Wisconsin Plan Cuts Rates, Broadens Bases, Improves State Business Tax Climate Ranking

May 28, 2013

Wisconsin Representative Dale Kooyenga today introduced a bill that reforms a host of elements of Wisconsin’s tax code that would improve the state’s ranking in the State Business Tax Climate Index, moving Wisconsin out of the bottom ten. The plan expands on Governor Walker’s income tax cut which as currently written into the budget, and also includes additional reform that simplifies the code, makes it more neutral to different types of business activity, and trims several odds and ends that have persisted for decades. The result is an Index ranking of 40, up from the current ranking of 43.

A full list of provisions is found in the legislative note, but the major changes include:

  • Reduce income tax rates across the board, while reducing the number of brackets from five to three by 2015 (see table)
  • Eliminate the Alternative Minimum Tax starting in tax year 2013
  • Sunset defunct provisions relating to the now-extinct estate tax “pick-up” credit
  • Recouple depreciation and depletion schedules to the federal standard
  • Eliminate or reduce several distortionary business tax credits, including, but not limited to:
    • Eliminate the jobs credit
    • Make credits for research and development available to passthroughs for 2013, but then repeal the research facilities credit in 2014
    • Eliminate film tax credits
  • Limit the manufacturing and agricultural tax credit
  • Increase the cap on capital losses from $500 to conform to the federal $3,000
  • Ensure that any new federal rule with regard to internet sales tax that increases state sales tax revenue be put toward lowering individual income tax rates

Individual Income Taxes Under Kooyenga Plan

Current Law

Governor's Plan

Kooyenga's Plan in 2015

4.60%

$0

4.60%

$0

4.50%

$0

6.15%

$14,510

5.94%

$14,510

5.94%

$14,510

6.50%

$29,020

6.36%

$29,020

7.60%

$319,460

6.75%

$217,630

6.75%

$217,630

     

7.75%

$319,460

7.75%

$319,460

     
                 

Rates given are for married joint filers

     

These changes improve Wisconsin’s score in our State Business Tax Climate Index as follows:

Index Scores under Kooyenga Plan

 

Current Law

Kooyenga plan

Overall

43

40

Corporate

32

26

Individual

46

45

Sales

15

15

UIT

23

23

Property

33

33

To be sure, more needs to be done to remove problems in the Wisconsin tax code, but this plan is a concerted step in the right direction. It removes some of the special treatment of some businesses (which comes with the cost of higher overall rates), and all the while cuts income taxes across the board. It will be interesting to see how this develops.

Good analysis by the McIver Institute here.

More on Wisconsin.

Follow Scott Drenkard on Twitter @ScottDrenkard.

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