Since November the statements out of Gov. Tony Evers, Speaker Robin Vos and Senate Majority Leader Devin LeMahieu have been encouraging. They’re talking compromise on the next state budget.
They all recognize that when you’re problem is a multi-billion dollar surplus (it’s projected to be somewhere in the $7 to $9 billion range) this is not the worst kind of problem to have. There might be enough money to give everybody what they want.
Before we get to handing out money though, let’s recap where we’ve been. The last two budgets have followed the same pattern. Evers has loaded up his budgets with every demand from every interest group in the Democratic base. He’s given new meaning to the term “base budget.” In response, the Republicans have trashed the whole thing and started from scratch, which is a literal base budget, meaning they start from what we’re spending in the last year of the current two-year budget cycle. Then they load up their budget with Republican priorities and send that budget back to Evers. He signs it, with modest tweaks, as he claims credit for the Republican tax cuts heavily weighted toward the rich.
This year could be different. What should happen is that Evers pulls Vos and LeMahieu into the budget writing before he introduces it. He should talk with them frequently and include as much of their agenda as he can, since they’re going to add it anyway, no matter what Evers puts into his own document. In exchange, Evers should demand some of what he wants.
Here are three suggestions.
We might as well go with the flat income tax. I’m not a fan of this idea since it’s less progressive than a graduated tax. But we’ve been flattening out the brackets for decades and Illinois and Michigan, hardly conservative states, already have flat taxes. This will mean a big cut for the richest Wisconsinites, but that’s going to happen anyway and Evers didn’t stop Vos from doing that in the last budget. We could make it somewhat more progressive by just making the first chunk of earnings (say, the first $25,000 — just a stab in the dark here) tax exempt. And we’d probably need to do that since the flat tax is probably going to have to be higher than the current lowest rate of 3.54%, just to provide enough revenues in the long-run.
I like the idea of dedicating 1% of the sales tax to shared revenues. Inside baseball, I know, but important. Shared revenues are no-strings-attached payments to municipalities. When the income tax was enacted over 100 years ago the deal was that 70% of the revenues would go back to local governments. Now it’s a fraction of that and the amount hasn’t been increased in decades. The political problem is that legislators see no advantage in increasing payments to local governments because the money just gets lost in the system. Maybe the local government uses it to hire more cops or firefighters or improve a park, but legislators don’t get any credit. By linking shared revenues to the sales tax they would go up automatically without the Legislature needing to decide on an exact amount. This is good because it means your local governments can, I don’t know, maybe hire more cops or firefighters or improve a park.
Don’t spend one-time money on permanent commitments. This is the main thing. We need to know how much of that surplus is federal COVID relief money and how much is growth in state tax revenues. Then we need to make conservative guesses about how sustainable that growth will be over the next couple of years. The bottom line may well be that what we can prudently spend on permanent tax cuts or commitments to ongoing spending is a whole lot less than we think. One-time money should go into the rainy day fund or be used to buy down debt.
A big surplus could buy more than tax cuts and spending increases. It could provide the means for better, more cooperative relationships between state leaders. Evers, Vos and LeMahieu have a great opportunity here to work together in the broad public interest. It’s up to them not to mess this up.