Wisconsin’s Republican members of Congress, led by Speaker Paul Ryan of Janesville, love the huge tax bill. Democrats from Wisconsin are united against it.
What will it mean for you and businesses you know?
A lot of analysis is left to be done, but here are some initial takes from WisBusiness.com reporting:
Real estate experts in Wisconsin say the GOP tax bill could result in fewer homebuyers and lower property values for some homes due to a $10,000 cap on state and local tax deductions included in the bill.
Mike Ruzicka, of the Greater Milwaukee Association of Realtors, says “We are very concerned with the implications on residential real estate with the tax bill.”
“Not being able to deduct over $10,000 will impact a lot of people,” he said. “It relates to the cost of housing.”
As he puts it, the “nickel and diming” effect of this provision would make certain homes slightly more costly by a few thousand dollars, edging some out of the buyer’s position.
“It raises the bar for getting over the hurdle to get a home — that will cause people to stay in apartments longer,” he told WisBusiness.com.
But this isn’t the case across the board, as Marquette University’s David Clark notes, because although owners of more expensive properties won’t be able to write off as much of their taxes, many in the median-range are relatively untouched.
“For more expensive properties, it will have an impact on the desirability,” says Clark, an economics professor who works as a consultant for the Wisconsin Realtors Association. “If you think of it in one way, it raises the cost of buying one of those homes by taking tax benefits off the table — so what ultimately happens is it makes some of those properties less desirable.”
Some business leaders in Wisconsin are applauding the reforms being rolled out in the Republican tax bill, while others are wary about potential problems.
Kurt Bauer, president and CEO for Wisconsin Manufacturers & Commerce, says comprehensive tax reform, including a lower corporate rate, is “obviously very popular to our business community,” citing a recent WMC survey.
“The 35 percent rate for C-corps is uncompetitive,” he told WisBusiness.com. “It needed to be reformed for us to be competitive with the rest of the industrialized world.”
“In general, we’re very excited that it got done,” said Steve Baas, senior vice president of governmental affairs and public policy for the Metropolitan Milwaukee Chamber of Commerce. “It impacts everyone by being simpler from a business standpoint.”
And, Baas said, it’s better aligned with the goal of economic growth than the existing tax code. That’s in part due to “significant reforms” like the lower corporate tax rate, which would be dropped from 35 percent to 21 percent.
“That’s huge,” Baas said. “That gets us back in the game in terms of international competitiveness.”
More than anything, Bauer argued, this lower rate will help to keep big companies like Johnson Controls from moving to another country with a more competitive rate, like Ireland or Canada.
“That’s one benefit — keeping American companies American,” Bauer said.
Tom Still, president of the Wisconsin Technology Council, calls the GOP tax plan “a bit of a mixed bag.”
“On the one hand, there hasn’t been corporate tax reform in 30 years and it was time for a review,” said. “On the other hand, there appears to be broad consensus that this tax reform could inhibit the nation’s ability to balance the budget and reduce the deficit. Or simply delays the day of reckoning to 2025.”
Jacob Maddox, a UW-Madison research associate in nuclear engineering, says he and his colleagues “can all rest easy” now that the proposed tax on tuition waivers for graduate students is no longer included.
“It means a lot,” Maddox said. “It would have been really bad for grad students ... it’s almost indescribable.”
In a letter sent to students by UW-Madison Graduate School in early November, Dean William Karpus argued the proposed change would cause a “completely unaffordable” increase in students’ taxable income and make pursuing a graduate school degree “much more challenging, if not impossible, for a large number of these students.”
“In turn, this would greatly damage our nation’s scientific research enterprise,” he wrote.
Maddox argues graduate students are underpaid already, so anything cutting their incomes further is significant. If the proposed tax had been included, he says the university would have needed to make some systemic changes or risk “a huge number of people” walking away from the grad program.
“Because of how compensation is structured, the proposed tax would have been devastating,” he said.
Ravindra Misra, dean of the graduate school of biomedical sciences at the Medical College of Wisconsin, says “we are pleased that the provisions placing negative impacts on graduate students” didn’t make it into the final bill.
“Maintaining the student loan interest deduction and other education-related credits facilitates our mission of training and educating students to build a healthier community for our current and future students,” Misra said.
“It’s like your future is being dangled over a crevice, and then it’s pulled back in ... so we’re no longer hanging over the bottomless pit.” Maddox added.