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State tax compromises prove that partisanship can be set aside — for a while

Madison, Wis. - The average citizen may think Gov. Jim Doyle and the Republican-led Legislature fight like Ali and Frazier whenever they step into the boxing ring of politics. And judging by some of the bare-knuckled debates that have taken place in the Capitol over the past two and a half years, Joe and Jane Citizen would be largely correct.

Not entirely correct, however, as evidenced by some important tax changes contained in the 2005-2007 budget bill.

The bill signed into law by Doyle Monday morning will pave the way for hundreds of millions in savings for taxpayers, although much of the relief won't be felt until the 2008 year. The bulk of the tax changes were introduced by Republicans, but Doyle accepted them in modified form.

The changes will:
• Exempt Social Security benefits from state income taxes starting in tax year 2008. The budget passed by the Legislature would have started the phase-out in 2007. Wisconsin is one of just 15 states that collect a tax on Social Security benefits for recipients whose income exceeds a certain level. The cut will save about $420 per year for the 183,000 senior citizens who are affected.
• Cut the state gasoline tax. That portion of the state gas tax used to pay for restoring "brownfields" will be reduced by 1 cent per gallon in May 2006. The gas tax was automatically scheduled to increase between now and then, so the reduction amounts to about two-tenths of 1 cent per gallon. Still, even that cut will save motorists $46 million over two years.
• Increase the income-tax deduction for college tuition from the current maximum of $3,000 a year to twice the average amount charged by the UW Board of Regents at four-year institutions for resident undergraduates. The change reflects a policy decision to encourage more young people to attend college - the state trails the U.S. average in college graduates - while conceding the fact that tuition is rising within the UW System. This proposal was contained in Doyle's original budget.
• Increase tax deductions for health insurance premiums paid by employees whose employers don't contribute toward their health insurance, and create a deduction for premiums for people who have no employer and no income from self-employment. The deduction will be effective in tax year 2007, payable in 2008.
• Enact a modified property tax "freeze" that Doyle says will hold taxes on the average home essentially flat for two years. Doyle had proposed more property-tax relief in his budget, but Republicans increased the amount in their version of the two-year bill. The governor's vetoes will essentially split some of the differences.

Republican leaders will be peaking under the covers to make sure Doyle's actions do what he says they will do, but they're also inclined to declare victory. The property tax relief is a prime example, given that various Republican plans dating back three years or more have focused on reducing taxes on property.
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"We've thrown this thing at him four, five, six times in the form of bills and amendments to the budget," said Rep. Dean Kaufert, R-Neenahn, co-chairman of the Legislature's Joint Finance Committee. "But the bottom line is, hey, he (Doyle) is coming around."

For his part, Doyle says he's always maintained that taxes in Wisconsin are too high - a factor that probably distinguished him from other Democratic candidates in the 2002 primary race for governor. Doyle also noted he's not too proud to accept good ideas from Republicans.

"A budget is about finding common ground, and I am pleased that I was able to work with Republicans and Democrats in the Legislature to provide tax relief to Wisconsin's families that is real and meaningful," Doyle said.

It's sometimes lost in the debate over "wedge" social and cultural issues, but the Legislature and Doyle have largely worked together to hold down and even reduce taxes. It may be some time before Wisconsin looks better in the state-by-state tax rankings, but progress is being made.

Tom Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.

The opinions expressed herein or statements made in the above column are solely those of the author, & do not necessarily reflect the views of Wisconsin Technology Network, LLC. (WTN). WTN, LLC accepts no legal liability or responsibility for any claims made or opinions expressed herein.

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