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Charlie Sykes: Sykes Writes

How Big A Tax Cut?

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Assembly Speaker Robin Vos is suggesting that the next state budget could cut middle class income taxes by as much as $350 million. That translates into about $200 per family... over two years.

But, as painful as this might be, let's put this in context. Even a cut of that magnitude would not even come close to undoing all of the damage wrought by Jim Doyle's last budget binge, when the Democrat loaded the state's economy with $2.2 billion in new taxes.

That included a $311 million income  tax hike through the creation of a "very high earner income tax bracket," a new 7.75% top rate that jacked up taxes by 15% on income over $232,660 for singles and  $310,000 for married couples. (BTW: the top tax rate in the tax hell of Illinois is.... 5%). As Republicans repeatedly reminded us during the last campaign, this is the tax rate paid by many small businesses, the folks who Walker is counting on to create new jobs.

Early reports suggest that Walker and the GOP will leave that Doyle increase intact, cutting only taxes below $200,000.(This will also result in lower tax bills for high earners, but won't affect the marginal tax rate they pay.)

It's unclear whether he intends to repeal or roll back any of the other Doyle taxes, including "combined reporting," which raised business taxes by $187 million (the tax was tweaked but not repealed in the first budget), or the "Hospital Assessment," which dropped a $650 million bomb on medical costs.

There are undoubtedly good reasons -- some political, some fiscal -- for not pushing a bolder tax cut. One administration insider tells me: "Eliminating combined reporting and/or the top tax bracket as an example are too easy to demagogue, especially when cutting tax rates at the lower brackets has the effect of reducing everyone's taxes."

 But it's an open question whether the Walker cuts will  be enough to jump start an economy still smothered by Doyle-era holdovers.

Compare this modest cut with what Bobby Jindal is proposing in Louisiana.

If Bobby Jindal has his way, Louisiana’s personal and corporate income taxes are headed for extinction.

**

A few years ago, Christian Schneider published this chart on the WPRI website listing the size and scope of the tax increases that Former Governor Jim Doyle dropped on the state's economy.. It remains a useful scorecard of the damage that Doyle left in his wake. Grand total: $2.2 billion.

 

Tax Increase FY 2010 FY 2011
Adopt Combined Reporting $75,600,000 $111,700,000
Adopt Main Street Equity Act 30,300,000 31,000,000
Extend Sales Tax to Digital Personal Property 4,200,000 6,700,000
Cigarette Tax Increase 127,400,000 130,300,000
Tobacco Products Tax Increase 15,200,000 18,000,000
Very High Earner Income Tax Bracket 175,563,000 136,194,000
Reduce Capital Gains Exclusion to 40% 85,100,000 95,500,000
Nonresident Pass-Through Withholding 38,500,000 0
Decouple from Federal Qualified Production Activities Deduction 38,200,000 33,500,000
Affiliated Entities Sales Tax Treatment 19,800,000 21,000,000
Fully Recognize Throwback Sales 57,700,000 37,500,000
Air Carrier Definition 4,000,000 4,000,000
Economic Nexus Standard for Internet Businesses 1,500,000 1,500,000
Internal Revenue Code Updates -40,560,000 -5,490,000
Angel and Early Stage Seed Investment Credits Revisions 0 -7,000,000
Increased Research and Development Investment Credit 0 -5,000,000
Sunset Film Production Services Tax Credit 5,000,000 5,000,000
Delay Credit for Medical Records Technology Investments 4,500,000 10,000,000
Next Generation Farmer Tax Credit (effective 2011) 0 0
Dairy Cooperative Tax Credit -600,000 -700,000
Meat Processing Facility Tax Credit -300,000 -700,000
GPR Total Tax Changes $641,103,000 $623,004,000
     
Hospital Assessment $310,021,000 $339,695,800
Oil Company Profits Tax 100,324,900 171,490,300
SEG Total Tax Changes $410,345,900 $511,186,100
     
NET TOTAL ALL FUNDS $1,051,448,900 $1,134,190,100
Total 2010-11   $2,185,639,000

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