Assembly Republicans plan to study tax system

Assembly Republicans, who called for but failed to enact a major tax system overhaul during the 2017-19 budget, are looking to explore the issue in depth.

JESSIE OPOIEN, THE CAPITAL TIMES

A comprehensive tax overhaul — an elusive pursuit in Wisconsin politics — will be the focus of a new Assembly Republican effort leading up to the 2018 election and 2019 state budget deliberations.

The announcement Wednesday comes as a similar federal effort has reached a critical juncture. Congressional Republicans on Thursday are scheduled to announce a plan to rewrite the federal tax code.

Rep. John Macco, chairman of the Assembly Ways and Means Committee, said his committee’s mission for the rest of the session is to study tax law changes.

He offered few details Wednesday and didn’t set a firm deadline for delivering a detailed proposal, but said the goal would be to keep it revenue neutral, meaning lower taxes in one area would be offset by higher taxes elsewhere.

For example, he said, income tax rates could be lower while some sales tax exemptions are eliminated. Transportation taxes and fees will also be scrutinized, he said.

“We are trying to come up with what is the best ways and means to generate revenue for the state of Wisconsin,” Macco said in an interview. “I’m going to tell them how to do that in the smartest way possible.”

Macco, R-De Pere, said the effort would be different from previous ones because lawmakers are stepping outside the immediate legislative process to study taxes.

Democrats were skeptical that Republican lawmakers would deliver the middle-class tax cuts they favor and instead would benefit corporations and the wealthy.

“The goal has to be providing relief to those individuals who need it most,” said Rep. Chris Taylor, D-Madison. “That’s not the population John Macco is going to target.”

Assembly Speaker Robin Vos, R-Rochester, said the process for coming up with a plan will be transparent, include ample public input and develop “a new tax code that is fair and simple with lower rates.”

Senate Majority Leader Scott Fitzgerald, R-Juneau, didn’t respond to a request for comment.

New members

on committee

Macco’s committee, which historically hasn’t had the same tax-writing oversight as the powerful House Ways and Means Committee in Washington, D.C., is adding four new members: three Republicans and one Democrat. It will have four subcommittees devoted to sales and use tax, personal and corporate income taxes, local government taxes and funding and excise taxes and fees. Each committee will be expected to report on the history and purpose, current problems and possible changes to their respective form of taxation.

Jon Peacock, research director for liberal-leaning Kids Forward, applauded Macco for reviewing how the tax code can be simplified, noting there is broad agreement that the state and federal tax codes have too many special-interest tax breaks. But he was also skeptical about the effort.

“Although state-level tax ‘reform’ could be positive, I worry that it might resemble the latest federal proposals that are primarily intended to create new and larger tax exemptions for the very wealthy, to the detriment of low- and middle-income taxpayers,” Peacock said in a statement.

Todd Berry, president of the Wisconsin Taxpayers Alliance, said he has been interested in fundamental tax simplification and reform since the 1970s. He said he has been encouraged by continuing interest from Assembly Republicans on the topic.

“It is rare that such impetus comes from the legislative branch,” Berry said. “In the past, major reform initiatives have come from the executive branch, and particularly the Department of Revenue.”

Walker ‘open’ to idea

Gov. Scott Walker declined to take questions on issues unrelated to his trip to Israel during a call with reporters on Wednesday, but a spokesman said of Macco’s effort that the governor “is open to further reform so long as we keep driving the tax burden down for the hard-working taxpayers.”

Department of Revenue Secretary Rick Chandler said in a statement that Wisconsin’s overall tax burden as a percentage of personal income has fallen below the national average and the state’s tax ranking is the best it has been in 50 years.

“We are always interested in finding ways to further improve Wisconsin’s tax climate,” he said.

Republicans cut income tax rates in the 2013-15 budget that reduced taxes by $423.6 million per year, according to Department of Revenue data. Walker’s office says his tax changes since taking office in 2010 have cumulatively reduced taxes by $8 billion.

If the tax reform pitch a year before an election sounds familiar, it could be because four years ago Walker launched a series of tax reform meetings led by Chandler and Lt. Gov. Rebecca Kleefisch.

After 22 closed-door, invite-only meetings and hundreds of online comments, Chandler and Kleefisch issued a 19-page report in December 2014 concluding taxes are “too high and too complicated.” The report offered no recommendations for changes.

Also in 2014, the conservative Milwaukee-based Wisconsin Policy Research Institute (now the Badger Institute) released a study showing how Wisconsin could boost its economy without bankrupting state government by cutting income and property taxes, while broadening its sales tax on consumer goods and services — including groceries.

“I can’t say that we’ve had a big impact with that,” Badger Institute president Mike Nichols said.

Nichols noted a recent Tax Foundation report ranked Wisconsin’s business tax climate 38th in the nation, and said the state’s mix of high income and property taxes is harmful to the economy.

In response to the WPRI report, Walker said in 2014 his goal was to cut taxes in each budget, but “it isn’t specific to a particular tax or form of tax — it’s what will ultimately have the biggest bang for the buck in terms of driving more prosperity, more opportunity and more jobs to the state.”

Property tax is focus

In the past two budgets, the focus has been on lowering property taxes. Walker proposed cutting income taxes in his latest budget proposal, and Assembly Republicans came forward with a proposal to raise transportation revenue while moving toward a 4 percent flat income tax, but both proposals were ultimately scuttled.

Macco pointed to other efforts to rewrite the tax code in 1997 and 2004 that didn’t work out, but he said the difference this time is he will be driving the process with the support of legislative leadership.

“I’m not at all interested in doing an exercise for exercise’s sake,” Macco said. “The problem we’ve had in the past in tax policy is we discuss it within the framework of what we have now and I’m saying, ‘Let’s get out of that box and have the entire conversation.’ ”

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Matthew DeFour covers state government and politics for the Wisconsin State Journal.