Here & Now

Todd Berry Discusses Governor's Tax Cut Proposals

Frederica Freyberg:

But first, Governor Walker’s tax reforms were his showcase items Wednesday night, including a proposed $406 million property tax cut.

Scott Walker:

This is more than four times larger than the property tax relief we passed last year, and it is vitally important to protect working families, senior citizens, farmers and small businesses. A typical homeowner will see an actual reduction– reduction– an actual reduction of $101 on their next property tax bill.

Frederica Freyberg:

For analysis of the governor's tax proposals we turn now to the man who studies property tax bills for a living. He’s the president of the Wisconsin Taxpayers Alliance, Todd Berry. Todd, thanks for being here.

Todd Berry:

Thank you. Pretty boring work.

Frederica Freyberg:

I’ll say. We’re glad we have you to do it for us. What is your opinion of the governor’s property tax cuts?

Todd Berry:

Well, it’s focused at the technical colleges. And I think, in theory, there’s a lot of merit to having a big tax reform discussion in the next state budget about whether we should fund technical colleges with property taxes. I can remember Speaker Loftus talking about this 20, 30 years ago. So, you know, policy-wise I think it has merit. The question becomes, what happens in the next budget. Because this is– the way they’re accomplishing this, they’re spending more money. They’re spending money on tech colleges to force the property tax down. And so that creates, you know, a liability, a promise, in the next budget.

Frederica Freyberg:

Oh, absolutely. I know that the technical college system says they very much like this idea, and that they had actually been in conversation about it with the governor. But it does beg the question, you know, does it put the tech colleges in jeopardy, as you say, in the next budget if the state decides, oops, we don’t have that money.

Todd Berry:

Well, perhaps. The flip side of that is, it puts the state in the position to link its money with the property tax, which we haven’t had that linkage before with tech colleges. So there’s going to be fiscal and political pressure on the state to keep that money that the tech colleges up.

Frederica Freyberg:

Absolutely. Well, now what about the numbers themselves, earmarking this $406 million in technical colleges? Some have said maybe this should be held back to address a projected state budget shortfall.

Todd Berry:

Um-hum, well, there isn’t a projected state budget shortfall in the real sense. There are commitments that have been made, and if our economy doesn’t grow at all, then we have a problem. It’s not a structural deficit, although that’s what it’s become to be called. It’s an imbalance that may or may not be a problem. It certainly is a vulnerability, that we’ve made promises in the next budget.

Frederica Freyberg:

You have often been quite fiscally conservative in this regard. Is that over?

Todd Berry:

Is that over?

Frederica Freyberg:

For you. I mean, because often you talk about the imbalance, or the–

Todd Berry:

Oh, yeah, yeah. Well, you know, surpluses solve a lot of problems. I think, as I said on Public Radio on Monday, I think you got to take a deep breath and be a little bit cautious in times like this because we have a long, rich history of underestimating revenues at this part of a cycle and then creating a surplus and then committing it, and then two or three years later ending up having painful spending cuts and big tax hikes. That’s exactly what happened in 08/’09-’10. So I can see why there’s some uneasiness in some quarters of the legislature.

Frederica Freyberg:

Let’s take a listen to the governor’s plan for income taxes.

Scott Walker:

We reduced income taxes by $98.6 million to ensure we don’t leave anyone behind in our economic recovery. We will target this tax relief to the lowest income tax bracket. If you’re a family of four making $40,000, your savings will be $58. No one will get a bigger savings than that.

Frederica Freyberg:

Well, so income tax cut of roughly $60 per filer. Is that a good use of this surplus again? Or could this $100 million have gone to pay toward the shortfall or maybe it’s not a shortfall?

Todd Berry:

Yeah, yeah. Well, first of all, I think it’s important to remember that we’re in the middle of a $650 million income tax cut. So there is something under the way. So in that context $98 or $100 million is not major. It’s delivered in a clever way because by reducing the lowest rate, it does benefit everybody. So you can have your cake and eat it, too.

Frederica Freyberg:

Now, on the consumer side of both these things, say it’s $100 you’re saving in property tax and 60-some dollars you’re saving in income tax. Do the consumers turn around and spend that, thereby boosting the economy?

Todd Berry:

Well, in a $250 billion state economy, I think we’ve just got to keep that in mind, that, you know, $100 million here or there is not enough to move the economy one way or another. You know, tax cuts over a long period of time can change the– you know, the fiscal climate of the state and send the right signals. But you’re not going to– the state can’t stimulate the economy with tax cuts the way the federal government can unless you do massive ones.

Frederica Freyberg:

But in your view, presumably, because you are kind of a tax hawk, this is all good news.

Todd Berry:

Well, I am more cautious because I’m not sure that the– what you get now is worth a bigger tax increase later. And I’m not saying that’s going to happen, but that’s what history shows. We– surplus monies burn a hole in our pocket. We immediately spend them or deliver them back in tax cuts. They’re the same, you know, fiscally. And then a couple years later, see 2007, ’08, ’09, we end up with really painful spending cuts and tax increases. I'm not sure the public– I think by now, with this up and down and up and down over the last couple of decades, the public has that sort of figured out. They have a longer term view.

Frederica Freyberg:

Let’s listen what this governor said about the withholding.

Scott Walker:

Earlier today I directed revenue secretary, Rick Chandler, to adjust withholding for state income taxes by $322.6 million. So you can keep more of your hard-earned paychecks.

Frederica Freyberg:

My understanding is you like this idea.

Todd Berry:

Well, we’ve written about it at the Taxpayers Alliance before this governor, going back into the prior one. And we were simply making the point that for the last 10 to 15 years the state has been over-withholding income taxes by 20% or more, a billion or more a year, and that it was really doing it to take our money, invest it, manage their cash flow when they were having terrible budget problems and then give it back to us a year later. So there’s something to be said for not taking it to begin with. It does potentially improve the state’s financial statements, and it does give people a little more money in their pocket. If you’re over-withholding by a billion, whatever, $300 million is part of that, but it leaves them quite a bit to refund probably.

Frederica Freyberg:

All right. Todd Berry, we need to leave it there. Thanks very much.

Todd Berry:

You're welcome.