Tax Collections Fall Short, Possibly Creating Future Budget Problems

The latest numbers from the Wisconsin Department of Revenue show tax revenues lagged expectations by $281 million last fiscal year, sending the state’s two-year budget into a projected shortfall.

The state income tax accounted for the biggest portion of the decrease in sheer dollars, while as a percentage, it was corporate income tax collections that led the decline. The drop in revenue collection was not enough to send the state’s budget into shortfall immediately, but assuming no other changes, Legislative Fiscal Bureau Director Bob Lang said it will create an estimated $115 million dollars shortfall at the end of this fiscal year.

Wisconsin Taxpayers Alliance Director Todd Berry said multiple factors could be driving the drop in tax collections.

“There’s the possibility here that the numbers are off because of the economy,” said Berry. “There’s also the possibility that we just can’t guess as well as we’d like.”

Whatever the cause, Berry said the Legislature and Gov. Scott Walker set themselves up for a shortfall when they crafted a budget with a relatively small ending balance.

“It’s the same old story as it’s been forever, and that is governors and legislators can’t predict with absolute precision. They always cut things too close when it comes to tax cuts and spending. So if you have any kind of little surprise, it’s going to be a big surprise simply because you cut things way too close.”

Berry said the shortfall going forward could actually get bigger if the economy continues to grow at its current pace.

The Department of Revenue will release more detailed numbers in October.