State Legislature Rejects Earned Income Tax Credit Increase

The Legislature’s Joint Finance Committee (JFC) approved a modified version of the 2017-2019 Wisconsin state budget in early September that was signed into law by the Governor later that month.  The $76 billion dollar budget included deep tax cuts for businesses and wealthy Wisconsinites.  Lower- to moderate-income Wisconsinites didn’t fare as well under this version of the budget, which attempted to eliminate the Working Family Credit Program, a program that gives a small tax cut to families with lower incomes.  Governor Walker has vetoed the elimination of the program, but it will certainly see a major decrease in funding.  The JFC also rejected the very modest increase to the state Earned Income Tax Credit (EITC) that was proposed by Governor Walker and would have helped thousands of lower-income working families.

The modest change that Governor Walker proposed was to add $20 million dollars to the EITC to counteract the 2011-2013 state budget, which cut the program substantially, leading to a $114 million tax increase for lower-income families over the last four years.  The state EITC program provides a mechanism that is designed to help move low-income families out of poverty by incentivizing work with a tax credit that helps boost household income.  The way that the state EITC does this is by providing a “refundable” tax credit for workers that have not made enough to pay federal or state income taxes.  This tax credit is important for families with children and has also been a particularly important poverty-reduction tool for women, especially women of color. 

In addition to the state EITC, there is a federal EITC program which has received surprisingly strong bipartisan support and even has even been increased by Congress in recent years.  While this bipartisan support in Congress should serve as an example of how important the EITC is, the Joint Finance Committee opted to reject this modest $20 million increase within a budget of $76 billion. 
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The question becomes one of priorities.  The Joint Finance Committee rejected this plan to provide relief for lower-wage working families while simultaneously cutting taxes for the upper class.  The Committee even approved the lowering of the alternative minimum tax and to eventually eliminate it starting in 2019.  This alternative minimum tax is an annual tax that ensures those making between $200,000 and $500,000 pay a minimum amount in taxes regardless of how many deductions they have.  This could equate to a $7 million dollar tax cut for those in this income bracket.

While some representatives may see these changes as “just cleaning up the tax code,” these are real dollars that impact working families struggling to make ends meet in Wisconsin.  The willingness of the Joint Finance Committee to reject a small increase to a program that helps lift people out of poverty in favor of tax breaks for the wealthy is an incredibly disappointing omen for working families in Wisconsin.

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