Rep. Macco has scheduled the first of five Assembly Ways and Means public hearings on taxation in Wisconsin. The first hearing, scheduled for today*, invites two legislative service agencies and three associations to testify about Wisconsin property taxation. Additional hearings will be scheduled on sales and use tax, excise tax and fees, corporate and personal income taxes, and local government.
In an interview with The Wheeler Report, Macco said his goal is to gather information, make sure everyone making decisions is starting from the same basic knowledge, and to build a build a tax structure that looks like it was made on purpose, not pieced together. Macco emphasized that the Ways and Means hearings are about gathering information and looking at the tax structure, not about budgeting. “The Ways and Means committee is really supposed to determine the ways and means of providing the funds for the State of Wisconsin.” Macco said. “Our job is not budgeting. Our job is not appropriations. Our job is to say here is the best way to get that amount of revenue. I’m not saying it’s the right amount of revenue; that it’s too high or too low. We are charged with analyzing that. In my background as an asset manager, we build portfolios all the time.” Macco said he wants to build the State a “well-balanced portfolio so everything is working in harmony.” Macco highlighted that Wisconsin currently has sales tax, use tax, income tax, personal property tax, property tax, alternative minimum tax, and others that are all collecting or reducing at different rates. Macco said when he first began looking at the tax structure he realized there were “bad economics” that were causing anomalies and distortions on creating wealth verses consuming wealth, and how debt is rewarded. Macco continued to explain that the anomalies and distortions affect how counties are run, and how schools are forced to bond. Macco included that an escalation in student debt, and an increase in the young and retirees leaving the state are a “symptom of a poorly functioning tax structure.” Macco said Wisconsin needs to find the right mix of income tax, sales tax, property tax, use tax, excise tax, alternative minimum tax, and others to reach a balance.
Macco said too many decision makers decide the solution before they take the appropriate steps to consider the issue. Macco plans to hold hearings to make sure everyone knows what all the issues are before deciding a solution. The first hearing is focused on property taxes. The hearing will look at what is property tax, the kinds of property tax, what is property and how is it taxed, the rules and regulations that govern property tax, and what personal property tax is. Macco discussed how he believes if the committee takes the time to understand the issues, then works to make a balanced portfolio for the state it could solve the education funding problems, the transportation funding problems, and ultimately provides a consistent revenue stream and will not be greatly affected by the ups and downs in the economy.
Macco emphasized that changes to taxation are not always easy. When explaining the interdependence of taxes, Macco said that if the State tweaked the lower income tax bracket it could send more people into the alternative minimum tax area. Exemptions are another area the committee needs to study according to Macco. He said the committee needs to understand what are exemptions and why they are needed. Macco said many of his colleagues want to eliminate the personal property tax, which he is in favor of, but eliminating the personal property tax affects TIF districts. Macco said personal property tax cannot be discussed without a discussion on the property tax, which cannot be discussed without talking about the components of the property tax – like the forestry tax or the burdens on counties to provide services.
When asked what he expected to be the reaction of organizations that currently have exemptions, Macco said most organizations are willing to trade their exemptions if it results in a “fair, flat and easy to comply with” tax code. Macco highlighted that one thing he has been unable to do up to this point is to determine the dynamic score for taxes and tax exemptions. Macco said he is able to tell the cost associated with some taxes, but is unable to quantify the excess cost to business owners to collect the taxes, or do the paperwork that is required as part of the taxes and exemptions. Macco said there is an efficiency value in making it easier for people to comply with the tax code.
“The long-term goal is to transcend the budget conversation from a six-month discussion on budget and spending and move it to an on-going two-year conversation on what we really should be doing. It’s the difference between management and leadership. I think we’ve done a great job on doing things well, but now we need to decide are we doing the right things.” Macco said. He emphasized that when Wisconsin’s tax code was last updated the internet didn’t exist and people weren’t moving goods and services electronically. Macco insisted that the tax code and taxation only gets worse as society moves forward technologically if the State doesn’t do something about it now. Macco highlighted that to institute changes everyone has to be on board and everyone has to be ready to move forward.
Macco said the goal of his committee is not to weigh in on what is or is not an appropriate amount of money for the State to collect or spend, his committee is focused on making sure whatever amount of revenue needs to be collected is done so in the most efficient and most consistent manner. Macco said the revenue numbers released last week reinforce his stance that now is the time to make changes. Macco used the analogy that if a family was looking to make a career change the best time to do that is when there is money in the savings account and there is an opportunity to cover extra expenses that may be incurred while moving over to the new job. He continued by saying you don’t want to have to make huge changes where there is no money to cover the costs of the transitions, and the economy is bad. Macco insisted that economies are cyclical and a future drop in the state economy or revenue collections could make changes harder or more cost prohibitive in the future.
*This interview was originally published on Thursday, January 26, 2017.