Wisconsin Legislature Sends Budget, Marketplace Provider Bill to Governor

June 28, 2019

With July 1st right around the corner, Wisconsinites are anxious to find out whether a new two-year revenue and spending plan will get approved before the start of the state’s next fiscal biennium. Governor Tony Evers (D) introduced his budget bill earlier this year, but the amended version the Republican-controlled legislature sent him this week unsurprisingly looks quite different than the bill he proposed. When it comes to tax provisions, Republicans stripped out most of the governor’s proposed changes, which we wrote about earlier this year, and included modifications of their own.

Both chambers also recently passed a separate bill, Assembly Bill 251, requiring marketplace providers to collect sales taxes. Additionally, this bill would dedicate revenue from the anticipated post-Wayfair sales tax collections influx to offset reductions to the state’s two lowest marginal individual income tax rates (which would be calculated later based on actual collections).

Individual Income Taxes

Between Republicans’ proposed rate reduction in the budget (which would bring the 5.84 percent rate down to 5.21 percent starting in tax year 2019) and Assembly Bill 251’s specification that Wayfair revenue be used for rate reductions to both the lowest and second-lowest rates, many Wisconsinites remain hopeful that individual income tax rate reductions will occur in the near future.

Should both the legislature’s individual income tax provisions in the budget and the marketplace provider bill get adopted as is, it is estimated that Wisconsin’s lowest and second-lowest individual income tax rates would be reduced as shown below.

Wisconsin’s Individual Income Tax Rate Schedules, Current and Proposed (Single Filers)

Note: Wisconsin’s bracket levels are adjusted for inflation each year and are not yet available for Tax Year 2020 and thereafter. Source: Wisconsin Legislative Fiscal Bureau; Tax Foundation.

Current (Tax Year 2019)   Proposed (Tax Year 2019)   Proposed (Tax Year 2020 and Thereafter)
4.00% > $0   3.89% > $0   3.76% > $0
5.84% > $11,760   5.08% > $11,760   4.93% > $11,760
6.27% > $23,520   6.27% > $23,520   6.27% > $23,520
7.65% > $258,950   7.65% > $258,950   7.65% > $258,950

Even if the governor rejects these provisions, a law passed late last year prescribes rate reductions to all four individual income tax rates (for 2019 only) in accordance with this year’s Wayfair collections influx.

Transportation Taxes and Fees

When it comes to transportation funding in the budget, the governor proposed increasing the gas tax by 8 cents per gallon, indexing the gas tax for inflation, and removing the minimum markup on gasoline, among other changes. Despite the merits of these proposals, they were rejected by the legislature. Instead, the legislature opted to increase vehicle title fees from $69.50 to $164.50 and vehicle registration fees from $75 to $85. In addition, the budget provides $2.5 million to conduct a mileage-based fee study to explore new infrastructure user fees, such as mileage-based vehicle registration fees and tolling.

Vapor Taxes

Notably, the legislature’s budget departs swiftly from the governor’s proposal in the taxation of e-cigarettes. Under the legislature’s plan, vapor products would be taxed at a rate of 5 cents per milliliter of nicotine or non-nicotine liquid, similar to the 5-cent per milliliter rates already in place in Delaware, Kansas, Louisiana, and North Carolina. The governor’s budget proposed taxing vapor products at 71 percent of the manufacturer’s list price, which would make Wisconsin’s vapor tax one of the highest in the country. 

Will the Governor Use His Partial Veto Authority?

Thus far, the governor has not declared his intentions for the budget or the marketplace provider bill. However, when it comes to the budget, Wisconsin’s governor has exceptionally strong partial veto authorities. Should Gov. Evers neither wish to approve the budget in full nor veto it altogether, he has the option of using a partial veto to strike individual words or lines, and he can make downward adjustments to appropriations figures.

While the legislature specifically amended the budget’s language to try to block the governor from making outright changes to legislative intent, he may yet attempt to make partial changes where possible. To override a veto or partial veto, the legislature would need a two-thirds vote in each chamber, which would be highly unlikely given Republicans’ lack of a supermajority.

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