Today, the Senate Committee on Economic Development and Technical Colleges chaired by Sen. Dan Feyen (R-Fond du Lac) voted to recommend passage of a GOP counterproposal to Gov. Evers workforce development package, Special Session SB1. The vote was 4-2, with both Democrat members of the committee voting against. Last Friday, Senate Majority Leader Devin LeMahieu (R-Oostburg) offered up a substitute amendment to Special Session SB1 that strips the bill of many of the provisions proposed by the governor and replaces them with GOP initiatives. This comes after Senate and Assembly leaders took no action on the legislation during the Sept. 20 special session called by Gov. Evers but promised to address the issues with ideas of their own and kept the session open.
Items of interest to school boards in the governor’s original proposal include payments to childcare programs established or contracted for by a school board; significant changes to family and medical leave law; allowing Wisconsin Retirement System annuitants to return to work; and various grants and stipends to assist with teacher workforce challenges. Read the WASB’s previous blog post for more information on the governor’s original workforce development proposal.
The GOP counterproposal strips out all of these provisions and replaces them with income tax rate reductions, childcare tax credits, private school tuition deductions, apprenticeship grants to tribal and technical college students, and several licensure compacts with other states. The GOP proposal also includes changes to unemployment insurance programs, healthcare sector licensing, and creates a commercial driver’s license grant program.
Income tax rates
Beginning with the 2023 tax year, this bill decreases the individual income tax rate in the third tax bracket from 5.3 percent to 4.40 percent. Under current law, there are four income tax brackets for single individuals, certain fiduciaries, heads of households, and married persons, and the brackets are indexed for inflation. The rate of taxation under current law for the lowest bracket for single individuals, certain fiduciaries, heads of households, and married persons is 3.50 percent of taxable income. The rate for the second bracket is 4.40 percent. The rate for the third bracket is 5.3 percent. And the rate for the highest bracket is 7.65 percent. Before bracket indexing, the four brackets for individuals, certain fiduciaries, and heads of households, to which the above rates apply, are as follows: 1) taxable income from $0 to $7,500; 2) taxable income exceeding $7,500 but not exceeding $15,000; 3) taxable income exceeding $15,000 but not exceeding $225,000; and 4) taxable income exceeding $225,000.
Child and dependent care tax credit
Under current law, an individual who is eligible to claim the federal child and dependent care tax credit may claim a state income tax credit equal to 50 percent of the amount the individual may claim as a federal income tax credit. However, the amount of employment-related expenses that an individual may claim to determine the amount of the federal credit is limited to $3,000 if the individual has only one qualifying dependent, and $6,000 if the individual has two or more qualifying dependents.
The bill increases the amount of the state credit that an individual may claim by increasing the employment-related expense limitation to $10,000 for one qualifying dependent and $20,000 for two or more qualifying dependents, and by allowing an individual to claim a state income tax credit equal to the full amount that the individual could claim for the federal child and dependent care credit determined using the individual’s employment-related expenses.
Private school tuition deduction
Under current law, an individual, when computing income for income tax purposes, may deduct the tuition paid during the year to send his or her dependent child to private school. The maximum deduction is $4,000 for an elementary school pupil and $10,000 for a secondary school pupil.
This bill increases the maximum deduction to $5,070 for an elementary school pupil and $12,660 for a secondary school pupil. The bill also increases the amounts by the annual percentage change in the consumer price index for future tax years.
Apprenticeship grants for technical college and tribal college students
This bill creates grant programs under which the Technical College System Board and Higher Educational Aids Board may award grants of up to $1,500 to technical college students and tribal college students, respectively, who have undertaken an apprenticeship program in conjunction with their course of instruction at the technical college or tribal college. These grants may be awarded only to pay for the students’ actual materials expenses, such as the cost of tools, equipment, and clothing, associated with the apprenticeship program. Among the requirements for a student to be eligible for a grant, the student must be enrolled in the apprenticeship program in the semester in which the grant is made and in the following semester.