State tax collections take $870 million hit as lawmakers debate reopening the economy

State tax collections take $870 million hit as lawmakers debate reopening the economy

From the The pandemic hits home: Keep up with the latest La Crosse area news on COVID-19 series
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Recently released tax data show an $870 million drop in state tax collections last month — due in large part to the COVID-19 pandemic and the state’s efforts to shut down nonessential businesses to mitigate transmission of the virus.

The news comes as Democratic Gov. Tony Evers and Republican lawmakers, who have filed a lawsuit in the state Supreme Court that could eliminate the governor’s “safer at home” order, try to reach common ground on how to reopen the economy.

During an interview with Wisconsin Health News, Assembly Speaker Robin Vos, R-Rochester, offered some details on how he might like to reopen the state economy, but said the first effort is to try to reach consensus with Evers.

Such bipartisan agreements, however, have been scarce since the governor was elected in 2018, and Vos said it’s possible Republicans, who control the Assembly and Senate, could present their own plan.

“We might end up having to do that, but that is not certainly step one,” Vos said. “I would much rather do it collaboratively.”

Asked about how he’d like to see the state reopen, Vos said he would prefer a more regional approach that imposes regulations differently depending on the number of cases in that area. He also said he’d like to see some form of mass gatherings allowed this summer.

“Why wouldn’t we focus our efforts where we know they are problematic and continue to do the testing around the state as we gradually, slowly reopen?” Vos said. “If Gov. Evers keeps saying it’s a dial, not a switch, well let’s start to turn the dial. … If we wait for Milwaukee and Brown (counties) to be the indicator it’s going to be a long time potentially before Wisconsin can open up.”

Vos also said he likes the proposal brought forth by Wisconsin Manufacturers and Commerce, which would effectively reopen all businesses in the state — with varying regulations based on risk.

On Monday, Evers said the WMC plan has “good pieces” but he added it lacks metrics for determining when it’s safe to take next steps.

Evers and Department of Health Services officials say the state will begin reopening businesses only after a 14-day downward trajectory of influenza-like illnesses and COVID-19 symptoms, and a 14-day downward trend in positive tests as a percentage of total tests. The proportion of positive tests the past two weeks has ranged from about 7% to nearly 13%, with about 8% on Wednesday and the overall trend line essentially flat.

Democrats also have expressed concerns that regions with different rules or requirements could create division between businesses and communities.

Vos acknowledged that reopening the economy early could risk the lives of some Wisconsinites.

“So yes, we want to minimize the number of people who are infected with the disease and we certainly want to minimize the number of people who die, but whenever we reopen the state, it’s not going to be possible for us to prevent all deaths,” Vos said.

As of Wednesday, the respiratory disease had killed 362 Wisconsinites and sickened more than 8,900, according to DHS.

Conservative calls to reopen the state’s economy have grown louder over the weeks, including former Republican U.S. Senate candidate Eric Hovde, a millionaire Madison businessman, who launched a television ad Wednesday arguing for the immediate reopening of the state.

The Hovde ad, along with a new website with a petition calling for reopening, are the first public projects of a group he created called Our Future Matters. Hovde ran for the Republican nomination for Senate in 2012 but came in second in the primary to former Gov. Tommy Thompson, who lost to Madison Democrat Tammy Baldwin in the general election. The banker, investor and developer flirted with another run for Senate in 2018 but did not get in. Hovde has said he’s considering running again in 2022.

“It’s time to open Wisconsin given the data and the consequences of the shutdown,” Hovde said in a statement. “Decisions are being made to lock down our state that are having both severe negative economic and health consequences for our citizens.”

Also on Wednesday, the nonpartisan Legislative Fiscal Bureau found state tax collections from July 2019 through last month were $313 million lower than the same 10-month span in the last fiscal year.

Tax collections last month alone were $870 million below collections in April 2019, the report notes.

The bureau reports that April’s reduction can be due in part to the extension deadlines for filing income and franchise taxes from April to July this year. But it also noted that “the coronavirus pandemic has severely impacted the state’s economy and tax collections.”

Last week, Evers’ administration secretary, Joel Brennan, said all of the state’s executive agencies will need to make a 5% reduction in taxpayer-funded operating expenses by June 30 in an effort to begin to address anticipated shortfalls in state revenue brought on by an economic recession and the administration’s efforts to reduce transmission of COVID-19 by closing nonessential businesses.

Evers estimated the cut would result in a roughly $70 million savings for the state.

Fiscal bureau officials have said it is too early to know the full financial impact of the pandemic, but many lawmakers have all but ruled out the likelihood of a surplus in the state budget, which was projected earlier this year to have $452 million in extra tax revenue through June 30, 2021.

The Associated Press contributed to this report.

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