Here & Now

Sens. Fitzgerald and Larson Discuss Tax Cut Proposal

Frederica Freyberg:

But first, work got underway at the state capitol this week on Governor Walker’s half-billion dollar property tax and income tax plan, including testimony from Brookfield Republican representative, Dale Kooyenga, before the assembly jobs committee.

Dale Kooyenga:

As you move towards higher tax rates, there is a direct correlation between those higher tax rates and further insolvency. Why is that? Because high tax rates are a drag on the state’s economics and a drag on the state’s economics are on drag on the state’s solvency. This package, not only is it putting $400 million towards Wisconsin’s debt and in the rainy day fund, but is also a pro-growth tax cut that is going to make us more like those solvent states and less like those insolvent states.

Frederica Freyberg:

The state assembly has fast-tracked the governor’s tax cuts and expects to put the $505 million proposal to a full vote early next week. Not so fast, says the leader of the state senate, where some changes might need to be made to win over moderate Republicans worried about the state's projected short-fall. Meanwhile, Democrats have their own ideas. Tonight, Republican senate majority leader, Scott Fitzgerald, and Democratic senate minority leader, Chris Larson, join us. Thanks to both of you.

Scott Fitzgerald:

You bet.

Chris Larson:

Thanks for having me.

Frederica Freyberg:

First to you Senator Fitzgerald. What is your reaction to the assembly moving so fast on this bill?

Scott Fitzgerald:

Well, the procedure that the speaker is using to run the governor's bill through a standing committee, and then ultimately to the floor of the assembly, which it looks like they’re still heading on that course, I’ve told the speaker I disagree with it. I think it’s something we haven’t seen in the legislature in a number of years. We all know that the joint finance committee is where compromise is always achieved. And they’ve got the resources and the technical kind of experience to deal with a bill of this size. So I’ve told him I disagree with it. And I’m not sure why they’re pushing so hard because the bill has to go to the finance committee at some point.

Frederica Freyberg:

So what happens then from your side? What do you do? You put it into joint finance?

Scott Fitzgerald:

Yeah. As soon as the bill is messaged over to the senate, it will be immediately sent to the finance committee, where our version of the bill is as well. And then we’ll have to meet and come up with a compromise at some point.

Frederica Freyberg:

What have you heard from the governor on this?

Scott Fitzgerald:

The governor is flexible. The governor says, listen, I’m not tied to the bill that I introduced in the state of the state. I will certainly allow changes to be made in the legislature and I’ll sign those changes. So he’s been flexible, which is great, because it gives me a lot more time and certainly there’s a willingness to work with members to get to the right point on this.

Frederica Freyberg:

Senator Larson, notwithstanding kind of the infighting between the Republican leaders on the process of this, does it seem likely to you that the bulk of these tax cuts will eventually go through? And, if so, what is your position on spending the surplus in this way?

Chris Larson:

Yeah. Well, I think for Democrats, we want to see what ends up happening long-term. This is a projected surplus, so I think that’s the important thing to remember, is that the money is not in hand. It’s projected. And so our expectations really changed as a state because we were in a recession. We thought that we’d be getting less revenues than we are actually projected to now. So for us, we’d like to make sure that we are not going to start spending this money willy-nilly before it’s actually here. And the big thing we’re focused on is the projected structural deficit of $800 million. We want to make sure that we are addressing that head-on before we start spending money out. So we’re– you know, folks are always– we always think tax cuts sound good, but we need to make sure we’re doing the responsible thing before we start handing them out.

Frederica Freyberg:

Some people might say doing the responsible thing and looking toward the shortfall doesn’t sound like a Democratic position.

Chris Larson:

Well, I think we always– we’re always mindful of trying to go after the structural deficit. Democrats will be coming out with a plan that will reduce that to zero. From there we can also allow for a better tax cut for the middle class. I think we can do this in a responsible way, while at the same time making sure we’re not setting the bar really low for the state of Wisconsin going forward. And that’s the big worry about this, is some of these tax cuts are permanent and I think they’d hurt our state going forward long-term. We want to make sure there’s a good fund for the programs that we care about, like education, higher ed and job training.

Frederica Freyberg:

Senator Fitzgerald, what about that? What are these concerns?

Scott Fitzgerald:

Yeah. I mean, the one thing that I would underscore is that there certainly will be a significant property tax relief package, probably the $400 million that the governor introduced. So that will absolutely remain part of the package. And there will be some type of income tax cut that works its way through all the brackets that we have here in Wisconsin. The question is whether or not you leave revenue in the rainy day fund, the budget stabilization fund as it's known, or the statutory balance, which would be available in the next budget cycle. If you put those dollars in that statutory balance, then it would be there to offset some of this structural deficit. And if you go back to 2010, it was something that a lot of Republicans talked about. And I would even say, I mean, it’s not the moderate Republican. It’s the ultra conservative kind of fiscal member of my caucus that’s really worried about, you know, if we don’t have any revenue left and there is some type of downturn, you can’t grow your way out of it. Where is that going to leave us? So, I mean, in that regard, that’s kind of the one concern that’s still out there with some of our members at this time.

Frederica Freyberg:

Senator Larson, you said that Democrats had a plan to reduce that shortfall to zero? How so?

Chris Larson:

Well, by making sure that we’re using this money to offset what the structural deficit is projected to be. And we’ll be unveiling it in the next week. But the trick is, is to not have a trick. This is an election year gimmick. Governor Walker is running for re-election. His poll numbers are going down. So it makes sense that he doesn’t want to plan for anything that happens after election day this November. For us, for those of us that are planning on making sure that Wisconsin is on a good path long-term and that the workers, the students and the people who live here are having a good plan for the rest of the state that don’t care necessarily about the election, we want to make sure that there’s a good plan for all of us going forward. And that includes reducing the structural deficit so that we are not going to have huge– either huge tax gains– tax hikes next year or have another round of debilitating cuts to programs like k-12 education, like higher ed, like job training.

Scott Fitzgerald:

I don’t think this is an election year gimmick. This is a promise Republicans made to the taxpayers, that we were going to continue to chip away at Wisconsin’s ranking as a high-tax state, and we’ve continued to do that. And I also think the governor’s in great shape with the electorate and as a result of the reforms that have been put in place. He’s made that case to that middle group of Wisconsinites that oftentime are the swing voter. So I think this package is going to be well-received by the taxpayers, and ultimately in November, sure, it will help. Good policy is good politics, and it will help the governor get re-elected and I’m sure that will happen.

Frederica Freyberg:

Senator Larson, go ahead.

Chris Larson:

Yeah. Just a pure example of how this is a gimmick is the withholding tables. When people get a new job, they fill out a form that says how much they would like to withhold for their state taxes. Some people put higher. I'm one of those people. Because then you get a return all at once that you can spend or do what you want with. What Governor Walker is doing as part of this proposal is saying he knows better than all the individuals of this state, and he is reducing their withholding. So they're going to start getting– Whether they want it or not, all of a sudden they’re going to start getting more money on their paychecks, thinking they can go out and spend this, they’re not going to owe it. But the fact is, they will. It’s putting off the time they have to pay those taxes for after the election. So again, for a governor who ran against trying to use gimmicks to solve budget problems, this is a governor who’s more than willing to use gimmicks in order for election year politics.

Frederica Freyberg:

What about the withholding as a gimmick?

Scott Fitzgerald:

It’s not a gimmick. It’s something that probably should have been adjusted a number of years ago. When we’re collecting 120% of what the state needs and then holding on to a billion dollars, that’s unacceptable. And that was identified numerous times. And it’s not something that needs legislative action. It’s simply something that the governor can do unilaterally by asking the Department of Revenue to make those adjustments and that’s what they’re doing right now. But no, you know, we want to make sure people understand it’s going to be less of a rebate check when they do their taxes in April of ’15. But as far as a gimmick, no. I think it’s just an adjustment that had to be made, and certainly this was the time to do it because there are some dollars involved in the one-time implementation.

Frederica Freyberg:

Now, regardless of kind of the fine points on how best to handle the surplus and these tax cuts, is it your position that cutting taxes on individuals and property taxes grows the economy?

Scott Fitzgerald:

Absolutely. I think it’s a fundamental principle that oftentimes, you know, I think is not described correctly, as some type of trickle-down. But the fact of the matter is, you put more money in people’s pockets and oftentimes that means the economy is going to expand and its going to grow. And that’s what’s happening in Wisconsin right now.

Frederica Freyberg:

Senator Larson, do you think tax cuts in this way are the best way to grow the economy and jobs?

Chris Larson:

Well, I think– I appreciate that Senator Fitzgerald and Governor Walker want to take credit for not just Wisconsin’s surplus, but for all 50 states having a surplus based off of their policies, but that’s not the case. The entire country’s economy is moving up. But it's about where we're at in relation to that. Wisconsin is right now 37th in the nation in job creation, so I think, while we are continuing to try and move ahead of other states, we should be doing more on that front. I think we should be investing in job creation, in doing things to make our state better off instead of continuing to dig further down to the bottom. I think Wisconsin can do better than our Midwest neighbors, and right now we are behind in job creation in every state that we touch.

Scott Fitzgerald:

The hard number that we rely on is the increase in sales tax and income tax collections, also corporate. I mean, if we see that number, that’s something that typically indicates to a Wisconsin legislator things are happening out there.

Frederica Freyberg:

We need to leave it there. Senator Fitzgerald, Senator Larson, thanks very much.

Scott Fitzgerald:

Thank you.

Chris Larson:

Thank you.