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POLICY INSIGHT
BEYOND THE NUMBERS

Wisconsin Governor’s Budget Takes Aim at Low-Income Working Families

Wisconsin Governor Scott Walker’s budget would force low-income working families with children to pay $41 million more in income taxes over the next two years by cutting the state’s earned income tax credit (EITC), giving him some of the revenue he needs to cover $200 million in recent and proposed tax cuts for corporations and wealthier people. Wisconsin’s EITC is a tax credit for working families, mostly families with children, with incomes below around $41,000 (for a family with two children).  Walker’s cut in the credit would more than double the tax bill for a single working parent with two kids and earnings of $25,000, from $193 to $394. Over the years, federal and state EITCs have earned bipartisan support as a way to help working families move up.  President Reagan called the tax reform bill he signed in 1986, which included a large EITC expansion, “the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress.”  The federal EITC lifted 6.5 million people out of poverty in 2009, including 3.3 million children. Wisconsin’s EITC lives up to its promise:
  • It offsets other state and local taxes paid by workers earning the lowest wages — janitors, home health aides, child care workers, and wait staff, for example.
  • It helps local businesses by enabling working families to spend money to feed, house, and clothe their children and buy gas to get to work.
  • And it reduces poverty, most importantly for children.
At the same time, Walker proposes $82 million in new corporate tax cuts over the two-year budget period.  Together with other tax cuts enacted earlier this year with Walker’s support, they would cost the state about $200 million over two years.  And as I explained last week, they are very unlikely to produce the promised job creation. Walker’s budget also would make life harder for many low-income working families in other ways.   It would scale back the state’s child care program.  At the same time, as my colleague Judy Solomon explained last week, Walker continues to seek cuts in Medicaid eligibility and benefits.  And he proposes large cuts in K-12 education and in funding for cities and counties, some of which goes for services that help low-income families make it into the middle class. In his budget address, Walker said, “[we] were elected — not to make the easy decisions to benefit ourselves — but to make the difficult ones that will benefit our children and grandchildren.”  Yet his choice to cut the EITC and other services for working families while pursuing more corporate tax breaks doesn’t live up to that aspiration.