Revenue Secretary Peter Barca hints at possible compromise on high income tax bracket

A top official in Gov. Tony Evers' administration has signaled there could be room for compromise between Republican lawmakers and the Democratic governor to lower the top income tax bracket in Wisconsin.

Evers and the Republican-controlled state Legislature are grappling with how to spend a projected $7.1 billion surplus as they tackle the next two-year state budget in the coming months. GOP leaders want to enact massive income tax cuts, especially for filers in the top bracket. Evers has said he wants tax relief for the middle class.

Department of Revenue Secretary Peter Barca indicated Wednesday evening at the Wisconsin Policy Forum annual meeting in Milwaukee that the budget-writing process could include changes in tax policy for the highest earners.

“I think we could do something on the top rate, I think we could do something to have an impact, to also make a change so that we do, primarily, help those that are struggling to get in the middle class and those that are there,” Barca said.

“To me that would be a reasonable compromise, but the governor has made clear that he will not sign a flat tax.”

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Senate Majority Leader Devin LeMahieu has proposed a 3.35% flat income tax which, if passed, would be vetoed by Evers.

If a flat tax was implemented, Barca said the state would “be looking at an annual $4 billion reduction in revenue.”

Barca added the state could afford a flat tax during this biennial budget, but in the next budget, the state could be looking at a structural deficit.

Barca said he’s met with state senators from both parties “and one of the GOP senators said to me today was ‘The last thing in the world that I want is to go back to structural deficits.’”

Barca was joined on stage at the event by Rick Chandler, former secretary of the Wisconsin Department of Revenue during the Walker administration.

A large portion of the discussion focused on how the state could make itself more competitive via the tax code.

“Historically, in Wisconsin, we’ve had a tax system where we’re above average on income and property taxes, well below average on sales taxes. That’s a little bit of a problem from a marketing perspective,” Chandler said. “Because the two taxes that people notice the most and dislike the most are the income and property taxes. People don’t really notice the sales tax.”

Chandler said a flat tax is “easier to understand, easier to market,” but doesn’t necessarily lower the tax burden of all residents.

“Illinois has a flat tax. One rate, 4.95%. People look at that and think Illinois has lower taxes than us. Actually, our overall tax burden is lower than Illinois,” Chandler said.

“We have to find better ways to market our tax system. A flat tax would do that. On the other hand, it would direct a large share of the cuts to the people at the upper end of the tax bracket, not as much for the middle class.”

This article originally appeared on Milwaukee Journal Sentinel: Revenue Secretary Barca hints at compromise on high income tax bracket