The Associated Press May 31, 2011, 11:19PM ET

Wis. budget panel cuts tax credit for poor

Republicans on the Legislature's finance committee tucked a host of tax changes into the state budget Tuesday, reducing credits for the working poor and expanding tax breaks on business investments.

The committee adopted a massive motion covering a wide swath of tax revisions on a 12-4 party line vote. Chief among them was a provision cutting back on the earned income tax credit.

Both the federal and state government offer the credit to low-income people as a means of offsetting their income taxes. The federal government set 2011 credit levels at $3,094 for families with one child; $5,112 for families with two children; and $5,571 for families with three or more children. The state sets its credit levels as a percentage of each federal credit.

Republican Gov. Scott Walker's executive budget calls for increasing the state credit for one-child families from 4 percent to 5 percent, but would cut the credit for two-child families from 14 percent to 8 percent and for families with three or more children from 43 percent to 40 percent.

Republicans who control the finance committee left the governor's increase for one-child families unchanged. They increased the two-child family credit from Walker's 8 percent to 11 percent, but went beyond the governor's cut to families with three or more children, decreasing their share to 39 percent.

Rep. Robin Vos, R-Rochester, the committee's co-chair, told reporters before the panel convened that Wisconsin's credits are among the most generous in the nation. According to state fiscal analysts, no other states offer a credit of more than 40 percent or offer more than one reimbursement percentage based on the number of children in a family.

He said Republicans want to target the credit to one-child families in hopes of helping single mothers.

But the four Democrats on the committee decried the changes, calling them unjustified, immoral and callous.

"We hate poor people," Rep. Tamara Grigsby, D-Milwaukee, said. "We kick them when they're down. They will never have the chance to thrive."

The motion also included a provision that would allow someone to defer taxes on long-term capital gains that are reinvested in a Wisconsin business. The taxes wouldn't come due until the investment is sold. If the person holds the investment for five years, he or she would owe no taxes on it. Under current law, generally 30 percent of capital gains are exempt from taxes.

Other changes included:

--Allocating $39 million to the veterans and surviving spouses property tax credit, about $9.7 million more than Walker set out. The program provides an income tax credit for property taxes veterans and their surviving spouses. Participation in the program has been growing as more people learn about it, according to state fiscal analysts.

--Allows relatives who contribute to a child's state college savings account to claim income tax deductions.

--Allowing movie theaters to obtain a liquor license.

The finance committee is expected to complete its revisions to the budget later this week. The spending plan then goes to the full Legislature. Both the Senate and Assembly must pass identical versions of the bill before it can go to Walker for his signature.


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