Scott Walker meets with State Journal editorial board
Wisconsin Gov. Scott Walker makes a point during a meeting Thursday with the State Journal editorial board at the newspaper’s offices. CRAIG SCHREINER - State Journal

Low-income taxpayers in Wisconsin would lose hundreds of dollars in tax credits a year under Gov. Scott Walker’s proposed budget — at the same time the governor wants tax cuts for businesses and investors to boost jobs.

Walker proposes cutting about $16 million a year from the program, which in 2009 paid 273,939 low-income Wisconsin residents a total of $133 million.

Under Walker’s proposed biennial budget, a single mother with two children earning about minimum wage — $15,000 a year — would lose $302 of her $704 Earned Income Tax Credit next year, according to estimates from the nonpartisan Wisconsin Taxpayers Alliance. A two-parent household with two children earning $30,000 a year would see its tax credit cut by $194 to $258, the alliance said.

“Gov. Walker’s raid on the Earned Income Tax Credit is the most egregious example of Walker’s war on Wisconsin families,” said Rep. Tamara Grigsby, D-Milwaukee. “At a time when Wisconsin is supposed to be putting people to work, Gov. Walker is actually stealing from working families in order to give big payouts to special interests.”

The program gives rebates to qualifying taxpayers earning $48,362 a year or less. Many pay no state income taxes because their wages are so low, said Jon Peacock, research director at the Wisconsin Council on Children and Families. The credit is seen as an anti-poverty tool that helps offset federal Social Security taxes and encourages work among the lowest-wage earners.

In an interview Friday, the Republican governor called the tax credit a “redistribution program” that involves “taking money from other taxpayers and giving it to individuals who have a limited tax liability.”

“This is reducing how much money other taxpayers have to give to those individuals,” Walker said.

The governor also proposes cutting $9 million in tax rebates to low-income homeowners under the Homestead Tax Credit. That credit is designed to offset the cost of property taxes for residents earning no more than $24,500 a year, many of them elderly.

The budget proposal would freeze the Homestead credit at the current level rather than allowing it to rise with inflation. Last year, 247,011 taxpayers claimed the credit, costing the state $128 million, according to the Department of Revenue.

Revenue Secretary Rick Chandler said about half of the states do not have an earned-income tax credit, and among those that do, Wisconsin’s is one of the most generous. Chandler said the proposed changes to the Homestead credit would return Wisconsin to the system it had before 2009, when the tax credit remained unchanged for 20 years.

A family earning $20,000 a year that qualified for a $332 tax credit would see that drop to $300 next year under the proposal, the taxpayers alliance said.

“We’re strongly opposed to both changes,” Peacock said. “We think it’s very disappointing that the governor’s proposing changes that amount to tax increases for low-income families at the same time he’s proposing tax breaks for multistate corporations and the wealthy.”

Laura Dresser, associate director of the Center on Wisconsin Strategy, echoed Peacock’s concerns. Combined with Walker’s proposals to cuts millions from health care, child care and other social support programs, cutting the tax credits would be a double whammy for poor families, said Dresser, whose group advocates economic development based on good-paying jobs.

Todd Berry, president of taxpayers alliance, said the Homestead and Earned Income tax credits generally are seen as effective and efficient ways to combat poverty.

“Together, Homestead and EITC do work as sort of a low-cost form of income maintenance, and they certainly make the tax system more fair in the sense that the folks on the bottom end are not only not paying increased taxes, they’re getting tax rebates,” Berry said.

Chandler said cutting tax credits for the poor while increasing tax incentives for businesses and individuals that invest and add jobs to Wisconsin are not in conflict.

“The best thing for people at the lower end of the income scale is to get more Wisconsin jobs,” he said.

But state Rep. Donna Seidel, D-Wausau, sees hypocrisy in the governor’s approach.

“The main thing we have heard over and over (from Walker) about shared sacrifice and no tax increases, as details of the budget unfold, we see that there are in fact tax increases, and the people bearing the burden of balancing our budget are the middle- and low-income — the people who can least afford it.”