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GOP leader proposes flat income tax; Evers opposes

State Senate Majority Leader Devin LeMahieu, R-Oostburg, watches as Wisconsin Gov. Tony Evers delivers his State of the State address in 2021. The Republican leader of the Wisconsin state Senate plans to propose moving to a 3.25% flat income tax rate on Friday, a proposal that Democratic Gov. Tony Evers has vowed to block. (Amber Arnold/Wisconsin State Journal via AP)

Associated Press

MADISON, Wis. (AP) — The Republican leader of the Wisconsin state Senate plans to propose Friday moving to a 3.25% flat income tax rate, a roughly $5 billion proposal that Democratic Gov. Tony Evers has vowed to block.

The conflict comes as both sides say they want to tap a nearly $7 billion state budget surplus to lower taxes. Evers has also listed other costly priorities that will compete with cutting taxes, including increasing funding for K-12 public schools and giving local governments more money.

Details of Republican Senate Majority Leader Devin LeMahieu’s proposal, provided to The Associated Press ahead of its release, would phase in a flat income tax rate of 3.25% by 2026. Income tax rates are currently split into four brackets, ranging from 3.54% for those earning up to $12,760 to 7.65% for those earning more than $280,950.

LeMahieu argues the move will make the state more competitive. He argues in the memo being sent to lawmakers Friday seeking cosponsors that the move will help Wisconsin businesses that are structured in such a way that they pay personal income taxes.

LeMahieu also argues that Wisconsin’s top rate is out of whack nationally, with 31 states having a top rate that is lower than Wisconsin’s third tier rate of 5.3%. By moving to a flat 3.25% rate, only 11 states will have a lower top individual rate, LeMahieu said.

Other Republicans, in arguing for the move, have also pointed to neighboring Illinois, a state run by Democrats, which has a flat personal income tax rate. Illinois voters in 2020 also rejected a constitutional amendment that would have allowed for lawmakers to change that and institute a progressive income tax system like Wisconsin’s.

Evers and Democrats in the Legislature are against the flat tax, saying it will primarily benefit wealthy people. Under LeMahieu’s plan, for example, those already in the lowest tax bracket would see only about a quarter percentage point tax cut, while the wealthiest would have their tax rate could in half.

Democrats don’t have the votes to stop the measure from passing, but Evers can block it with his veto.

“I don’t see that as something that I could support,” Evers said of the flat tax last month. “I believe that targeting the middle class is where we should be. We should continue to have a progressive tax system.”

Evers is pushing a plan that would cut income taxes 10% for individuals earning less than $100,000 and families earning less than $150,000.

Evers’ $600 million proposal would also cap copays for insulin at $35, repeal the state’s minimum markup law in an attempt to lower gas prices, cut taxes for seniors on fixed incomes, expand property tax relief for veterans with disabilities, and attempt to lower the cost of caregiving and child care.

The debate over what taxes to cut and by how much will be a large focus of the Legislature’s work this year. Wisconsin’s budget is projected to have a nearly $7 billion surplus, fueling support from both Republicans and Democrats to cut taxes. The last state budget, passed by the Republican Legislature and signed by Evers, cut income taxes by more than $1 billion.

Wisconsin’s total tax burden, which is total taxes measured as a share of personal income, fell to its lowest point in more than 50 years in 2022, according to the Wisconsin Policy Forum.

However, the state’s average income tax rates are more favorable to high- and middle-income residents and worse for those with lower income, the Wisconsin Policy Forum reported last year.

Copyright 2023 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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