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Income taxes would be cut across the board by $3.5 billion under a plan announced Thursday by Republicans who control the Wisconsin Legislature’s budget-writing committee, a proposal that Democrats assailed as being skewed to benefit the wealthy.
Republicans also plan to cut the University of Wisconsin System’s budget by $32 million despite a projected record-high $7 billion state budget surplus, leaving the university nearly half a billion dollars short of what it requested, GOP leaders announced Thursday.
The cut comes in reaction to Republican anger over diversity, equity and inclusion, or DEI, programs on the system’s 13 universities. Republican leaders have said the $32 million is what they estimated would be spent on those programs over the next two years.
“They need to refocus their priorities on being partners on developing our workforce and the future of the state and we’re hopeful that they’re going to be ready to do that as we move forward,” Republican state Rep. Mark Born, co-chair of the Legislature’s budget-writing committee, said at a news conference.
Both plans, part of the larger state budget, must pass both the Senate and Assembly before going to Democratic Gov. Tony Evers. He can make changes with his line-item veto power before signing the two-year spending plan into law.
The budget-writing Joint Finance Committee was scheduled to add both measures among the final pieces of the two-year state budget later Thursday. The budget will likely be passed by the state Senate and Assembly next week, sending it to Evers for his consideration. Evers can either sign the budget, veto it or make partial vetoes.
Top tax rate gets biggest cut
Under the income tax cut, which would be retroactive to Jan. 1, 2023, the average reduction would be 15% for all filers or $573, Republicans said. The state would go from four to three brackets, with the lowest rate dropping to 3.5% and the highest rate being 6.5%.
Evers, who had proposed a tax cut primarily benefitting low and middle-income earners, criticized the GOP plan.
Evers “believes that when we deliver tax relief, it should be real, responsible and targeted to the middle class,” his spokesperson Britt Cudaback said on Twitter. “The GOP is doubling down on tax breaks for wealthy millionaires and billionaires instead of prioritizing relief for working families.”
The largest percentage point drop would be at the highest rate, paid by married couples who earn more than $405,550 or single people making more than $304,170. That rate would drop from 7.65% to 6.5%. The middle two brackets would collapse so all married couples earning between $9,210 and $202,780 would pay 4.4%. The lowest rate for the poorest taxpayers would drop only slightly, from 3.54% to 3.5%.
The income tax cut will be paid for by tapping the state’s projected $7 billion surplus. Republicans were also devoting $622 million to keep property taxes in check.
Some Republicans, including Senate Majority Leader Devin LeMahieu, had wanted even deeper cuts. LeMahieu proposed moving to a flat income tax rate of 3.25% by 2026, saying the state surplus offered a “once-in-a-lifetime opportunity” to make generational tax reform. But fellow Republicans balked at that plan, which would have cost nearly $5 billion over two years.
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. It also found that that in recent years, Wisconsin income tax rates have declined more for higher income earners than they have for those with lower incomes.
Overall, however, when compared to national averages, rates in Wisconsin are higher for higher incomes and lower for lower incomes.
Republican Rep. Terry Katsma said the cuts were designed to keep Wisconsin competitive with neighboring states with lower rates, like Illinois, which has a flat tax of 4.95%.
“We have to be competitive with the states around us,” Katsma said.
But Democrats objected, saying the tax plan would make the state less competitive when combined with GOP budget decisions to end funding for child care programs and cut spending for the University of Wisconsin.
“Those issues were ignored, denied, for this, what they came out with today, which was primarily a tax cut for the very wealthy,” said Democratic Rep. Tip McGuire.
“They are making Wisconsin a place that is unattractive and inhospitable to women and to families,” said Democratic Sen. Kelda Roys.
The last state budget, passed by the Republican Legislature and signed by Evers in 2021, cut income taxes by more than $1 billion.
UW warns of budget cuts, tuition hike
The proposed $32 million cut to the UW System comes despite warnings from UW President Jay Rothman of tuition increases and possible campus closures if the system’s budget was cut.
Rothman said in a statement that the cut “will diminish student access and affordability at our public universities. This is a missed opportunity and a significant setback to Wisconsin’s efforts to win the war for talent.”
The university system could get the $32 million back at a later date if it shows how it would be spent on workforce development efforts, and not diversity, equity and inclusion programs, lawmakers said.
Evers, a former member of the UW Board of Regents, threatened to veto the entire state budget if the university’s budget was cut. Evers has said that cutting the university’s budget given the state’s surplus would be “irrational.”
Republicans earlier this month rejected the university’s top building project — a new engineering building on the flagship Madison campus. Born left open the possibility that the project could be funded later, saying discussions about that would continue.
University leaders asked for a nearly half-billion dollar funding increase, citing financial difficulties stemming from a decadelong tuition freeze and inflation.
Evers proposed a funding increase of more than $300 million for the university system, an amount that already had university leaders saying they would have to consider raising tuition to make up the difference from what they requested.
Democrats on the committee slammed the cuts as the latest in a series of budget decisions they say will hurt the state’s economy.
“We reject the entire concept of what they’re doing, that the university system would be cut at a time of surplus,” Democratic Rep. Evan Goyke said. ”I don’t see in the budget any initiatives that will catch the attention of young people to either come here or to stay here.”
Republican Assembly Speaker Robin Vos has been the loudest critic of the university’s diversity efforts, saying at the state party convention on Saturday that he was embarrassed to be a UW alum because of it.
He called DEI “the single most important issue that we are facing as a people, as a nation and as, really, humanity.”
Vos calls the efforts a waste of taxpayer money that only sow racial division.
“For people on the left, (DEI) has become their new religion,” Vos told reporters last week. “They no longer go to church on Sunday, but boy, are they trying to make sure that everybody is evangelized on campus, that there’s only one acceptable viewpoint. That’s not what I think taxpayers should be funding.”
The university should not be “forcing these students to view the world through a lens of race, gender or economic class just to obtain one of these degrees,” Republican state Rep. Alex Dallman said when announcing the cut.
“UW System ought to be teaching them different things, such as critical thinking and problem solving, teamwork and collaboration, professionalism and communication skills,” Dallman said.
Rothman, speaking after a WisPolitics.com event prior to the vote, said at times that DEI efforts can sometimes go too far. Last month, Rothman ordered campuses to stop asking job-seekers to supply statements on their applications describing how they would support equity and diversity.
“This is an evolving process,” he said Thursday.
The fight reflects a nationwide cultural battle over campus diversity efforts. Republican lawmakers this year have proposed more than 30 bills in 12 states to limit diversity, equity and inclusion efforts in higher education, an Associated Press analysis found in April.