Tag Archives: tax cuts

GOP plans tax overhaul, mostly for the rich, but largely ignores deficit

Congressional Republicans are planning a massive tax overhaul next year, a heavy political lift that could ultimately affect families at every income level and businesses of every size.

Their goal is to simplify a complicated tax code that rewards wealthy people with smart accountants, and corporations that can easily shift profits — and jobs — overseas. It won’t be easy. The last time it was done was 30 years ago.

Senate Majority Leader Mitch McConnell, R-Ky., and Speaker Paul Ryan, R-Wis., have vowed to pass a tax overhaul that would not add to the budget deficit. The Washington term is “revenue neutral.”

That means that for every tax cut there has to be either a spending cut or a tax increase, creating winners and losers. Lawmakers would get some leeway if non-partisan congressional analysts project that a tax cut would increase economic growth. Prior studies have found unlikely, including “Taxes and the Economy: An Economic Analysis of the Top Tax Rates Since 1945,” a 2012 study from the Congressional Research Service. 

Passing a massive tax overhaul will require some tough votes, politically.

Some key Republican senators want to share the political risk with Democrats. They argue that a tax overhaul must be bipartisan to be fully embraced by the public. They cite President Barack Obama’s health law — which passed in 2010 without any Republican votes — as a major policy initiative that remains divisive.

Congressional Democrats say they are eager to have a say in overhauling the tax code. But McConnell, who faulted Democrats for acting unilaterally on health care, is laying the groundwork to pass a purely partisan bill.

Both McConnell and Ryan said they plan to use a legislative maneuver that would prevent Senate Democrats from using the filibuster to block a tax bill.

McConnell says he wants the Senate to tackle a tax plan in the spring, after Congress repeals Obama’s health law. House Republicans are more eager to get started, but haven’t set a timeline.

Some things to know about Republican efforts to overhaul the tax code:
House Republicans have released the outline of a tax plan that would lower the top individual income tax rate from 39.6 percent to 33 percent, and reduce the number of tax brackets from seven to three. The gist of the plan is to lower tax rates for just about everyone, and make up the lost revenue by scaling back exemptions, deductions and credits.

The plan, however, retains some of the most popular tax breaks, including those for paying a mortgage, going to college, making charitable contributions and having children.

The standard deduction would be increased, giving taxpayers less incentive to itemize their deductions.
The non-partisan Tax Policy Center says the plan would reduce revenues by $3 trillion over the first decade, with most of the savings going to the highest-income households.

That’s not revenue neutral.

Small business owners would get a special top tax rate of 25 percent.

Investment income would be taxed like wages, but investors would only have to pay taxes on half of this income.
Senate Republicans have yet to coalesce around a comprehensive plan, or even an outline.
Trump’s plan has fewer details. He promises a tax cut for every income level, with more low-income families paying no income tax at all.
The Tax Policy Center says Trump’s plan would reduce revenues by a whopping $9.5 trillion over the first decade, with most of the tax benefits going to the wealthiest taxpayers. Trump has disputed the analysis.

Like the House plan, Trump would reduce the top income tax rate for individuals to 33 percent, and he would reduce the number of tax brackets to three. He would also increase the standard deduction.

Trump has embraced two ideas championed by Obama but repeatedly rejected by Republicans over the past eight years. Trump’s plan would cap itemized deductions for married couples making more than $200,000 a year. It would also tax carried interest, which are fees charged by investment fund managers, as regular income instead of capital gains.
The top corporate income tax rate in the U.S. is 35 percent, the highest in the industrialized world. However, the tax is riddled with so many exemptions, deductions and credits that most corporations pay much less.

Both Trump and House Republicans want to lower the rate, and pay for it by scaling back tax breaks.

Trump wants to lower the corporate tax rate to 15 percent. Ryan says 20 percent is more realistic, to avoid increasing the budget deficit.
This is one of the most controversial parts of the House Republicans’ tax plan. It is also key to making it work.

Under current law, the United States taxes the profits of U.S.-based companies, even if the money is made overseas.

However, taxes on foreign income are deferred until a company either reinvests the profits in the U.S. or distributes them to shareholders.

Critics say the system encourages U.S.-based corporations to invest profits overseas or, more dramatically, to shift operations and jobs abroad to avoid U.S. taxes.

House Republicans want to scrap America’s worldwide tax system and replace it with a tax that is based on where a firm’s products are consumed, rather than where they are produced.

Under the system, American companies that produce and sell their products in the U.S. would pay the new 20 percent corporate tax rate on profits from these sales. However, if a company exports a product abroad, the profits from that sale would not be taxed by the U.S.

There’s more: Foreign companies that import goods to the U.S. would have to pay the tax, increasing the cost of imports.

Exporters love the idea. But importers, including big retailers and consumer electronics firms, say it could lead to steep price increases on consumer goods. The lobbying has already begun.

UW-Madison drops in research ranking after Walker’s budget cuts

UW-Madison has fallen out of the National Science Foundation’s top five research institutions for the first time in over 40 years because of the school’s decreasing spending on research.

Following massive funding cuts to the UW System that were enacted by Gov. Scott Walker and his ruling Republican majority, the school cut research spending by more than $100 million between 2012 and 2015. The cuts were made to offset, in part, massive tax cuts to the state’s wealthiest individuals. Campus officials highlighted the falling expenditures as they encouraged lawmakers to increase funding for the system in the next state budget, the Wisconsin State Journal reported.

UW-Madison vice chancellor for research and graduate education Marsha Mailick said years of funding cuts have made it more difficult for the university to recruit top researchers and have led some to leave Wisconsin.

“We are extremely proud of our faculty, staff and students but if Wisconsin is to remain at the pinnacle of American research universities, the state will need to reinvest to be sure we have the faculty positions and conditions necessary to attract and retain the best researchers,” Mailick said.

Walker’s spokesman Tom Evenson said that despite the research ranking, the school recently rose in a U.S. News and World Report ranking of top public universities. Walker said his budget proposal includes increased funding for the UW System that will be tied to unspecified categorical performance.

Evenson said the governor’s focus “is to invest in the university in a way that enhances career-oriented instruction to help students and employers looking for jobs and workers in high-demand fields.”

How Trump’s and Clinton’s tax policy would affect your wallet

For America’s wealthiest families, the presidential campaign presents a stark choice when it comes to tax policy: A big tax increase if Hillary Clinton wins the election — or a big tax cut if Donald Trump wins.

For everyone else? Right now, neither candidate is proposing major tax changes.

Tax policy is probably where the two nominees differ the most. On trade, Clinton has backed off her previous support for free trade agreements and, like Trump, now opposes the Trans-Pacific Partnership, a pact involving the U.S. and 11 other nations.

And Trump has said he would spend twice as much on building and repairing roads, airports and other infrastructure as Clinton would.

On trade and infrastructure spending, Trump has taken a populist approach that jettisons Republican orthodoxy. But on tax policy, his proposed tax cuts for individuals and businesses are more in line with previous Republican candidates and elected officials.

Clinton, for her part, is proposing to raise taxes for the wealthiest households to pay for traditional Democratic proposals such as expanding access to higher education.

“Here, at least, they fall into very much traditional Democratic and Republican proposals,” said William Gale, co-director of the Tax Policy Center, a joint project of the Brookings Institution and Urban Institute.

Yet on taxes, the two candidates remain far apart. Here are summaries of their proposals:



TRUMP: His tax policy would cut the top income tax bracket to 33 percent from its current level of 39.6 percent. Republican House Speaker Paul Ryan has made the same proposal, which the conservative Tax Foundation said would help boost after-tax income for the wealthiest 1 percent of Americans by 5.3 percent. Trump updated his tax proposal in a speech last week in Detroit, and hasn’t yet released many details. Tax experts haven’t been able to evaluate his proposals as a result.

CLINTON: She is proposing several tax increases on wealthier Americans, including a 4 percent surcharge on incomes above $5 million, effectively creating a new top bracket of 43.6 percent. And those earning more than $1 million a year would be subject to a minimum 30 percent tax rate. She would also cap the value of many tax deductions for wealthier taxpayers. All the changes would increase taxes in 2017 for the richest 1 percent by $78,284, reducing their after-tax income by 5 percent, according to the Tax Policy Center.



TRUMP: Would reduce the seven tax brackets in current law to three, at 12 percent, 25 percent and 33 percent. Using the Tax Foundation’s evaluation of the House Republican plan, which includes the same brackets, the change would lift after-tax incomes for the bottom 80 percent of income earners — those earning less than about $195,000 a year — by just 0.2 percent to 0.5 percent.

CLINTON: Says she will not raise taxes on the middle class. Her current proposals would have little impact on the bottom 95 percent of taxpayers, according to the Tax Policy Center.



TRUMP: Would cut the corporate rate from its current 35 percent to 15 percent. He would also cut taxes on “pass-through” business income from partnerships such as law firms to 15 percent. More than two-thirds of “pass-through” income flows to the richest 1 percent of taxpayers, according to the liberal Center on Budget and Policy Priorities.

CLINTON: Would not change the corporate tax rate.



TRUMP: Managers for private equity firms and hedge funds can classify their investment profits as “carried interest” and pay capital gains taxes on their income at rates that can be as low as half the regular income tax rate. Trump says he would eliminate the loophole, but hedge fund and private equity managers would be able to pay even lower tax rates under his proposal to cut business taxes to just 15 percent.

CLINTON: Would eliminate the loophole and tax carried interest as ordinary income.



TRUMP: Would eliminate the so-called “death tax” on that is currently levied on estates worth more than $5.45 million ($10.9 million for married couples).

CLINTON: Would increase the estate tax to 45 percent from 40 percent and apply it to more estates, starting with those worth $3.5 million ($7 million for married couples).



TRUMP: Says his steep cut in the corporate tax rate would end the practice of corporate “inversions,” which occur when a U.S. company acquires a foreign corporation, then relocates overseas, to avoid paying U.S. corporate taxes. The U.S. corporate tax rate of 35 percent is the highest in the developed world, though many companies use deductions and other strategies to avoid paying that amount.

CLINTON: Would discourage inversions by making it harder for a U.S. company to classify itself as a foreign-owned to avoid U.S. taxation. She would also place an “exit tax” on companies that leave the U.S. while still keeping earnings overseas that haven’t been subject to U.S. tax.



TRUMP: Wants to make all child care costs tax-deductible. Would allow the deduction to apply to Social Security and Medicare taxes to benefit lower-income earners who pay little or no income tax. Current law allows parents to deduct up to $6,000 in child care expenses.

CLINTON: Has made several proposals intended to help limit child care expenses to 10 percent of a family’s income, but hasn’t proposed using the tax code to achieve that goal.



TRUMP: Would allow taxpayers to deduct child care costs from Social Security and Medicare taxes.

CLINTON: Says she will ask the wealthiest to “contribute more” to Social Security, by raising the cap on income currently subject to Social Security taxes, but has not released any details.


Kansas cut taxes to stimulate economy, now in record debt

Gov. Sam Brownback and legislative leaders on Wednesday authorized a record $900 million in temporary borrowing to cover the state’s expenses through June 2017.

The State Finance Council, which is led by the Republican governor, voted 8-1 to loan the state’s main bank account the money from other, idle funds.

The move, known as a certificate of indebtedness, is one the state has used repeatedly to cover bills when cash is expected to run low. It’s similar to when a family borrows from a savings account or college fund to cover monthly bills because its checking account is temporarily short of funds between paychecks.

The only dissenting vote Wednesday was from Senate President Susan Wagle, R-Wichita, who believes the state is in a recession.

“This isn’t the way I manage my finances. This isn’t the way I manage the finances of my business. This is like me putting groceries on a charge card and praying that the money comes in,” Wagle said. “And now we’re being asked to cover our operation expenses on a certificate of debt and it’s not going stop unless you increase taxes or cut spending.”

The vote came after Budget Director Shawn Sullivan told the council the state is considering sweeping as much as $16 million from the Kansas Department of Transportation and up to $45 million from a Medicaid fee fund to balance the budget for the current fiscal year, which ends June 30. An additional $3 million can be taken from the Kansas Department of Corrections and it is possible the state would delay part of its June payments to school districts until July, Sullivan said.

The state is likely to have between $5 million and $15 million in the general fund to begin the next fiscal year, he said.

The council’s action and Sullivan’s disclosures came a day before legislators convened a special session on school funding. The state Supreme Court ruled last month that the education finance system remains unfair to poor school districts and GOP lawmakers are working on a $38 million plan to comply.

Kansas has struggled to balance its budget since Republican legislators slashed personal income taxes at Brownback’s urging in 2012 and 2013 in an effort to stimulate the economy. While even some GOP lawmakers have acknowledged that the tax cuts didn’t work as anticipated, the governor and his top aides blames the state’s ongoing fiscal problems on regional slumps in agriculture, energy production and aircraft manufacturing. The state’s tax collections have fallen short of expectations 10 of the past 12 months.

Senate Minority Leader Anthony Hensley, D-Topeka, criticized Brownback for refusing to reverse the tax cuts to respond to the financial problems.

“When is it we’re going to admit that what is happening in this state is wrong? We are in a downward spiral when it comes to the fiscal management of this state and we have to correct our house. We’ve got to get our fiscal affairs in order at some point,” Hensley said.

Brownback, who stressed his evangelical Christian beliefs in running for governor, is the most unpopular one in the nation, with only a 26 percent approval rating and a 65 percent disapproval rating.

State budget faces problems, Walker delays $101M in payments

Gov. Scott Walker’s administration said last week it’s delaying $101 million in debt payments to help the state budget’s bottom line. But how big of a problem the state’s budget may be facing isn’t clear.

The decision to restructure debt suggests that the Walker’s administration is concerned there will not be enough cash on hand for the state budget to balance at the end of the current fiscal year on June 30, as required by law.

The latest estimate, prepared by the nonpartisan Legislative Fiscal Bureau in January, projected that the state budget was going to end this year with a $219 million cushion, but a razor-thin $71 million buffer in June 2017.

Walker administration spokeswoman Laurel Patrick called delaying the payment a “prudent financial management tool,” but did not say why it was necessary.

“Normally, if you’re in strong financial condition, you’re not kicking the can down the road,” said state Rep. Gordon Hintz, a Democrat from Oshkosh who sits on the Legislature’s budget committee. He said it was embarrassing and an indication that there wasn’t enough money available to pay for tax cuts approved in the last budget.

Pushing off debt payments into a different budget year is a common tactic used by Republican and Democratic governors alike as a short-term method of balancing the books. Since 2001, more than $1.6 billion in such payments have been delayed.

The accounting move was first detailed in a memo by the Fiscal Bureau to the Legislature’s budget-writing committee. That memo said Walker intended to defer $50 million, but Walker’s administration later said it was actually going to be $101 million.

Walker has now delayed more than $741 million in payments since 2011, including $108 million last year. His predecessors, Democratic Gov. Jim Doyle and Republican Gov. Scott McCallum, also made similar delays totaling about $872 million.

Delaying $101 million will cost the state nearly $2.3 million in additional interest over the next eight years, according to the Fiscal Bureau.

Follow Scott Bauer on Twitter at http://twitter.com/sbauerAP and find more of his work athttp://bigstory.ap.org/content/scott-bauer


Analysis: GOP’s deficit reduction promises are unfeasible without tax increases and program cuts that they’ll never support

Thanks to Congress’ recent tax-and-spending spree, Republicans vowing to balance the budget will have to raise taxes and propose far deeper cuts than the public would accept.

If the GOP should won the White House in 2016, those promises — the same ones they make in every election cycle — are likely to come back and haunt them. The last president to balance the budet was Democrat Bill Clinton, who presided over an era of great prosperity that’s not likely to be equaled in the near future. 

In fact, the weakening economy that the nation is currently experiencing means Republicans will have to dig even further into the budget to find sufficient spending cuts to balance the budget, according to the latest projections from the Congressional Budget Office. The budget — a non-binding wish list of cuts and policies — was already unrealistic, promising cuts that lawmakers have never shown they’d be willing to make.

Last year, for instance, Republicans promised more than $5 trillion in spending cuts over a decade. Instead, they worked with President Barack Obama to add about $750 billion to the deficit over the decade through a mix of spending increases and permanent tax cuts. Even a token effort to curb the federal crop insurance program was immediately reversed after a revolt by farm state lawmakers.

Now, the dismal fiscal picture, budget experts say, would mean Republicans would have to slash more than $2 trillion over 10 years, with the most draconian cuts required in the final years. That’s assuming they will still try to balance the budget.

“Realistically speaking, that’s just not going to happen,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a Washington group that advocates for lower deficits.

With Social Security, the Pentagon and most of Medicare insulated politically from cuts, Republicans are likely to call for even further reductions to programs like Medicaid, domestic agency budgets, student loan subsidies and food stamps.

The GOP chairmen of the House and Senate Budget panels insist they will find a way.

“It’s not only realistic but essential,” Senate Budget Committee Chairman Mike Enzi, R-Wyo., said of balancing the budget. “This country is going to be bankrupt if we don’t do something.”

Under Congress’ arcane budget process, lawmakers vote first on a broad, non-binding outline called a budget resolution — which is akin to the blueprints for a house — and then use follow-up legislation to fill in the details. The second-step of votes to implement the budget are invariably more difficult than the first.

Congress does a lot more bragging about budget blueprints than actually trying to enact them. House Republicans boast but they’ve never drafted legislation detailing how they would turn Medicare into a voucher-like program for most future retirees or cut Medicaid funding by about one-fifth — and force many millions of people from health coverage or nursing home care.

Even architects of the budget acknowledge that there’s no stomach to actually try to impose its cuts.

“The critical mass does not yet exist in the country or the Congress that recognizes that we need to save and strengthen and secure these mandatory programs,” said House Budget Committee Chairman Tom Price, R-Ga. Price was referring to programs like Medicare, Medicaid, and Social Security, whose mandatory budgets grow automatically unless Congress cuts them.

So in some ways the budget process is perfect for politicians: It gives them a chance to tell voters they’re cutting spending even as they avoid the politically dangerous votes required to actually do it.

The budget process also fits into Speaker Paul Ryan’s vision for using the House agenda to tell voters what they’ll get if Republicans win the White House. The annual budget debate will come before efforts to replace the health care law or reveal the party’s plans to update the loophole-clogged tax code after five years of controlling the House.

Conspicuously left off the agenda? Emphasizing spending cuts, even as the deficit has begun growing again and the latest estimates reveal trillion-dollar deficits returning in just a few years.

“Clearly that’s going to take a Republican president because this president has continued to kick the can down the road and I see no change in his behavior,” Ryan, R-Wis., said recently.

But it’s by no means clear that balancing the budget will be a top priority for presidential candidates who have promised big tax cuts and aren’t really talking about the issue on the campaign trail. If there is a GOP president next year, he will have to answer questions about living up to the balanced-budget promises of Republicans in Congress.

If a GOP president embraces a balanced budget, they’ll have to offer an enormously difficult set of cuts to Republican lawmakers unschooled in what balancing the budget really means.

“The magnitude of the policy changes that you would have to implement to achieve the savings that are promised in the budget — I don’t think there’s an appreciation for the magnitude of those changes,” said Neil Bradley, a former top House GOP aide who now works for the Conservative Reform Network, which offers policy advice to GOP candidates and lawmakers.

Obama submits his budget Feb. 9, and House and Senate Republicans promise floor debates on their alternatives in March.

Wisconsin projects $100 million shortfall under current budget

Wisconsin is expected to take in $100 million less in revenue than it expected by the end of the 2015–17 budget, the nonpartisan Legislative Fiscal Bureau reported today.

The shortfall is the result of a $158.2 million decrease in projected tax collection. Some spending will have to be cut from the budget.

Democrats said that tax revenues have fallen short because Republicans have failed to generate jobs that would increase Wisconsinites’ take-home pay. Several noted the irony of the news coming so closely on the heals of Gov. Scott Walker’s State of the State address, during which he touted the state’s economy and finances under his leadership.

Walker has slashed many state programs in order to provide large tax breaks to the wealthy and to corporations. That strategy, known as “trickle-down” economics, has been the mainstay of the GOP’s financial strategy for nearly four decades.

“Big tax breaks for businesses do not trickle down to the pockets of our citizens,” said state Sen. Jon Erpenbach, D-Middleton. “Let’s try something new like prioritizing funding for education, increasing the minimum wage and roll back some business tax breaks in favor of middle class tax cuts. We know what works to improve the economy, unfortunately there is not a Republican out there that will consider proven solutions.”

Assembly Democratic Leader Peter Barca, D-Kenosha, said, “The first step toward improving our state’s finances is accepting federal BadgerCare funds to provide health care to roughly 80,000 Wisconsinites at a savings of more than $300 million to taxpayers over the next two years.”

Senate Minority Leader Jennifer Shilling, D–La Crosse, said, “Democrats will continue to fight for investments in local schools, worker training and infrastructure projects to create jobs and move our state forward.”

The budget shortfall comes after Wisconsin experienced the worst year for mass layoffs and plant closing since 2010 last year.

But the shortfall for 2015 is better than the $2 billion deficit the state had leading into the 2015–17 budget negotiations.

Walker budget raises taxes and fees by $43 million

An analysis by the nonpartisan Legislative Fiscal Bureau finds that Gov. Scott Walker’s budget would raise taxes and fees by $48 million.

The report released Monday also determines that Walker proposals to bolster tax collection would bring in nearly $125 million in additional revenue over the next two years.

Walker faces a budget shortfall of at least $2.2 billion. Although he’s greatly reduced education expenditures and other government services since taking office, he’s offset the resulting budget gains with massive tax cuts to the very wealthy and giveaways to his corporate backers. The red ink looks bad for Walker, who is a leading contender for the 2016 Republican presidential nomination.

The bulk of the tax increase, $22 million, is Walker’s proposal to delay implementation of a law that expanded when retailers could claim certain sales tax reductions for bad debt.

That law is set to begin in July 2015 but Walker is calling for it not to take effect until 2017.

Walker’s budget would also increase annual state park vehicle admission fees by $3 and nightly camping fees by $2, raising $1.9 million annually.

New estimate projects $1.8-billion budget shortfall from Walker’s corporate tax cuts

A nearly $1.8 billion budget shortfall projected by a new report released yesterday provides yet more evidence that Gov. Scott Walker and Republicans who control the Legislature have mismanaged the state’s finances, critics say.

The two-year budget that ends in June is projected to be nearly $396 million short after tax collections came in $281 million less than anticipated. The $1.8 billion shortfall is forecast for the next budget, which runs from July 2015 through June 2017.

The Legislature will have to address the deficits next year. All of the numbers are estimates and will change based on actual spending and tax collections in coming months.

Walker and legislative Republican leaders downplayed the latest bad news for the budget, while Democrats pressed them for details about how they planned to address it.

“We have a proven track record of managing the taxpayers’ money well,” said Walker spokeswoman Laurel Patrick. “By continuing to grow the economy, finding further efficiencies in government, continuing to eliminate waste, we will take care of any future structural issues.”

Walker’s Democratic challenger, Mary Burke, a former state Commerce Department secretary and Trek Bicycle executive, said the projected shortfall is the result of Walker’s “irresponsible approach” and “failed stewardship of a lagging economy.”

Walker and the Republican Legislature passed about $2 billion in tax cuts over the past three years, approving broad income and property tax reductions and an income tax cut targeting manufacturers. Critics complained that the lion’s share of the tax cuts went to Walker’s wealthy corporate out-of-state donors while taxes on the poor effectively increased.

“Governor Walker has spent money we don’t have,” Burke said in a statement. “In the business world, if a CEO created this big of a financial mess, he would be fired.”

Republican Assembly Speaker Robin Vos accused Democrats of “looking for dark clouds on a sunny day.”

Since Walker took office, only about 103,000 private-sector jobs have been created in the state after about 133,000 were lost during the recession. Walker pledged during the 2010 campaign to create 250,000 private-sector jobs, a pledge he won’t come anywhere close to meeting. During his 2010 campaign, he urged voters to hold him to his pledge, but now he says that he never meant it to be taken literally.

Under Walker and the GOP, Wisconsin’s job growth has been about half the national average. The state ranks last in the upper Midwest for job creation during Walker’s term.

Although the unemployment rate has fallen, experts attribute that partly to people giving up on seeking jobs as well as people taking low-paying part-time jobs.

Walker and Republicans inherited a roughly $3 billion budget shortfall, which they plugged by making deep spending cuts to schools and local governments. Walker also used the shortfall to argue for passage of a law requiring most public workers to pay more for their pension and health care benefits while also taking away nearly all of their collective bargaining power.

The savings from those higher contributions helped schools and local governments deal with the other spending cuts.

Walker argues, as he runs for re-election, that he made the tough choices necessary to turn around the state’s economy, which his critics contend that he turned around from bad to worse.

Even in the face of the recent negative estimates, Walker and Republican legislative leaders have promised to take a similar approach to bring the budget into balance.

“Our local schools, small businesses and communities can’t afford to limp through another round of devastating budget cuts,” said Democratic state Sen. Jen Shilling, a member of the Legislature’s budget committee. She said the numbers definitively prove that Walker and Republicans’ approach has failed.

The Associated Press contributed to this article

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Scott Walker’s phony surplus will fund his insignificant tax cuts

During his campaign for governor, Scott Walker made many promises that he promptly abandoned after taking office. We can’t fault him for that – empty promises are part and parcel of our political process.

The centerpiece of Walker’s campaign, however, was the vow to create 250,000 jobs by November 2014. Given the miniscule role governors actually play in the economy, that was an audacious boast. But a surprising number of voters took him at his word. Meanwhile, Walker was clearly betting that the nation’s economic crisis had bottomed out, and he was positioning himself to take credit for a recovery that seemed inevitable at the time. 

Obviously, things didn’t work out the way Walker had planned. So while his party focused the Capitol on everything but legislation to bolster the economy – laws to bust unions, restrict access to abortion, allow guns anywhere and everywhere, eliminate pay equity protection for women, cut funding for health care and education, eliminate alternative energy projects, etc. – he moved his goal post from creating jobs to eliminating the state’s debt. 

Walker claims not only to have achieved that goal, but also to have amassed a surplus from which he plans to provide tax breaks to stimulate the economy. This, like the promise to create 250,000 jobs, makes a wonderful sound bite, but it’s equally disingenuous. 

First of all, the notion that a tax cut averaging $83 annually per household could stimulate economic growth is laughable. Apparently the millions they’ve hauled in from out-of-state billionaires have removed Wisconsin Republicans so far from financial reality that they don’t know what things cost. Here’s a hint: The cuts are not enough to have any impact on the economy, according to the experts, particularly at a time when federal payroll taxes have risen significantly.

But even more upsetting than the governor’s hollow economic-growth strategy is the fact that there is no real budget surplus.  

During his campaign, Walker insisted that he’d use generally accepted accounting principles “to balance every state budget, just as we require every local government and school district to do.”

But Walker’s vaunted budget surplus is not based on GAAP accounting but rather on gimmicky cash accounting procedures.

According to cash accounting procedures, there was money left over in state accounts after all the bills for 2011-13 were paid. But that method of accounting does not take into consideration the GAAP debt increase of at least $320 million that has accrued since Walker took office. By taking the last budget’s operational surplus and giving it back to taxpayers in meaningless increments, Walker is increasing that debt level.

Walker should have used the excess operational money to reduce some of the harmful cuts he made to education and health care in his draconian prior budget. Or he could have paid down the state’s debt.

Instead he chose to use the money in a reckless manner that gives him a sound bite for his next campaign but provides no benefit to the people of Wisconsin.

Even worse, in addition to implementing minimal tax cuts, Walker says he’ll use some of his “surplus” to fund unnecessary road-building projects, thus spreading the faux wealth to political backers who will return some portion of it to his own campaign trough.

That’s just the sort of self-serving trickery that’s characterized every move of Walker’s political career. Wisconsin deserves much better.