2017-18 Wisconsin “Lame Duck” AB 1069

The Wisconsin Legislature will begin debate on several proposed bills during the “Lame Duck” session beginning this week. It has been widely reported that these bills are an attempt to limit the powers of the incoming Governor, Tony Evers, and Attorney General, Josh Kaul. Both of these men are Democrats and both won elections against incumbent Republicans. [1] [2]

Five proposed bills outline the changes that lawmakers are seeking. These bills are AB 1069, AB 1070, AB 1071, AB 1072 and AB 1073. The Legislative Reference Bureau (LRB) provides an analysis of the proposed changes. The following is a summary of these analyses along with additional background and context of the proposed rule changes in AB 1069 [3].

(1.) This bill provides that for Southeast Wisconsin freeway megaprojects, major highway development projects, and certain state highway rehabilitation projects for which the Department of Transportation spends federal money, federal money must make up at least 70 percent of the aggregate funding for those projects.

70% of the funding for specific highway projects, including the planned highway expansion near the Foxconn plant, will be federal money.

(2.) Under current law, DOT may make transfers of state and federal funding between highway programs. This bill eliminates this authority.

The Dept. of Transportation (DOT) may no longer reallocate funding between projects.

(3.) The bill also provides that the new individual income tax rates based on the determinations would not take effect automatically in the year following DOR’s certification, but, instead, the Department of Administration, in consultation with DOR, would determine the new tax rates to take effect for the taxable year ending on December 31, 2019, and report its determinations to the governor, JCF, and the Legislative Audit Bureau. LAB would then review the determinations and report its findings to JCF and the Joint Legislative Audit Committee. If LAB’s review results in a re-determination of the rates, JCF would determine which rates apply to the taxable year ending on December 31, 2019, and report its determination to the governor, the secretary of administration, and the secretary of revenue.

Supreme Court case South Dakota v. Wayfair (2018) established that out-of-state retailers (meeting certain criteria) may be charged sales tax. Under current law, this decision triggers action by the Dept. of Revenue (DOR) to determine how much additional sales and use tax will be collected under the new federal law. The DOR must then reduce individual income tax rates to an amount equal to the increased sales tax revenue. The DOR must “certify” these new rates to the secretary of administration, governor, and the legislature. The new rates take effect the following year.

Under the proposed change the Dept. of Administration (with DOR) will determine the new rates. The Legislative Audit Bureau (LAB) will review and if they find that the rate is “incorrect” then the JCF will determine the rate.

The leaders of the DOR and the DOA are both appointed by the governor [4]. However, the Legislative Audit Bureau is led by the state auditor. This position is appointed by the Joint Committee on Legislative Organization [5]. The JCF is entirely made up of the House and Senate finance committees [6].

What this really breaks down to is an attempt to shift the responsibility of setting of the new income tax rates from the executive to the legislature. Of course, this can only be done IF the legislature determines that the DOA/DOR recommendations are flawed.

[1] https://www.jsonline.com/story/news/politics/2018/11/30/lawmakers-consider-changes-early-voting-transportation-funding-2020-presidential-primary/2162684002/

[2] https://www.wbay.com/content/news/Republicans-prepare-to-move-ahead-with-lame-duck-session-501740511.html

[3] https://docs.legis.wisconsin.gov/2017/related/proposals/ab1069

[4] https://docs.legis.wisconsin.gov/misc/lrb/blue_book/2017_2018/060_executive.pdf

[5] https://docs.legis.wisconsin.gov/misc/lrb/blue_book/2017_2018/050_legislature.pdf

[6] https://docs.legis.wisconsin.gov/2017/committees/joint/1680

 

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