MADISON, Wis. — Gov. Scott Walker made the case in his State of the State speech Wednesday that extra money collected thanks to an improving national economy should be returned as property and income tax cuts, even as some Republicans are saying his proposal goes too far.
Walker, in a speech that also doubled as an argument for his re-election in November, asked lawmakers to approve $504 million in property and income tax cuts over the next 17 months.
"The state of our state is strong and improving every day," Walker said during a joint meeting of the Legislature in a packed Assembly chamber. "The economy is dramatically better and our finances are in great shape. Still, there is more work to be done."
The speech, Walker's fourth State of the State as governor, comes as he's running for re-election this year and trying to position himself as a possible 2016 Republican presidential candidate. Democrat Mary Burke, a former Trek Bicycle Corp. executive, is challenging him in the governor's race.
Walker's tax cut proposal — which would save a typical home-owning family about $150 a year — was made possible by updated projections released last week that showed the state would collect $912 million more than previously anticipated.
But elements of the tax cut plan are running into opposition from some Republican state senators who say it increases the state's projected budget shortfall too much. Republicans control the Senate 18-15 and have a broader 60-39 majority in the Assembly.
Heading into the 2015 two-year budget, the state already faces a $725 million projected shortfall. That would grow by about $100 million under Walker's proposed tax cut, but those estimates don't take into account future revenue growth.
Tax collections would only have to grow 1.5 percent to wipe out that shortfall, Republican Senate Majority Leader Scott Fitzgerald said Wednesday. Net tax collections are projected to increase by 2.2 percent by July and another 4.3 percent by mid-2015.
Republican Sen. Luther Olsen, of Ripon, said Walker's tax cut plan will have to be scaled back so the projected shortfall doesn't grow.
"We have to reduce it," Olsen said. "We ran on that stuff."
Republican Senate President Mike Ellis said his preference would be to reduce the size of Walker's proposed income tax cut to help lower the projected deficit, if it appeared revenue growth wouldn't be strong enough to eliminate it.
"Every conservative has been against inordinate deficits," Ellis said.
Still, Fitzgerald said that while Republican senators were concerned about the growth in the shortfall, they were also supportive of cutting taxes. Ellis, while voicing concerns about the deficit growing, called the property tax cut "exciting," ''fantastic" and "significant."
"There's definitely a willingness to return the money to taxpayers," Fitzgerald said.
That's also Walker's approach.
"What do you do with a surplus?" he said in the speech. "Give it back to the people who earned it. It's your money."
Walker said on Thursday he would call for a special session of the Legislature to consider his tax cut proposals, a new initiative to help people with disabilities find work, and a $35 million worker training initiative.
Republican Assembly Speaker Robin Vos on Tuesday indicated that Walker's tax cut plan is likely to pass the Assembly largely the same as proposed. Vos downplayed concerns over the shortfall, saying his highest priority is cutting taxes.
Walker's proposed tax cuts would equal $101 in property tax savings for the owner of a median-valued $151,000 home and between $44 and $58 in income tax savings, depending on how a person files. Walker wants to cut the lowest income tax rate from 4.4 percent to 4 percent.
Walker also said he ordered the state Department of Revenue earlier Wednesday to update income tax withholding tables, which will result in a typical family of four keeping about $58 more a month starting in April.
"The days of double-digit tax increases, billion-dollar deficits, and major job loss are gone," Walker said. "We replaced them with massive tax cuts, growing budget surpluses, and significant job growth. Wisconsin is going back to work."
Democratic critics were quick to point out that Wisconsin ranks 37th in private sector job growth over the 12-month period that ended in June. And Walker is not on pace to meet his 2010 campaign pledge to create 250,000 private sector jobs by the end of this year.
"Too many Wisconsinites are unemployed or stuck in low-wage, part-time jobs relying on food stamps and friends and family to make ends meet," said Phil Neuenfeldt, president of the Wisconsin State AFL-CIO. "Gov. Walker should be laying the foundation for long-term fiscal health by investing in worker training programs, infrastructure, and education to ensure that every Wisconsinite has access to a long-term family-supporting job with decent benefits."
Assembly Minority Leader Peter Barca said Tuesday that raising the budget shortfall was "irresponsible" and that Walker's tax cuts don't do enough to target the middle class and poor people who don't have any income tax liability.