Here & Now

Explaining the Tax Withholding Veto

Frederica Freyberg:

When the dust settled after its signing, senior political reporter Zac Schultz took a look at some of the vetoes Governor Tony Evers made to the two-year state budget. Zac’s reporting can be seen on the PBSwisconsin online news page. One of the vetoes has been described as “the craziest thing” by a UW-Madison professor who is a tax and budget policy expert. We’re talking about the Evers veto of language that would update tax withholding tables. Yawn, right? Well, not so fast. Zac Schultz joins us from the Capitol to explain. Zac, thanks a lot for joining us.

Zac Schultz:

My pleasure, Fred.

Frederica Freyberg:

Setting this up, Republicans wrote a budget with billions of dollars in tax cuts. The governor signed it but didn’t sign companion language that would align withholding tables. What is the implication of not aligning the withholding tables?

Zac Schultz:

Well, the implication is if you are receiving a paycheck and your employer takes out your state and federal income tax out with every paycheck, then you won’t see an increase in your take-home pay due to these tax cuts. In theory, this will reduce your tax burden which should lower the amount of tax you pay but you won’t see that until you file your tax return next spring. That’s because it’s up to your employer to decide how much to take out according to these tax withholding table the state sets up. We should mention right off the bat, anyone can adjust their own withholding numbers by changing their W-4 through their employer’s HR system, but in general the employer takes care of it and most people don’t mess with their own W-4s.

Frederica Freyberg:

So why does the tax expert, budget expert call this “the craziest thing” he’s ever seen?

Zac Schultz:

Well, it’s coming from a tax expert, and they believe that everyone should want their money as soon as it’s their money and they shouldn’t let the state hold on to their money for an entire year. These are some of the people that will adjust their own withholding tables anytime something happens that merits that. So for them, it’s crazy to think the state wouldn’t automatically do that to get that money back out to the people right away.

Frederica Freyberg:

So again, the state gets to hold on to the pot of money derived from people being overtaxed, but the goveror points out that no one is going to lose that money because they get a bigger refund come filing time.

Zac Schultz:

That’s absolutely correct. The state’s going to hold on to this money. And the reason why this happened, this isn’t a new thing. The last time the tax withholding tables were adjusted was April of 2014. So more than seven years ago. This isn’t just a Governor Evers’ thing. It’s just this is the most recent tax cut. And the reason why it hasn’t been done is it actually costs quite a bit of money to properly adjust the withholding tables in one time state money because then the state doesn’t have that money, it goes out to workers. Once it’s adjusted, then things are equalized again. Republicans put it in the budget because they say we have all the money. We can budget for that one-time payment of $600 to $700 million right now. Governor Evers vetoed that because he says he wants that money available to be reinvested into education if necessary, especially if the requirements change to capture some of those federal COVID dollars, those ESER dollars coming into public schools. So this has implications that go back to education and much broader than just a withholding table.

Frederica Freyberg:

Much broader than just our paychecks, apparently, under the dome there. But there are two more pieces to this. One, that if Evers signed the tax withholding table language, the tax cuts would be permanent? Is that accurate? And does that play any part in the veto?

Zac Schultz:

Well, that’s one of the theories out there speculated by this UW professor as to why maybe in the conspiracy land that Governor Evers wouldn’t do this, hoping the next Legislature would be Democrats and it would be easier to overturn and repeal these tax cuts and then taxpayers wouldn’t notice the difference. I talked to the secretary of the Department of Admin — Revenue, Peter Barca. He said absolutely that is not true, that the DOR can do this whenever they want. State law requires the Department of Revenue to adjust the withholding tables from time to time. The problem is from time to time, we’re already seven years in and it hasn’t happened and there’s a lot of politics and budgetary issues that go into playing with this, which is why Republicans wanted to do it now. Secretary Barca told me that one of the reasons that Evers didn’t do it now is because he doesn’t like being told to do it now. That state language in the budget said it had to be done by October 1. Secretary Barca says they plan to look at the tables over the course of the next year and adjust those accordingly. He just didn’t want a deadline that actually is coming up pretty quickly in terms of making those adjustments now.

Frederica Freyberg:

Wow. Lots of stuff. But let’s touch on another story you’ve been working on. Namely, $750,000 for a specialty charter school in Vilas County. Governor Evers vetoed this. Why did he do that according to your reporting?

Zac Schultz:

Well, this specialty school was created a few years ago. It’s a charter school as part of a public high school in Minocqua. It has a line item and in the last two budget that’s totaled a $1 million. Governor Evers has vetoed it each time. The governor says he doesn’t want to pick winners and losers in education. He doesn’t like the idea that one school, and it’s a tiny school — they serve 30 students right now — would get all this money when he feels public schools in general haven’t been funded properly. Republicans are saying this is a special school that’s been created to serve students with sensory needs and autism. You’ll have to go to the story and learn all the other issues.

Frederica Freyberg:

All right. Well, thank you very much for this reporting, Zac. Again, you can look for that reporting on Monday on PBSwisconsin.org and then go to the news page. Zac, thanks again for your work.

Zac Schultz:

My pleasure. Thanks.