Wisconsin Assembly Republicans propose $3 billion tax cut targeting middle class

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Wisconsin Assembly Republicans on Tuesday proposed a nearly $3 billion tax cut targeting the middle class, but it's unclear whether Democratic Gov. Tony Evers is on board after he vetoed a similar tax cut just last month.

"We’re giving the governor a second chance to do the right thing," Rep. Mark Born, co-chair of the Legislature’s budget-writing committee, said at a news conference announcing the plan.

Republicans called for tapping the state's projected $4 billion budget surplus to pay for the tax cut, which would lower the state's third income tax bracket from 5.3% to 4.4% and exclude the first $150,000 of a couple's retirement income from taxes. That would apply to people over age 67.

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The income tax cut would mean that taxes for income between $27,630 and $304,170 for individuals, and between $36,840 and $405,550 for married couples, would drop from 5.3% to 4.4%. Every joint filer earning between $18,420 and $405,550 would be taxed at the same 4.4% rate.

Evers vetoed that same income tax cut in the state budget. He had no immediate comment on the new Republican proposal, but his spokesperson Britt Cudaback posted reminders on social media that Republicans had rejected a 10% middle class income tax cut the governor previously proposed.

Wisconsin Gov. Tony Evers speaks during the annual State of the State address on Jan. 24, 2023, in Madison, Wisconsin. Republicans in Wisconsin's Assembly proposed nearly $3 billion in tax cuts, but Gov. Evers vetoed a similar proposal last month. (AP Photo/Morry Gash, File)

The retirement tax cut is a new proposal. It would exempt the first $100,000 from an individual's retirement income from taxes and the first $150,000 from a couple's income. Under current law, money withdrawn from an individual retirement account, 401(k) plan or other retirement savings accounts are subject to Wisconsin income tax.

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Evers has said he was open to reconsidering cutting taxes if Republicans would look at funding some of his priorities. Evers called a special session for the Legislature to spend more than $1 billion for child care, the University of Wisconsin System, worker shortage programs and other areas.

But Republicans have said they aren't going to do that, a point Born repeated Tuesday.

"The Legislature is not interested in spending more money," he said.

But Republicans are trying to work with Evers as evidenced by them not reviving the income tax cut for the highest bracket, which Evers also vetoed in July.

"We’re not trying to do the same thing," Born said. "We’re trying to find a way to return this money to taxpayers."

It was unclear whether Republicans in the Senate, which must also sign off on any tax cut, agree to the plan. Republican Senate Majority Leader Devin LeMahieu did not immediately return a message seeking comment.

Sen. Rachael Cabral-Guevara is co-sponsoring the tax cut bill and attended the news conference. She said Republican senators want to cut taxes and they will discuss the proposal.

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The Assembly GOP plan comes after Evers vetoed a $3.5 billion income tax cut to just $175 million, which left the average taxpayer with a $3 monthly reduction in taxes. Evers argued then that he was vetoing the tax cut to make money available for other priorities.

Evers' budget director issued a memo on Monday warning that cutting taxes more than $432 million over the next two years could jeopardize about $2.5 billion in federal pandemic relief money the state has received. But Born dismissed that concern, calling it a threat from the Evers administration that won't happen.