Wisconsin Senate to send middle class tax cut bill to Evers (UPDATE)

Gov. Tony Evers voices opposition on Tuesday to a Republican proposal to reduce income taxes, saying he favors his plan, which would all-but eliminate a tax credit that primarily benefits manufacturers (AP Photo/Scott Bauer)

By SCOTT BAUER, Associated Press

MADISON, Wis. (AP) — The Republican-controlled Wisconsin Senate was expected to send a middle class tax cut bill to Gov. Tony Evers, a Democrat, on Wednesday, setting up what is likely to be the new governor’s first veto.

The proposal would be the first bill passed by the Legislature this session. Republicans moved quickly to pass the $340 million-a-year tax cut to get ahead of Evers, who campaigned on a promise to reduce middle-class taxes by 10 percent and planned to include his proposal in the state budget he introduces in two weeks.

Although Republicans and Evers both want to reduce income taxes for middle-income earners, they can’t agree on how to pay for the change. Both sides have said they would be willing to compromise, but neither has shown signs of budging in an early test of how they will govern.

Republicans want to tap budget reserves, a proposal Evers opposes because it would take that money off the table for other spending priorities and could not be repeated in future years. Instead, Evers wants to all but eliminate a tax credit that effectively removes the state income tax for manufacturers. That would pay for about half of his $415 million tax cut. He hasn’t identified how he would pay for the remainder.

Republicans oppose Evers’ plan, saying it would shift $220 million worth of taxes onto manufacturers and stifle economic growth. Democrats cast the tax credit as a giveaway to millionaires and say there’s no evidence that it’s been as beneficial to the economy as Republicans argue.

The Assembly passed the GOP income-tax reduction with no Democratic support on Tuesday, sending it to the Senate, which plans to take it up Wednesday. Evers hasn’t said he will veto the proposal, but he’s repeatedly voiced opposition to the GOP funding source while voicing hopes for a compromise.

Republicans haven’t got large enough majorities in the Senate and Assembly to override a veto by Evers without Democratic support. If Evers were to veto the bill, lawmakers could still reach a compromise with him and include a tax reduction in the state budget, which most likely won’t be voted on until late spring or summer.

Under the Republican bill, the maximum deduction would increase by 20.6 percent for single people making less than $127,000 and joint filers making less than $155,000. The average reduction for all filers would be $170, according to the nonpartisan Legislative Fiscal Bureau.

The Evers plan would provide a 10 percent refundable tax credit for single filers earning below $80,000 a year and married-joint filers making less than $125,000. It would also expand the earned-income tax credit for low-income filers. The average tax cut under his plan would be $225, Evers’ office said.