NEWS BLOG (WSAU) We’re starting to hear some details about the state income tax cut that Governor Walker will formally propose next month.
The Governor’s proposal is for a reduction of about $4 a week. By comparison, the same $50,000 a year employee saw their federal payroll tax go up $18. It’s small to the point that the governor can’t make the argument that he’s trying to ‘un-do’ the tax hike from Washington for people who are fortunate enough to live in Wisconsin. To make it come out even, the cost to the state would rise from about $300-million to $950-million – much more than the state’s surplus.
And there are some who don’t want you to the lousy $4. There was a meek argument that the tax break should go towards restoring the state’s earned income tax credit, which was cut under the working poor two years ago. There are two simple arguments to swat that proposal aside. First, the earned income tax credit isn’t really a tax cut – it’s welfare, distributed in the form of tax refund checks. For instance, if you owe only $100 in state taxes but qualify for the a $400 earned income tax credit, you’ll get a $400, not a $100, refund. This isn’t a credit that offsets taxes you’ve paid. It’s a refund, even for people who don’t have a refund coming. Second, the Governor should express the hope people will climb further up the economic ladder over the next few years that they’ll qualify for the tax break instead of getting a bigger tax cut for sitting at the bottom.
The tax break is largely symbolic. But the symbolism is important. Washington is debating how much taxes will go up, and who will pay them. Wisconsin is debating how much money to give back to its people.