Ethnie Groves, Office of the Governor, 608-261-2156
Tax Cuts For Social Security Benefits, Health Insurance Premiums, College Tuition,
& Gas Will Reduce Tax Burden on Wisconsin Citizens By More Than $325 Million
HALES CORNERS – Governor Jim Doyle announced today four major tax cuts included in the State Budget on Social Security benefits, health insurance premiums, college tuition, and gas.
“Today, I’m pleased to announce that, not only am I keeping my word to not raise taxes, I am unveiling four major tax cuts that will ease the tax burden on Wisconsin citizens,” Governor Doyle said. “A budget is about finding common ground and I am pleased that I was able to work with Republicans and Democrats in the legislature to provide tax to relief to Wisconsin’s families that is real and meaningful.”
Income Tax Exclusion for Social Security Benefits
Governor Doyle signed a proposal that exempts Social Security benefits from taxes. Beginning in 2008, the proposal will provide a full 100 percent income tax exclusion for Social Security benefits above certain thresholds – $25,000 for single filers and $32,000 for joint filers. Currently, 50 percent of the income above these thresholds is excluded from income tax, and 100 percent of income below these thresholds is excluded.
“So many of our greatest generation are struggling to get by on a fixed income,” Governor Doyle said. “Living on Social Security is hard enough for many seniors without the state taking a bite out of their check.”
The legislature’s provision would have phased-in the exclusion by increasing it to 65 percent in tax year 2007, 80 percent in tax year 2008, and 100 percent in tax year 2009. The Governor’s partial veto eliminates the phase-in and makes the full 100 percent exclusion available to Social Security recipients one year earlier. This veto provides $16.2 million more in tax relief to eligible recipients than under the legislature’s phase-in proposal.
Wisconsin is currently one of only 15 states that taxes Social Security. Nine, including Minnesota, tax up to 85 percent of Social Security benefits; two, Iowa and Wisconsin, tax up to 50 percent; four others have state-specific formulas for determining the portion of Social Security that is taxable. Illinois and Michigan exempt all Social Security income.
“This tax cut brings Wisconsin in line with our neighboring states, including Illinois and Michigan, ensuring that Wisconsin is known as a great place to retire,” Governor Doyle said.
Individual Income Tax Deduction for College Tuition
Governor Doyle also signed into law an increase in the individual income tax deduction for higher education tuition expenses.
The bill will increase the maximum deduction from $3,000 to twice the average amount charged by the UW Board of Regents at four-year institutions for resident undergraduate academic fees for the most recent fall semester.
“This tax deduction can help students going straight from high school to college, or those returning to school as an adult to get their degree,” Governor Doyle said. “It’s available to all students, whether they attend a public or private institution and whether they get a two-year or four-year degree. It’s just common sense to have a tax code that helps people afford the cost of college, instead of making it harder.”
The provisions apply to taxable years beginning on January 1, 2005 and will reduce state individual income tax revenues by more than $10 million over the biennium.
The Governor announced he will sign into law a Gas Tax provision to decrease the petroleum inspection fee that is charged on purchases of gasoline from $.03 to $.02 per gallon effective May 1, 2006.
“A penny might not seem like much, especially when gas prices seem to be going up 20 cents every week,” Governor Doyle said. “But this tax cut will save our citizens $46 million over the next two years.”
Currently, the $.03 charge goes to the PECFA program which reimburses property owners with covering the costs of removing underground storage tanks – primarily gasoline – that are leaking remaining fluids into the groundwater table and homeowners that have similar issues with old home heating oil tanks. The program will still have sufficient funds to continue its work.
Health Insurance Premium Deductions
Governor Doyle also approved health insurance premium provisions added to the budget by the Legislature. One provision increases the current individual income tax deduction for health insurance premiums paid by an individual whose employer does not contribute toward the individual’s health insurance. The other creates a deduction for health insurance premiums paid by an individual with no employer and no self-employment income.
“I didn’t have these deductions in my original budget, but they’re going to improve the lives of countless Wisconsin residents and I’m pleased to sign them into law,” Governor Doyle said. “These deductions will improve access to health care and remove barriers for those who might not otherwise be able to afford insurance.”