Badger InstituteBadger Institute
  • Home
  • Issues
    • Taxes
    • Education
    • Crime & Justice
    • Spending & Accountability
    • Economy & Infrastructure
    • Federalism
    • Licensing
    • Healthcare
    • Civil Society
  • Mandate for Madison
  • Research
  • Magazines
    • Diggings
    • Wisconsin Interest
  • Events
  • Media
    • Podcast
    • Fact Sheets
    • Viewpoints
    • Press Releases
    • Badger in the News
    • Video
    • Audio
    • Testimony
  • About
    • Our Mission
    • Board of Directors
    • Team
    • Visiting Fellows
    • America’s Future
    • Careers
  • Newsletter
  • Donate
  • Contact Us

Subscribe for Updates

Get the latest news and updates from Badger Institute.

What's New

Latest crime figures show a Milwaukee in trouble

March 23, 2023

Wisconsin lawmakers in the dark on broadband

March 16, 2023

The underfunded part of Wisconsin public schooling

March 16, 2023
Facebook Twitter YouTube LinkedIn Instagram
TRENDING:
  • Latest crime figures show a Milwaukee in trouble
  • Wisconsin lawmakers in the dark on broadband
  • The underfunded part of Wisconsin public schooling
  • If we don’t pay for roads, we don’t get mobility
  • Foreseeing the Future of Wisconsin’s Flat Tax
  • Wisconsin voters will be asked about welfare work requirements
  • A state without convictions
  • Why Wisconsin Needs a Flat Tax and Education Reform
  • Donate
  • Newsletter
  • Contact
Facebook Twitter YouTube LinkedIn Instagram
Badger InstituteBadger Institute
SUPPORT OUR MISSION
  • Issues
    • Taxes
    • Education
    • Crime & Justice
    • Spending & Accountability
    • Economy & Infrastructure
    • Federalism
    • Licensing
    • Healthcare
    • Civil Society
  • Mandate for Madison
  • Research
  • Magazines
    • Diggings
    • Wisconsin Interest
  • Events
  • Media
    • Podcast
    • Fact Sheets
    • Viewpoints
    • Press Releases
    • Badger in the News
    • Video
    • Audio
    • Testimony
  • About
    • Our Mission
    • Board of Directors
    • Team
    • Visiting Fellows
    • America’s Future
    • Careers
Facebook Twitter YouTube LinkedIn
DONATE
Badger InstituteBadger Institute
Home » Economy and Infastructure » Wisconsin should consider using some of its surplus revenue for expensing reform
Economy and Infastructure

Wisconsin should consider using some of its surplus revenue for expensing reform

By Katherine  LougheadSeptember 30, 2019
Share
Facebook Twitter LinkedIn Pinterest

Last month, the Wisconsin Department of Revenue released data showing the state’s general fund tax collections for fiscal year (FY) 2019 were up nearly $1.2 billion, or 7.4 percent, from FY 2018, and nearly $703 million higher than anticipated when the state’s FY 2018-19 budget was adopted.

As noted in a memo from Wisconsin Revenue Secretary Peter Barca, much of this collections influx is attributable to a one-time phenomenon in which many businesses, where feasible, postponed earnings from 2017 until 2018 to take advantage of the new, lower federal corporate tax rate under the Tax Cuts and Jobs Act (TCJA). This contributed to a drop in state corporate tax collections in FY 2018 and an influx in collections in FY 2019, not just in Wisconsin, but across much of the country.

Some revenue has already been dedicated to the budget stabilization fund and individual income tax cuts

In any fiscal year in which actual tax collections exceed estimates, current Wisconsin law requires half the excess be deposited into the state’s budget stabilization fund to provide an important cushion for future recessions or other unanticipated revenue shortfalls. Notably, legislation enacted in 2017 excludes from this calculation excess sales and use tax revenue attributable to the influx in online sales tax collections following the U.S. Supreme Court’s 2018 South Dakota v. Wayfair decision. That recurring revenue has since been dedicated to corresponding reductions to the state’s two lowest statutory marginal individual income tax rates.

As a result, an estimated $321.7 million will be sent to the budget stabilization fund for FY 2019, which will nearly double the fund’s current balance of $327.4 million. An additional $59.2 million in FY 2019 Wayfair revenue will be dedicated to downward adjustments to the two lowest marginal individual income tax rates for tax year 2019, as prescribed by 2019 Wisconsin Act 10.

Wisconsin should consider dedicating remaining revenue to expensing reform

After these allocations to the budget stabilization fund and individual income tax rate reductions are made, the general fund is expected to have a balance of $74.05 million in undedicated funds. In the past, surplus revenues have sometimes been used to offer one-time tax cuts to Wisconsinites. With Wisconsin having the 15th highest state tax collections per capita, it is understandable that policymakers would seek to return surplus revenue to taxpayers. It’s important to keep in mind, however, that strategic, permanent structural reforms–not temporary tax cuts – are the types of changes that foster long-term economic growth.

Our recent guide to tax reform in Wisconsin outlines four approximately revenue-neutral options for comprehensive tax reform that rely on sales tax base broadening to bring down overall rates and significantly improve the state’s economic competitiveness. Short of comprehensive reform, however, there are still plenty of ways the state can make incremental improvements to its tax structure to increase the state’s attractiveness as a destination for investment in the Midwest region and in the nation at large.

One especially pro-growth reform would be to conform to Internal Revenue Code (IRC) Section 168(k), which allows investments in short-lived assets (machinery and equipment) to be fully claimed as an expense in the first year, rather than incrementally over the depreciable life of the asset. By removing a barrier that currently hinders investment, a full expensing provision would make it easier for businesses to purchase new machinery and equipment in the short-term, thus promoting growth and enhancing productivity over the medium- and long-term.

Unofficial estimates from the Wisconsin Department of Revenue have indicated conformity with IRC Sec. 168(k) would carry modest short-term costs but that the fiscal effect would turn positive after a few short years. It is worth noting that the federal Section 168(k) expensing provision is scheduled to phase out between 2023 and 2027, so Wisconsin would be well-advised to decouple from the phase-out and simply provide full expensing on a permanent basis.

As of January 2019, 16 states (including neighboring Illinois) conform to the federal provision, thus allowing immediate expensing of short-lived assets at the state level. Three additional states (including neighboring Minnesota) conform to the federal provision with partial addbacks, allowing a given percentage of the bonus depreciation offered at the federal level.

Katherine Loughead is a policy analyst with the Center for State Tax Policy at the Tax Foundation.

News
Share. Facebook Twitter Pinterest LinkedIn Tumblr Telegram Email
Katherine  Loughead

Related Posts

Latest crime figures show a Milwaukee in trouble

March 23, 2023

Wisconsin lawmakers in the dark on broadband

March 16, 2023

The underfunded part of Wisconsin public schooling

March 16, 2023
Categories
Top Posts

Local pols filling old budget holes with massive COVID aid

December 8, 20221,452

This is not four years ago

November 10, 20221,287

A state without convictions

January 12, 2023645

Billions in federal spending in Wisconsin unaudited; results never measured

November 9, 2022491
Archives

Sign Up for Top Picks

Our weekly e-Newsletter with the latest items and updates

Connect with Badger Institute
  • Facebook
  • Twitter
  • YouTube
  • LinkedIn
About Us
About Us

The Badger Institute is a nonpartisan, not-for-profit institute established in 1987 working to engage and energize Wisconsinites and others in discussions and timely action on key public policy issues critical to the state’s future, growth and prosperity.

Facebook Twitter Instagram YouTube LinkedIn

Sign Up for Top Picks

Our weekly e-Newsletter with the latest items and updates

What’s New

Latest crime figures show a Milwaukee in trouble

March 23, 2023

Wisconsin lawmakers in the dark on broadband

March 16, 2023

The underfunded part of Wisconsin public schooling

March 16, 2023

If we don’t pay for roads, we don’t get mobility

March 9, 2023
© 2023 Badger Institute | Privacy Policy | Disclaimer | Sitemap

Type above and press Enter to search. Press Esc to cancel.

This site uses functional cookies and external scripts to improve your experience.

Privacy settings

Privacy Settings

This site uses functional cookies and external scripts to improve your experience. Which cookies and scripts are used and how they impact your visit is specified on the left. You may change your settings at any time. Your choices will not impact your visit.

NOTE: These settings will only apply to the browser and device you are currently using.

CRM Software

Customer Relationship Management Software

Google Analytics

Google Analytics is a web analytics service offered by Google that tracks and reports website traffic. Google uses the data collected to track and monitor the use of our Service. This data is shared with other Google services. Google may use the collected data to contextualize and personalize the ads of its own advertising network.

You can opt-out of having made your activity on the Service available to Google Analytics by installing the Google Analytics opt-out browser add-on. The add-on prevents the Google Analytics JavaScript (ga.js, analytics.js, and dc.js) from sharing information with Google Analytics about visits activity.

For more information on the privacy practices of Google, please visit the Google Privacy & Terms web page: https://policies.google.com/privacy?hl=en

Powered by Cookie Information