MADISON, Wis. — Wisconsin families with school-aged children would receive a one-time $100 tax rebate this summer and state sales tax would be waived on certain purchases the first weekend in August under a deal Gov. Scott Walker and Assembly Republicans announced Thursday.
The agreement is a variation of an election-year tax cut the Republican incumbent governor first put forward last month that Democrats assailed as a gimmick to help Walker’s re-election bid. While Walker and Assembly Republicans are on board, the Republican-controlled Senate has opposed sales tax holidays before and is not yet on board with the latest proposal.
Assembly Speaker Robin Vos denied the timing of the tax breaks, which would come just days or weeks before the Aug. 14 primary, were politically motivated.
“I’ve never thought it was a gimmick,” he said. “Frankly, I am OK with anything to reduce the taxes paid in Wisconsin because we are overtaxed, period. I think this is a creative way to stimulate the economy.”
Democrats accused Walker of trying to buy his re-election.
“This is an election year bribe,” said Democratic Assembly Minority Leader Gordon Hintz. “The governor might as well save money on postage and just hand these checks out at polling places in November.”
The Assembly will approve the plan later this month, Vos said. Senate Majority Leader Scott Fitzgerald said Republican senators would discuss the idea in a private caucus meeting on Tuesday. He noted that similar ideas have run into opposition from Republicans before, but he didn’t want to discount it outright.
“It’s a good argument to be having, how do you give back revenue and tax dollars,” Fitzgerald said.
Under the deal, families with children ages 5 to 17 as of last year who are living at home would receive $100 for each qualifying kid. The money, estimated to be about $122 million taken from a budget surplus, would be delivered to all families regardless of income sometime in July. That is unchanged from what Walker originally proposed.
“As I promised, when we have a surplus, we will give it back to you,” Walker said in a statement. “It’s your money.”
Walker originally wanted to continue with a refundable income tax credit starting in 2019, but that has been scrapped. Instead, there will be a one-time waiving of the state’s 5 percent sales tax, and any local sales tax, on qualifying purchases under $100 made the first weekend in August. The total estimated cost to the state in lost tax revenue would be about $50 million.
All items priced under $100 would qualify for the exemption, but the full sales tax would be owed on any single item costing more than that. It would also apply to online purchases. For every $100 in qualifying purchases, the tax savings would be at least $5.
“Our goal is actually to increase the economic ability of families this year,” Vos said, noting that the benefit will extend to all families regardless of income.
The exemption would not apply to alcohol or tobacco products, prepared food, taxable services, motor vehicles or vehicle parts, telecommunications or utility tangible or intangible property.
Walker proposed a more narrow sales tax holiday in his last budget that would have applied only to back-to-school supplies. But Republicans rejected that, instead focusing on other tax cuts.
Critics of sales tax holidays, particularly retailers, argue they are costly and difficult to administer.
Sixteen states had some type of sales tax holiday in 2017, according to the Federation of Tax Administrators.
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