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Most won't see Wisconsin income tax cut until next year

Published On: Jul 25 2013 04:41:55 PM CDT
MADISON, Wis. (AP) -

The $650 million state income tax cut signed into law last month won't automatically result in higher paychecks for Wisconsin taxpayers.

That's because the state is not changing the withholding tables that tell employers how much to take out in taxes. Unless taxpayers fill out the necessary paperwork for the lesser amount to be withheld, they won't benefit until they file taxes in 2014.

The state has historically not adjusted withholding tables in order to collect more in taxes to pay its bills during the year, Todd Berry, president of the nonpartisan Wisconsin Taxpayers Alliance, said Thursday.

The average taxpayer has between 15 percent and 25 percent more withheld by the state for income taxes than is necessary, Berry said.

"It's been going on for well over a decade and this really was the golden opportunity to change it," Berry said. "The only reason I can come up with for the fact that they didn't is they want the income tax refund to be bigger next April."

Republican state Rep. Dale Kooyenga, who authored the tax cut proposal, originally called for the withholding tables to be changed. But that was removed as the tax cut worked its way through the Legislature.

Kooyenga said he would love to see the tables changed, but he also understands that doing so would create a cash flow problem.

"I could argue both ways," Kooyenga said.

Gov. Scott Walker pushed for an income tax cut.

"Regardless of whether or not the withholding tables are changed, all income taxpayers will receive an income tax cut and will be able to keep more of their hard-earned money," Walker spokeswoman Jocelyn Webster said in an email statement Thursday.

Not adjusting withholding will result in a more noticeable tax cut, as the average filer will get $158 more refunded back in 2014 — an election year — as opposed to getting $13 less taken out in taxes each month.

The tax cut was made retroactive to January of this year, which also made it difficult to adjust withholding tables for 2013, Kooyenga said.

The state budget cut rates in all five income tax brackets and compressed them to four. For all tax filers, the average decrease was $158. Those earning $45,000 a year on average would see an $87 reduction, while those earning $125,000 will get a $281 cut.

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