can because it favors the rich.
State Sen. Chris Larson, D-Milwaukee, tweeted over the weekend that he will vote no on the GOP version of the budget, in part, because it “takes a record surplus and gives it over to the richest in our state.” He knocked it for failing to invest in priorities such as public education, adding it “continues to set Wisconsin along the dangerous course of class warfare, where the rich have everything and the poor struggle to even survive.”
The state surplus is estimated at nearly $7 billion.
The state currently has four tax brackets that range from 3.54 percent to 7.65 percent. The top rate — which kicks in for salary above $405,550 for married joint filers — would drop to 6.5 percent under the GOP plan.
The middle brackets of 5.3 percent and 4.65 percent would both drop to 4.4 percent. The lowest bracket of 3.54 percent — which applies to the first $18,420 of income for married joint filers — would drop to 3.5 percent.
Following the release of the GOP tax package last week, approved by JFC as part of its version of the state budget, Wisconsin Manufacturers & Commerce official Evan Umpir touted the plan for “proposing to significantly reduce and flatten” the state’s individual income tax.
“Specifically, this plan would help move Wisconsin outside the top 10 highest income tax states — making Wisconsin a more attractive place for employers and workers alike,” Umpir, director of tax, transportation and legal affairs for WMC, said in a statement.
Still, Smith added he “would have liked to have seen a little more” of a tax break for income below $500,000, noting most small businesses in the state bring in closer to $300,000 or so annually.
— Meanwhile, NFIB Wisconsin and WMC are cheering for the end of the personal property tax, with both groups describing it as an unfair burden for the state’s business community.
Along with the direct financial impact, critics of the tax and others note the reporting requirements were the biggest complaint for many companies in the state.
After Evers last week signed legislation into law repealing the personal property tax, WMC thanked legislative leaders and the guv for eliminating “this archaic and unnecessary tax.”
“Oftentimes, navigating the red tape and recordkeeping for this tax could be more expensive than the tax itself,” Umpir said in a statement.
And in Friday’s interview, Smith noted the tax has been a declining source of revenue for local governments as exemptions added over the years resulted in a “grab bag” of confusion and complexity. Due to these changes, he said the bulk of the tax’s impact fell on small businesses that “haven’t carved out our own exemptions.”
“Good riddance to the small business tax, also known as the personal property tax,” he said. “It will be about a $174 million tax cut … Everyone will benefit in the small business community from eliminating the personal property tax. It should have been gone years ago, but we finally got it across the finish line.”
According to WMC, other Midwest states including Minnesota, Iowa, Illinois and Michigan have repealed their own personal property tax laws.
Now that Wisconsin has done the same, Smith is chalking it up as a “significant victory” for small businesses in the state.
“It’s not just so much the amount, it’s the complexity of it because of the exemptions, because of the administration of it,” he said. “There’s no consistency … so it’s been a very confusing tax.”
Dale Knapp, director of research and analytics for the Wisconsin Counties Association, said the organization has heard from many businesses that the worst part about the tax was the reporting requirement.
“It required a lot of time to report and the tax was often relatively small,” he said in an email. “I think they will be happy they don’t have to do that anymore.”
See more from WMC on both issues here: https://www.wmc.org/news/press-releases/
See the NFIB statements here: https://www.nfib.com/wisconsin/news-information/
See more at WisPolitics.com: https://www.wispolitics.com/2023/jfc-approves-3-5b-income-tax-package
— The tax package OK’d by the GOP-run Joint Finance Committee also includes more than $122 million in breaks that would benefit banks, retailers, and companies engaged in research and development.
Here are some of the tax changes included in the package that passed 12-4 along party lines and the price tag for each:
*Create an income and franchise tax deduction for banks on commercial loans of $5 million or less to borrowers located in the state that would be used primarily for a business or agricultural purpose. The move would reduce state tax collections by $65.2 million over the biennium. Backers of the move point out commercial banks pay state income taxes, while credit unions don’t. The move is designed to help banks be more competitive in making loans of that size. It also would reduce the surcharge revenues that banks pay into the state’s economic development fund by $130,000 annually starting in 2024-25.
*Increase the refundable portion of the research tax credit to 25 percent of the credit amount from 15 percent. The move would save companies $17.3 million over the biennium. Evers had proposed increasing the refundable portion of the credit to 50 percent.
Tom Still, president of the Wisconsin Technology Council, says the organization supports the research tax credit expansion.
“Almost all companies in Wisconsin or elsewhere need to innovate to remain competitive,” he said in a statement. “That requires investing in research and, in turn, developing the best ideas that come out of that research into products and processes. The decision to increase Wisconsin’s R&D tax credit from 15% of allowable expenses to 25% is a smart step forward.”
*Boost the sales tax retailer’s discount rate to 0.75 percent from 0.5 percent and increase the maximum discount a retailer may claim per reporting period to $8,000 from $1,000. It would reduce sales tax collections $36.6 million over the biennium. The move would benefit retailers, who collect and remit the sales tax. The discount is meant to help reimburse those costs, though retailers say they would still lose money even at the enhanced rate included in the package.
Wisconsin Grocers Association Vice President for Governmental Affairs Mike Semmann told WisPolitics he is hopeful the governor will approve the measures.
“We’re pleased that the Joint Finance Committee recognized the increased costs, particularly in light of inflation, that retailers are facing,” Semmann said.
*Increase the discount rate that cigarette manufacturers and distributors receive on cigarette tax stamp purchases for their administrative costs to 1.25 percent from 0.8 percent. The move would decrease cigarette tax revenues by $3.2 million over the biennium. Tax stamps must be affixed to each pack of cigarettes before they can be sold in Wisconsin. Manufacturers and distributors receive the discount as compensation for their administrative costs.
See the tax package the committee approved:
— Evers has appointed real estate broker Willie Smith to the Wisconsin Economic Development Corp. Board of Directors.
Smith has served on the Milwaukee City Plan Commission since 2021 and is the executive director of the Northwest Side Community Development Corporation, according to the guv’s office.
“Willie’s combined years of professional experience and demonstrated commitment to and success in promoting community economic development efforts will make him an asset to the WEDC Board of Directors,” Evers said in a statement.
This appointment fills a position vacated by Joe Kirgues, co-founder of the Madison-based startup accelerator program gener8tor.
See the release: https://content.govdelivery.com/accounts/WIGOV/bulletins/360b4e2
<br><b><i>Top headlines from the Health Care Report…</b></i>
— Marshfield Clinic Health System has finished an expansion at its Minocqua facility, adding a dozen inpatient rooms and 45,000 square feet of new space.
<i>For more of the most relevant news on COVID-19, reports on groundbreaking health research in Wisconsin, links to top stories and more, sign up today for the free daily Health Care Report from WisPolitics.com and WisBusiness.com.</i>
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#TOP STORIES#
# Madison-based EatStreet laying off drivers, moving to contract delivery
# Smaller tax incentive deals generating bigger returns
# For years, Wisconsin’s average homes cost $100,000 to $150,000. Here’s what to know as it nears $300,000
#TOPICS#
# AGRIBUSINESS
– Wisconsin faces drought challenges, protects pollinators, and rebounds unemployment fund
http://wisconsinagconnection.com/story-state.php?Id=621&yr=2023
# CONSTRUCTION
– Zenith Tech awarded $17.2M contract for new platform, pedestrian bridge at Milwaukee airport amtrak station
# ECONOMY
– Wisconsin economic development officials seeing ‘amped up’ levels of interest
# ENVIRONMENT
– EPA proposal seeks to tighten loophole that left some coal ash sites unregulated in Wisconsin
– Western Wisconsin utility now generates over half of its electricity without carbon
– MGE and WPL rate hikes would stunt clean energy goals, county charges
# HEALTH CARE
– Froedtert Hospital running at full capacity, CEO eyes expansion project
# LEGAL
– Investors feud over lead plaintiff status in Kohl’s securities lawsuit
– U.S. Supreme Court rules Lac du Flambeau Tribe in Wisconsin not immune from bankruptcy law
# POLITICS
– Republicans approve $3.5B income tax cut, reduce state funds for the UW System
– Wisconsin lawmakers, governor pass measures to support affordable housing
– Wisconsin Republicans pass plan to cut income taxes by 15% on average
# TOURISM
– Visit Milwaukee sets its highest booking goal with expanded convention center
# TRANSPORTATION
– See how the DOT may rebuild or remove I-794 to allow more development
# PRESS RELEASES
<i>See these and other press releases:
http://wisbusiness.com/index.iml?Content=82 </i>
Dykema: Corporate attorney Peter F. Waltz joins Dykema’s Milwaukee office
