JFC Motion on Taxes

In the motion on general fund taxes, JFC created a sales and use tax exemption for goods sold to construction contractors for school, municipal and nonprofit facility projects. This exemption amounts to $11 million over the biennium. The committee also reduced the manufacturing and agricultural (MAC) credit from 5.526% to 5.025% for tax year 2015. By reducing this tax credit, taxes on eligible companies are estimated to increase by $16.8 million in 2015-2016. The committee did not adjust the 7.5% MAC credit for tax year 2016.

The committee increased the standard deduction for married couples, which will result in a $20.9 million decrease in individual income taxes in 2016-17. The deduction for married-joint filers would increase by an estimated $550 and be set at $19,010 in 2016. For married-separate filers, the deduction would increase by an estimated $260 and be set at $9,030.

The committee also voted to federalize the alternative minimum tax exemption starting in tax year 2017. This provision is estimated to save Wisconsin taxpayers $6 million in 2017, $25.4 million in 2018 and $29.9 million in 2019. This adjustment reflects the difference in how Wisconsin defines adjusted gross income.

Another significant shift in the revenue estimates relates to re-estimations of the veterans property tax credit, the Illinois reciprocity payments and earned income tax credits. The total re-estimate for those credits and payments lowers funding projections $21.4 million over the biennium.

The committee also approved the governor’s request for 102 positions at Department of Revenue (DOR) to increase audits and supposedly collect more taxes. DOR must issue a report after the next five fiscal years on the amount of tax revenue generated by the additional auditors.

Some additional changes were made to the tax and retail sale of hard cider. Effective January 1, 2016, hard cider made from pears would be imposed with the hard cider tax, instead of the wine tax.

Economic Development

The committee repealed the governor’s changes to the Historic Tax Credit program, including the program cap. Current law will continue, with the exception of narrowing the provision to pre-1936 buildings.

In addition, the committee adopted the re-estimate of the Job Tax Credit that includes a modification to the refundable Jobs Tax Credit. This will decrease payments by $3.4 million GPR in 2015-2016 and increase payments by $800,000 in 2016-2017.

The committee voted to repeal the exclusion for job creation. Beginning in tax year 2015, repeal the current law exclusion from income under the individual income tax and the corporate income/franchise tax for increased employment in Wisconsin equal to:

  • $4,000 multiplied by the increase in the number of FTE employees for businesses with gross receipts of $5 million or less in the tax year;
  • Or, $2,000 per FTE employee for businesses with gross receipts of $5 million or more.

JFC adopted the governor’s proposal for a new Business Tax Development Credit. In addition, JFC increased the governor’s allocation of $10 million in each year to $17 million in 2016 and $22 million in 2017 and each year after.

The committee approved the governor’s request to phase out lending at the Wisconsin Economic Development Corporation (WEDC). Current levels will be reduced to $10 million in fiscal year 2015-2016 and $5 million in fiscal year 2016-2017. WEDC cannot originate any new loans as of June 30, 2017. WEDC will be able to continue to lend under the Technology Development Loan program however the program will be capped at $3 million a year.

Lastly, JFC reduced WEDC’s operations and program appropriation by $19.8 million over the biennium. The funds will be placed in JFC’s program supplemental appropriation.