Governor Walker’s initial 2013-15 budget released in February 2013 proposed lowering the bottom three individual income tax brackets by $343 million during the two-year period. In early May, as the Legislature was considering the budget, tax revenues were re-estimated by the non-partisan Legislative Fiscal Bureau to show a $500 million surplus. The Legislature was able to allocate a good portion of the surplus to nearly double the Governor’s initial proposal.
Under the budget approved by the Legislature, a total of $647.9 million in individual income tax relief is provided. All five state individual income tax brackets will be reduced, effective for the 2013 tax year. The number of brackets was consolidated to four.
2013 Individual Income Tax Rates | |||
Taxable Income | Previous Law | New Budget | |
Single | Married/Joint | ||
Up to $10,750 | Up to $14,330 | 4.60% | 4.40% |
$10,750 to $21,490 | $14,330 to $28,650 | 6.15% | 5.84% |
$21,490 to $161,180 | $28,650 to $214,910 | 6.50% | 6.27% |
$161,180 to $236,600 | $214,910 to $315,460 | 6.75% | 6.27% |
$236,600 and over | $315,460 and over | 7.75% | 7.65% |
While WMC had sought greater reductions to the top individual income tax bracket and a reduction to the uniform 7.9% corporate income rate, the Legislature focused on broad-based middle class income tax relief.
Most businesses are organized as pass-through entities like LLCs, S corporations, and partnerships. As such, they pay individual income tax rather corporate income tax, which C corporations and some LLCs pay. The top individual income tax bracket is often viewed as being among the leading indicator of a state’s economic conditions.
The 2013-15 budget is a great step in the right direction for Wisconsin, but further rate reductions in the top individual and corporate income taxes are needed if our state is to have a truly competitive tax regime.
