Don’t show them the money
The Legislative Fiscal Bureau estimated tax revenue would be $636 million over what was previously anticipated, and everyone in Madison suddenly has gold fever. The problem is, the money is not even in hand and both parties are already spending it.
If everything goes according to plan, Wisconsin should see an additional $233 million in 2010-11, $204 million in 2011-12, and $199 million in 2012-13, over previous projections. Even then, Act 10, the budget fix for the last biennium currently being held up in the courts, may cause those estimates to go down by as much as $40 million each year if local governments make the increased contributions from government employees for health and retirement benefits part of the employees’ pre-tax incomes.
For those Democrats crowing about their role in raising taxes in the last budget cycle possibly contributing to the increased revenue estimate, it’s worth noting that corporate taxes are actually expected to decline in the next biennium. According to the LFB, “Compared to the previous estimates, the revised estimates represent decreased corporate income and franchise tax revenues of $55 million in 2010-11, $10 million in 2011-12, and $3.4 million in 2012-13.”
The increased revenue comes largely from increased collections from individual income taxes. Growth in income tax withholding has also increased to 5.5% for the year so far. So much for sticking it to the rich corporations and making them pay their “fair” share.
While the new revenue estimate indicates that Wisconsin may be turning the corner economically, there is still a long way to go. There is even a warning hidden in the LFB revenue estimate. Sales tax revenue is actually expected to go down $240 million.
The anticipated increased revenue may never even materialize. As the Wisconsin Taxpayers Alliance points out, the estimated increase in revenue is only 1.4% to 1.8% of general fund collections, and actually less than the variance between anticipated revenue and actual revenue in 2011. The estimate is only an estimate, and well within the range of past error.
Still, some state legislators are reacting to the “found” money like the poor stiff that just lost everything at the casino, has no idea how he’s going to pay for his mortgage, and finds five dollars in the parking lot. Watch out roulette wheels, here come the legislators and special interest groups.