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The Latest Wisconsin Tax Reform Plan

Tax Law Alert John T. Barry, David Brunori, Patricia A. Hintz

As part of a comprehensive plan to change the transportation system, Republican leaders in the State Assembly have significant changes to the tax system as well. As part of the “Road to a Flat Tax”, the GOP leadership is calling for exactly that - a flat individual income tax.

Currently, only 10 states have higher marginal rates than Wisconsin. Over the next twelve years, the Republicans would like to move from the current 4 brackets to one flat rate on all income. The current top rate of 7.65 percent would be reduced to 3.95 percent in 2028. If the proposal became law, Wisconsin would join eight other states imposing a flat personal income tax. 

To help pay for the income tax reductions, the plan would eliminate a number of credits and deductions. The First Dollar Property Tax Credit, marriage credit, renters’ credit, and working families’ credit would be eliminated. The exclusion for 30 percent of capital gains would be eliminated and the credit for taxes paid to other states would be converted into a deduction equal to the amount of income taxed by the other state. The itemized deduction credit would be reduced from 5 percent to 2 percent. The assessment on ambulatory surgical centers would be eliminated.

The plan would also eliminate the state property tax; few states impose this tax. It would eliminate the electronics recycling fee. It would eliminate the internet access tax. And, it would eliminate the state alternative minimum tax; only six states impose such a tax.

As part of the transportation reforms, the GOP Assembly plan would reduce the excise tax on fuel by five cents a gallon but end the sales tax exemption for fuel. The plan would also allow counties to enact a .5 percent sales tax to fund transportation projects.

Quarles & Brady LLP believes that this plan will be part of a broader tax reform discussion. Governor Walker proposed less ambitious changes to the state’s tax laws in his budget proposal in February. For more information on the GOP proposal or tax reform in Wisconsin, contact John Barry at [email protected]/(414) 277-5825, David Brunori at [email protected]/(202) 780-2634, Patricia A. Hintz at (414) 277-5833/[email protected] or your Quarles & Brady attorney.