MADISON (WRN) A new report suggests lawmakers should think carefully before pursuing additional tax cuts, with new deductions and credits taking effect this year already positioned to remove extra revenue from the state.
The study by the Wisconsin Budget Project examined nine new or expanded tax cuts that will impact Wisconsin taxpayers in 2013. Researcher Tamarine Cornelius says their combined effect will be about $262 million in lost revenue for the state through the 2015 budget.
Cornelius says most of the cuts examined started this year, but will not take full effect until later as they are fully phased in. As a result, their total impact on state finances will not be seen until well into the next budget cycle.
Among the cuts the report looked at was a tax deduction for businesses on income derived from manufacturing or agricultural property. The cut will be phased in over the next four years starting this year, and Cornelius says when it takes full effect it will almost completely exempt many manufacturers in the state from paying Wisconsin income tax, resulting in a ten year cost of about $874 million.
Another loss comes from an income tax deduction for health insurance premiums paid by workers who share in the cost of employer-sponsored health insurance, which is projected to cost the state about $114 million over the next two years.
In the cases of most tax cuts, Cornelius says they are typically offset by further cuts to state spending. She says these types of phased-in costs are something lawmakers should keep in mind as they begin working on the next state budget this spring, especially with Republicans considering possible income tax cuts.