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Consumer experts question whether Walker's $150 tax cut for homeowners will 'fuel' an economic recovery
Walker is up for reelection this year and is also considered a Republican hopeful for the presidency in 2016.
Credit:Office of the Governor Scott Walker

Wisconsin Gov. Scott Walker opened and concluded his 2014 state of the state speech by touting a tax cut plan that he says will provide a boost to the economy.

"When I travel the state, people don't tell me that they want to keep sending more money to Madison," Walker said Wednesday, Jan. 22 before a joint session of the state Assembly and Senate. "Overwhelmingly, people across the state tell me that one of the best ways to fuel the economic recovery is to reduce their tax burden."

But it's not at all clear that the roughly $150 expected to be returned to each homeowner will do much to directly stimulate the state's economy, according to experts on consumer trends and financial planning.

For one, there's consumer confidence to consider, according to Jerry O'Brien, executive director of the UW-Madison Kohl's Center for Retailing Excellence.

While state tax cuts can make consumers feel good about the economy, "this can just as easily go back into paying bills if something happens nationally to scare consumers," O’Brien says.

Also, not all taxpayers spend money the same way, says J. Michael Collins, the faculty director of the UW-Madison Center for Financial Security.

"Most wealthy folks will end up putting the money in savings or an investment account, and not necessarily spending at the mall," Collins says.

There's also the matter of the return for each individual taxpayer. $406 million in property tax cuts and the $98.6 million income tax cut boil down to about $150 for the average homeowner.

Walker's plan to fund income and property tax cuts stems from a recently projected budget surplus (PDF). Walker has called for a special session of the Legislature to gain approval for those measures.

His plan also includes changes to state income tax withholding policies, which the governor already ordered earlier Wednesday. This does not increase anyone's income -- it simply means the state will withhold less money from paychecks, which will result in lower refunds after taxes.

The savings from the tax cuts are small enough, Collins believes, that some people might not even notice them.

"When you do a tax cut this small, it's not motivated strongly by economics. It's motivated by something else," he says.

Like the start of a reelection campaign.

"It was clearly a speech that was geared towards the election with almost exclusive focus on economic issues," says Ken Mayer, a political science professor at UW-Madison. "Almost all of it was jobs, taxes, spending, growth."

Walker is up for reelection this year and is also considered a Republican hopeful for the presidency in 2016.

Barry Burden, another UW-Madison political science professor, says Walker's focus on tax cuts is a "win-win" for its resonance with the Republican base.

Mary Burke, a Democratic challenger to Walker, criticized Walker's decision to use the projected surplus to fund tax cuts, rather than to pay off state debt.

"I don't know too many Wisconsin families who would rush out to spend money they may not even have on new things, particularly when they've already racked up a bunch of debt and have other bills coming due," Burke said in a statement.

The Milwaukee Journal-Sentinel reported Monday that some Senate Republicans who support tax cuts would also like to see more of the projected surplus used to address the state’s structural deficit.

Wisconsin is expected to spend about $700 million more than it will bring in by 2017. Walker's plan would put $100 million towards closing that deficit.

But that's just about one-fifth of what will be used to fund tax cuts, clearly Walker's priority.

"What do you do with a surplus?" Walker asked during his state. "You give it back to the people that earned it."

Read the complete text of Gov. Walker's 2014 State of the State address.

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