(The Center Square) – Expanding Wisconsin’s second income tax bracket of 4.4% for all filers will reduce the state’s tax collections by $323 million next fiscal year and $320 million in 2026-27, according to estimates from Wisconsin’s Legislative Fiscal Bureau.
The tax reduction is part of a $1.2 billion package of tax cuts approved recently by the state’s Joint Finance Committee as it works toward a budget proposal.
The income tax cut applies to the majority of Wisconsin tax filers in different ways as the amount of income taxed at 4.4% compared to the next tax bracket of 5.3% increases.
For married couples, that will move the cap on 4.4% from $39,150 to $67,300 while for single filers the line moves from $29,370 to $50,480.
That amounts to a maximum tax reduction of $253 for married-joint filers, $190 for single/head-of-household filers and $127 for married-separate filers if the income cap for those tax brackets are reached.
The tax changes also include exempting the first $24,000 of retirement income for those who are at least 67 before the end of a tax year with a maximum exemption of $48,000 for married couples.
That tax cut would have an even larger overall impact, reducing state tax collections by $395 million in 2025-26 and $300 million in 2026-27.
“Every dollar of revenue that is foregone in offering exemptions to a small subset of the population is a dollar of revenue that has to be generated from someone else,” Katherine Loughead, research manager at the Tax Foundation’s Center for State Tax Policy, told Badger Institute.
WISCONSIN SUPREME COURT UNANIMOUSLY RULES AGAINST GOP LAW THAT WEAKENED STATE AG POWERS
She told Badger Institute that it would make more sense to have broad income tax rate reductions or raising that income level for a standard deduction phase-out.
Overall, the impact of those tax cuts is expected to be more than $700 million in the first year and $605 million in the second year for a combine $1.3 billion tax cut.