On March 17, the Wisconsin Senate passed Assembly Bill 461, a bipartisan bill to allow Wisconsin residents to subtract overtime pay from their state income taxes. While we favor across the board rate cuts, keeping money in the pockets of hard-working Wisconsinites is crucial at a time when the costs of food and energy continue to rise. Importantly, the Legislative Fiscal Bureau estimates that the state will end the current biennial budget cycle with a surplus of more than $2.3 billion, and AB 461 makes progress by returning some of that money to the Wisconsin taxpayers who earned it.
The non-partisan Tax Foundation ranks Wisconsin number 21 overall on its State Tax Competitiveness Index. However, this rank is boosted by more favorable sales and property taxes. On income taxes, Wisconsin ranks only 34, well below nearby states like Michigan, Iowa and even Illinois. The state’s tax surplus alone is evidence that Wisconsinites are overburdened by the taxes they pay, and this legislation will return $176 million back to workers this year alone and $150 million per year going forward. AB 461 will move the state a step in the right direction and make it slightly more competitive with its neighbors.
State tax competitiveness is closely linked with domestic migration rates and a policy change like this one could prove to be a draw for workers in neighboring states. Making Wisconsin a favorable location for manufacturing and other businesses to thrive, and a destination for the workers those businesses will need, should be a high priority for state policymakers and will be a boon for the state’s economy in future years. In fact, in its testimony in support of the bill Wisconsin Manufactures & Commerce, which represents approximately 3,800 companies in the state, called this “a common sense policy that strengthens Wisconsin’s economy and supports workers,” and noted that Wisconsin needs this policy remain competitive.
Above all, the legislature and Governor Evers should build on the work AB 461 will accomplish and consider additional tax relief solutions to return the budget surplus to hard-working taxpayers. Such changes will make further progress in restoring Wisconsin’s competitiveness with its neighbors and benefit all Wisconsinites.
This legislation puts money back in the pockets of workers, strengthens independent businesses, and supports a free-market economy where productivity and initiative are rewarded — not taxed. It’s a win for families, employers, and Wisconsin. For all of these reasons, Governor Evers (who is in need of a signature achievement this session) should sign AB 461 into law.