News & Press: NAIFA-Wisconsin E-Newsletter

Assembly Committee Studying Major State Tax Changes

Friday, January 5, 2018   (0 Comments)
Posted by: Bill McClenahan
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A proposal for a major restructuring of Wisconsin’s tax structure is being developed by the state Assembly Ways and Means Committee. You can learn more about the committee’s work, and what it could mean to your business and to your clients, at NAIFA-Wisconsin’s Day on the Hill in Madison on January 24, 2018. 

Ways and Means is chaired by state Representative John Macco (R-De Pere), a C.P.A. and the founder of a financial planning firm. Macco says he wants to help build a tax structure that looks like it was built on purpose, not pieced together. His goal is to provide a revenue-neutral proposal, saying his committee’s job is to propose a balanced portfolio of revenues, not to determine the overall amount that is raised. 

The committee has been expanded to 16 members, and four bipartisan subcommittees have been created to study and make recommendations on the following tax topics:

-Sales and Use Tax, chaired by Representative Kevin Petersen (R-Waupaca);

-Personal and Corporate Income taxes, chaired by Representative Bob Kulp (R-Stratford);

-Local Government Taxes and Funding, chaired by Representative David Steffen (R-Green Bay); and

-Excise Taxes and Fees, chaired by Representative Shannon Zimmerman (R-River Falls).

The subcommittees will hold hearings over the next several months, but is unlikely that the full committee will make recommendations until after the Fall 2018 elections.  

The proposal could have far-reaching effects on businesses and individuals throughout the state, including the members of NAIFA-Wisconsin and their clients. Of course, the more ambitious a tax proposal is, and the more significant its impacts, the more difficult it can be to pass. 

For example, the committee may look at eliminating many current exemptions from the sales tax, which add up to billions of dollars in potential revenue. That new revenue could then be used to lower the sales tax rate or to lower property taxes, for instance.

But eliminating exemptions can be difficult. The vast majority of sales tax exemptions on goods – totaling more than $2 billion dollars per year – is for the value of labor in construction; food; motor fuels; medicines; purchases by governments and schools; farm machinery and supplies; manufacturing equipment; purchases by charitable, religious, scientific and educational organizations; and fuel and electricity used for residential use. Each exemption has its own constituency.      

In addition, services are not subject to the sales tax unless specifically enumerated.  The exemption for health services is the largest, worth more than $600 million per year. But other services add up to more than $1 billion per year, including many services used by businesses, such as computer services, legal services, advertising, accounting, management consulting and property repairs.  

Legislators who look at these issues say the instinctive reaction is for stakeholders to look at protecting their own tax exemptions, such as a sales tax exemption for financial planning services.  But they hope to make the case that restructuring and simplifying the tax code can provide greater benefits, to individuals and to the state’s economy as a whole.  

National Association of Insurance and Financial Advisors-Wisconsin

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