Our Views: Republican tax cuts don't look so wise given fiscal estimates

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September 12, 2014

"Go cautiously with tax cuts.”

That headline filled this space Jan. 23, the day after Gov. Scott Walker proposed major new cuts in property and income taxes during his State of the State address.

Walker and Republicans who control the Legislature suggested that cutting income taxes would give consumers more money to spend and stimulate the economy. We weren't so confident. We wondered whether the cuts would be large enough to boost the economy. We warned that rosy revenue projections don't always become reality, as the late Gov. Lee Dreyfus learned the hard way.

Conservative lawmakers forged ahead anyway, thinking tax cuts would curry favor with voters in the Nov. 4 election. That plan could backfire. The latest budget projections from the Legislative Fiscal Bureau might instead prompt voters to question the leadership of the state's GOP.

The nonpartisan fiscal bureau announced Monday it expects the state to face a $1.8 billion deficit in the next biennial budget, 2015-17. To no one's surprise, Burke and other Democrats jumped all over the news. They suggested Walker and Republicans aren't as smart as they think they are and are leading the state in the wrong direction. Democrats and Republicans alike spun the numbers and cast the news in the best possible light to support their views.

Sen. Alberta Darling, R-River Hills, claimed the state not only has no deficit but a $443 surplus. Half true, Poltifact pointed out.

Chris Larson, D-Milwaukee, stated that over the next two years, the deficit will cost each Wisconsinite $300. False, said Politifact.

What's the truth? In Monday's Gazette, Jason Stein of the Milwaukee Journal Sentinel put the fiscal situation in context.

Yes, the state started the 2013-15 budget with a $443 million surplus. The budget tucked a record $280 million into a “rainy day” fund. The fiscal bureau, however, now expects the state to close its fiscal year in June 2015 with a $396 million shortfall rather than a surplus. Blame lagging revenue and the tax cuts for much of the deficit.

Larson is projecting costs to families using numbers far from set in stone. An estimated shortfall is just that—an expectation of spending beyond revenue. The 2015-17 budget hasn't even been proposed. That will be up to whoever sits in the Governor's Mansion come January. The fiscal bureau's deficit numbers could change as further revenue flows in and lawmakers adjust spending and taxes.

Still, when Republicans are quick to tout how Walker erased a $3.6 billion deficit he faced when he took office, the new fiscal report isn't good news for Republicans. It also doesn't help that Medicaid funding is lagging, nor that the Transportation Fund's estimated deficit for 2015-17 ranges from $224 million to more than $600 million.

An unvarnished view comes from Senate President Mike Ellis, R-Neenah, who's retiring rather than seeking votes this fall. He told Stein that lawmakers likely will have to pass a  budget-repair bill early next year.

Ellis was among Republicans who expressed concerns that tax cuts went too far and might crimp future finances. But, he told Stein, because he and others voted for the cuts anyway, “we can't hide behind 'I told you so.'”

Here's another problem. Once enacted, tax cuts become all but permanent because lawmakers fear angering voters by rolling them back. We also made that point in our Jan. 23 editorial.

Walker demonstrated his fiscal chops soon after taking office. Now, however, Republican tax cuts have helped create political ammunition for Democrats. Whether conservatives went too far won't be known until Nov. 4.

Gazette editorials express the views of the newspaper's editorial board. Readers are encouraged to comment on editorials through letters to the editor.

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