Wisconsin tax research group suggests bigger-picture view of state budget surplus

Wisconsin Gov. Scott Walker’s plans to spend away a state budget surplus might not be the best in the long term.

Dale Knapp, from the tax research group Wisconsin Policy Forum, suggests a better way to deal with a budget surplus than giving it away in the form of a one-time tax credit is to keep it in a rainy day fund for when the next recession hits.

“We know that there’s going to be a recession coming,” Knapp said. “We don’t know when that is but we want to be prepared for it so we don’t have to make emergency cuts, make emergency tax increases, just to balance the budget.”

Walker has, apparently, reached a deal with Assembly Republicans to send parents $100 per child in a one-time tax credit, and also have a two-day sales tax holiday in August.

Both giveaways would total about $172 million.

Knapp says Wisconsin has little to fall back on in an economic downturn and that the most recent accounting shows Wisconsin can fund programs in the state for around 18 days at current reserve levels.

“We’re doing better but we’re still not really where we should be in terms of rainy day funds and balances,” he said. “Going into the last recession, we had almost nothing put aside so our finances were hit among the hardest of many states.”

Along with a rainy day fund, Knapp also suggests lawmakers could instead consider property tax relief for everyone by taking the tech college system completely off local taxes.