MADISON – The Legislature’s budget committee agreed Wednesday to cut taxes by $540 million over three years, primarily to help businesses that received Paycheck Protection Program loans to get through the COVID-19 pandemic.
Congress made the forgivable loans available to businesses last year to help keep them afloat and keep their workers employed. The funds they receive are tax-deductible at the federal level but not at the state level.
The Joint Finance Committee voted 11-4 for wide-ranging tax legislation that would allow businesses to deduct those payments. Most Republicans supported it and most Democrats opposed it, but two lawmakers crossed party lines.
The move came as Democratic Gov. Tony Evers prepared to release his two-year budget on Tuesday.
Evers said Wednesday he would use his budget to again try to expand the availability of health care under the Affordable Care Act — an idea strongly opposed by Republicans who control the Legislature.
Tax cut for businesses
Eliminating state taxes on payments under the Paycheck Protection Program and other COVID-related efforts would cost the state $540 million over three years, according to the nonpartisan Legislative Fiscal Bureau.
Backers of the idea argued it’s an important way to simplify taxes and help businesses while they are struggling because of the pandemic.
“Since I first got elected to the Legislature, I have argued for simplicity, to federalize our Wisconsin tax code as much as we can, to make things simpler,” said Sen. Howard Marklein, a Republican from Spring Green and a co-chairman of the committee.
But Assembly Democratic Leader Gordon Hintz of Oshkosh said there are other ways to help businesses.
He called the Republican proposal ineffective and unfair, saying tax help should be targeted to the businesses that have been hurt the worst, such as restaurants, bars and in-person retail stores. He noted debt collectors and payday lenders are among those who would benefit under the Republican plan.
“Essentially we’d be giving money to those that have profited off of people being destitute financially due to COVID,” he said.
Democratic Sen. Jon Erpenbach of West Point joined the majority in supporting the bill. Erpenbach said the bill wasn’t perfect but would help businesses that have faced difficulties.
Republican Sen. Duey Stroebel of Saukville joined the other three Democrats in opposing the bill. He said he wanted broader tax relief, noting much of the money would help businesses that have been profitable during the pandemic.
“Only PPP recipients that made money have any state tax liability. Rather than grant profitable PPP benefactors a $457 million tax write off, I would prefer a more broad and equitable tax reduction for all Wisconsin taxpayers,” he said in a statement.
The vote clears the way for the Assembly to vote on the bill Tuesday — the same day Evers will release his proposed budget. Lawmakers will spend the spring and summer reworking his spending plan.
If lawmakers and Evers agree to cut taxes, it will help businesses but make balancing the budget tougher.
In a statement, Evers expressed frustration at Republicans’ approach to taxation but left open the possibility he would sign the tax cut if it gets to him.
“We should be helping all small businesses, regardless of whether they received assistance from the state or the federal government,” his statement said. “But as has been the case all along, I will keep doing everything I can to help and support our small businesses and families as they recover and bounce back from this pandemic.”
Republicans added the large tax cut to Assembly Bill 2, mundane tax legislation that had already cleared one committee. By amending the legislation late in the process, Republicans avoided holding a public hearing on the deeper tax cut — a move Democrats called unfair.
Evers announced Wednesday he planned to recommend putting an additional $150 million over two years toward treating mental health and substance abuse. He would fund the effort by expanding the state’s BadgerCare Plus health program under the Affordable Care Act, which is also known as Obamacare.
Under that plan, the state would be able to provide health coverage to tens of thousands of more Wisconsinites while seeing its costs go down because of an influx of federal cash. The state would save $643 million over two years under the plan, according to the governor’s office.
Republicans oppose the idea because they believe it gives the government too much of a role in health care. They have blocked Evers’ past efforts and have signaled they would do so again.
Dispute over court settlements continues
Also Wednesday, the committee unanimously approved a request from Democratic Attorney General Josh Kaul to drop a lawsuit Wisconsin and other states brought against the U.S. Postal Service over concerns about the slow delivery of mail ballots.
The case is one of four that Kaul asked the committee to help resolve under a 2-year-old law that gives legislators more say in litigation involving the state. The other three cases involve environmental matters.
Kaul joined 13 other states in August to sue the Postal Service over cost-saving changes it was making that the states argued would hurt the delivery of mail ballots. Just before the suit was filed, Postmaster General Louis DeJoy disclosed he was holding off on the changes.
Now, the states are seeking to end the lawsuit because the presidential election is over and the post office has had injunctions placed on it in other election lawsuits, according to a memo from Charlotte Gibson, administrator of legal services for the Wisconsin Department of Justice.
Kaul was able to decide on his own whether to get Wisconsin involved in the case but sought the permission of the finance committee to get out of it.
That’s because Republicans passed lame-duck laws in 2018 that limited the powers of Kaul and Evers just before they took office. Under those laws, lawmakers have a say in certain court settlements.
The committee also agreed without dissent to sign off on settlements in which an excavation company is accused of destroying a wetland and two dairy farms are accused of improperly discharging manure. Under the agreements, the excavation company would pay $12,000, one dairy farm would pay $15,000 and the other dairy farm would pay about $11,000.
Kaul and Republicans have struggled to handle settlements because they don’t agree on the legality of the lame-duck laws.
The state Supreme Court declined to resolve the issue last year. Evers and Kaul in November asked the high court to revisit the matter, but the justices have not said if they will take up the request.
Contact Patrick Marley at email@example.com. Follow him on Twitter at @patrickdmarley.