[bctt tweet=”Now is not the time to go on a spending spree with one-time revenues. We refuse to spend in a way that we can’t afford, Assembly @SpeakerVos said of the better-than-expected revenue projections. #wiright #wipolitics ” username=”MacIverWisc”]
[bctt tweet=”.@ScottWalker has been out of office for four-and-a-half months, but Wisconsin’s economy — and the state’s coffers — continues to benefit from what the former Republican governor called the ‘Reform Dividend.’ #wiright #wipolitics” username=”MacIverWisc”]
MacIver News Service | May 15, 2019
By M.D. Kittle and Chris Rochester
MADISON — Scott Walker has been out of office for four-and-a-half months, but Wisconsin’s economy—and the state’s coffers—continues to benefit from what the former Republican governor called the “Reform Dividend.”
The fiscal bureau projects the 2018-19 general fund balance will grow from $691.5 million, as estimated in January, to more than $1 billion by June 30, the end of the fiscal year.
New projections show state tax collections over the next three years will come in $753 million higher than previously anticipated. The more robust revenue figures, reported Wednesday by the nonpartisan Legislative Fiscal Bureau, are largely driven by higher-than-expected income and corporate tax collections.
Individual income tax collections are now expected to increase by $460 million between the 2018-2019 and 2020-2021 fiscal years, while corporate/franchise tax collections are projected to grow by $610 million over the period. Meanwhile, sales and use taxes are expected to be $280 million less than previously thought.
As a result, the fiscal bureau projects the 2018-19 general fund balance will grow from $691.5 million, as estimated in January, to more than $1 billion by June 30, the end of the fiscal year.
Republicans took a victory lap Wednesday, pointing to tax breaks in excess of $8 billion and reined-in regulation over the previous eight years — when the GOP controlled both the legislative and executive branches.
[bctt tweet=”The fiscal bureau projects the 2018-19 general fund balance will grow from $691.5 million, as estimated in January, to more than $1 billion by June 30, the end of the fiscal year. #wiright #wipolitics ” username=”MacIverWisc”]Additional revenues are a good sign of a strong economy, and good decision making along the way. By statute we will make a large investment into our rainy day fund. As we fund priorities, we can also use our surplus from last budget & newly anticipated revenues for tax relief. https://t.co/GFF9Q8MVbN
— Scott Krug (@skrug75) May 15, 2019
“These new revenue projections reflect the growing economy and the impact of the pro-growth reforms made by Republicans over the last eight years,” Assembly Speaker Robin Vos (R-Rochester) said in a press release.
”Wisconsin is seeing a return on our responsible fiscal management over the last eight years. As a result, we find ourselves in a great position to cut taxes, make smart investments in infrastructure, and maintain a strong closing balance,” Senate Majority Leader Scott Fitzgerald (R-Juneau) said in a statement.
It’s what Walker, in his last budget, called the “Reform Dividend.”
In a February 2017 op-ed in the liberal Capital Times, Walker wrote that tax relief, at $4.7 billion then, was driving Wisconsin’s economic resurgence. Reducing “excessive regulations and frivolous lawsuits” improved the business climate. In short, Badger State business — manufacturing in particular — was feeling a lot better about things, and they were investing more, hiring more, and paying more because of it.
“Just look at the results,” Walker wrote. “During the past year, more people were employed in Wisconsin than ever before. Unemployment is now down to the lowest level since January 2001, and the percentage of people working in Wisconsin is among the best in the country.”
Wages climbed 5.8 percent in the first two quarters of 2018, 5.1 percent in the third quarter.
More than two years later, those numbers need to be revised — upward. Wisconsin’s jobless rate was 2.9 percent in February and March, and has been 3 percent or lower for nine months, according to the federal Bureau of Labor Statistics. It’s at the lowest level in over 40 years. There are more job openings than workers to fill them, admittedly a sign of economic success and peril. And personal income growth has picked up significantly in 2018, with an average increase of 4.7 percent statewide during the first 11 months. In the first two quarters, wages climbed 5.8 percent in the first two quarters of 2018, 5.1 percent in the third quarter.
A new report on personal income from the Pew Charitable Trusts ranks Wisconsin 33rd in the nation in income growth from 2007 to 2018, but it doesn’t take into account per capita income. The Badger State ranks in the middle of the pack in the more precise measure. What also is lost in the reporting on the analysis is just how damaging the Great Recession and its long, lingering malaise was to one of Wisconsin’s key, higher-wage sectors: manufacturing.
The Legislative Fiscal Bureau report projects personal income to grow by more than 4 percent in each of the next three years, more return on reform investments, Republicans say.
It’s more proof that letting the people keep more of their own money grows the economy, in turn bringing in more in tax dollars. @GovEvers should be wary of changing approaches now. Let’s leave the high-tax, high-debt Doyle days in the past. Wisconsin can’t afford to go back.
— MacIver Institute (@MacIverWisc) May 15, 2019
“This re-estimate proves that our reforms are working; the state is spending less on burdensome regulation while holding the line on taxes for Wisconsinites across the state,” state Sen. Alberta Darling (R-River Hills), co-chair of the Legislature’s Joint Finance Committee, said in a statement.
The GOP Tax Cuts and Jobs Act of 2017, too, is paying big dividends for Wisconsin businesses. Companies like Pewaukee-based Trico Corp. have rewarded their employees with increased benefits, and are looking at future expansion.
‘It’s Very Real’: Tax Cuts Of 2017 Still Fueling Economic Boom Of 2019
Grover Norquist, president and founder of Americans for Tax Reform, recently told MacIver News Service that the tax reforms were designed to ramp up economic growth over the next three to four years. When you cut corporate income tax rates from 35 percent to 21 percent, however, that frees up a lot of capital to reinvest, Norquist said. And U.S. companies have done just that.
Corporate America brought back nearly $670 billion in offshore profits to the U.S. last year, according to the U.S. Commerce Department.
“We saw the growth immediately from the first year, so imagine what will happen over the next two, three, four or five, six years (with) the most powerful, pro-growth, pro-wage increase” tax reform law, Norquist told MacIver News Service in a recent edition of the MacIver NewsMakers podcast.
On Tuesday, the state Department of Revenue reported April revenue collections were up, on an adjusted basis, by 23.7 percent for the month, and up 7.8 percent over the previous year. Revenue Secretary Peter Barca in a letter to Gov. Tony Evers said the increased revenue “is largely the result of the business community’s reaction to federal tax law changes which reincentivized the shifting of revenue across fiscal years.” Barca downplayed economic activity in the increased tax collections, noting that “these are significant one-time tax collections and they are not expected to occur in future years.”
Vos said Republicans plan to put the projected increased revenue toward more tax relief, growing the rainy day fund and paying down debt.
Perhaps, but the position seems to discount the impressive economic figures on the year, not the least of which is U.S. gross domestic product growing by a whopping 3.2 percent in the first quarter, crushing estimates and soothing worries of a looming economic slowdown. Last month, the U.S. economy created 263,000 jobs, with the unemployment rate at a 49-year low.
Democrats were mostly silent on the revised revenue projections on Wednesday. Evers did announce that he will be making an additional $56 million payment on state debt, amounting to, the Evers administration claimed, debt service savings of $70 million.
The Democrat blamed Republicans for eight years of “racking of debt on the state’s credit card,” despite the fact that Republicans have led the state government to eight straight years of surpluses. And that streak of better-than expected revenue came after conservatives were forced to fix a $3 billion-plus budget hole when they took over from Democrats in 2011.
Evers’ budget proposal calls for $6 billion-plus in additional spending from the last biennial budget, including hundreds of millions of dollars in tax increases. His budget blueprint, according to a fiscal bureau review, would leave a $2 billion budget shortfall for the next two-year budget.
But the latest improved revenue projections seem to make the governor want to spend even more. Evers is requesting the Joint Finance Committee spend $15 million in worker training, and he wants an $18 million increase in the Wisconsin technical college system. That appears to be on top of the additional $18 million he called for in his budget plan.
Only after the “critical investments have been made” will the governor support transferring the ending surplus at the close of the fiscal year to the Budget Stabilization Fund, or the “rainy day fund.” That fund has grown to approximately $320 million over the past years, an increase from just over $1 million before Republicans took over.
Vos said Republicans plan to put the projected increased revenue toward more tax relief, growing the rainy day fund and paying down debt.
“Now is not the time to go on a spending spree with one-time revenues. We refuse to spend in a way that we can’t afford,” the speaker said.