AB632: Bill Text

LRB-4260/1

MES:jlg:jf

1997 - 1998 LEGISLATURE

1997 Assembly BILL 632

December 2, 1997 - Introduced by Representatives Wasserman, F. Lasee, Dobyns, Green, Grothman, Porter, Seratti and Ziegelbauer, cosponsored by Senators Wirch and Panzer. Referred to Committee on Income Tax Review.

AB632,1,7 An Act to amend 71.06 (1m), 71.06 (2) (c) (intro.), 71.06 (2) (d) (intro.), 71.06 (2e), 71.06 (2m), 71.06 (2s) (a), 71.06 (2s) (b), 71.125 (1), 71.64 (9) (b), 71.67 (4) (a) and 71.67 (5) (a); and to create 71.06 (1n), 71.06 (2) (e), 71.06 (2) (f) and 71.06 (2s) (c) of the statutes; relating to: reducing the number of individual income tax brackets, lowering the individual income tax top rate of taxation and creating a task force to address issues related to the revenue shortfall caused by reducing the number of brackets and lowering the top tax rate.

Analysis by the Legislative Reference Bureau

Under current law, there are 3 income tax brackets for single individuals, certain fiduciaries, heads of households and married persons. The brackets for single individuals, certain fiduciaries and heads of households are taxable income from $0 to $7,500; from more than $7,500 to $15,000; and more than $15,000. The brackets for married persons filing jointly are taxable income from $0 to $10,000; from more than $10,000 to $20,000; and more than $20,000. The brackets for married persons filing separately are taxable income from $0 to $5,000; from more than $5,000 to $10,000; and more than $10,000.

The rate of taxation under current law, for taxable years beginning before January 1, 1998, for the lowest bracket for single individuals, certain fiduciaries, heads of households and married persons is 4.9% of taxable income, the rate for the middle bracket is 6.55% and the rate for the highest bracket is 6.93%.

For taxable years beginning after December 31, 1997, current law lowers the rate of taxation for all brackets by 1.0%. Therefore, for taxable years beginning after December 31, 1997, the rate of taxation under current law for the lowest bracket for single individuals, certain fiduciaries, heads of households and married persons is 4.85% of taxable income, the rate for the middle bracket is 6.48% and the rate for the highest bracket is 6.87%. For taxable years beginning after December 31, 1998, current law also indexes for inflation the maximum dollar amount in each tax bracket and the corresponding minimum dollar amount in the next bracket.

For taxable years beginning after December 31, 1998, this bill reduces the number of individual income tax brackets to 2 and lowers the rate of taxation for the highest bracket to 6.0%. Under the bill, the brackets and rates for single individuals, certain fiduciaries and heads of households are taxable income from $0 to $15,000, at a rate of 4.85%; and more than $15,000, at a rate of 6.0%. The brackets and rates for married persons filing jointly are taxable income from $0 to $20,000, at a rate of 4.85%; and more than $20,000, at a rate of 6.0%. The brackets and rates for married persons filing separately are taxable income from $0 to $10,000, at a rate of 4.85%; and more than $10,000, at a rate of 6.0%.

This bill also delays the start of indexing for inflation the maximum dollar amount in each tax bracket and the corresponding minimum dollar amount in the next bracket until taxable years beginning after December 31, 1999.

The bill also creates a bipartisan revenue shortfall task force to develop and recommend legislation that will make up the revenue shortfall to the state caused by lowering the top individual income tax rate from 6.93% to 6.0%. The task force shall submit that proposed legislation to the legislature before January 1, 1999.

For further information see the state fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB632, s. 1 Section 1. 71.06 (1m) of the statutes, as created by 1997 Wisconsin Act 27, is amended to read:

AB632,2,8 71.06 (1m) (title) Fiduciaries, single individuals and heads of households; after 1997 1998. The tax to be assessed, levied and collected upon the taxable incomes of all fiduciaries, except fiduciaries of nuclear decommissioning trust or reserve funds, and single individuals and heads of households shall be computed at the following rates for taxable years beginning after December 31, 1997 , and before January 1, 1999:

AB632, s. 2 Section 2. 71.06 (1n) of the statutes is created to read:

AB632,3,3 71.06 (1n) Fiduciaries, single individuals and heads of households; after 1998.

AB632,3,7 The tax to be assessed, levied and collected upon the taxable incomes of all fiduciaries, except fiduciaries of nuclear decommissioning trust or reserve funds, and single individuals and heads of households shall be computed at the following rates for taxable years beginning after December 31, 1998:

AB632,3,8 (a) On all taxable income from $0 to $15,000, 4.85%.

AB632,3,9 (b) On all taxable income exceeding $15,000, 6.0%.

AB632, s. 3 Section 3. 71.06 (2) (c) (intro.) of the statutes, as created by 1997 Wisconsin Act 27, is amended to read:

AB632,3,13 71.06 (2) (c) For joint returns, for taxable years beginning after December 31, 1997 and before January 1, 1999:

AB632, s. 4 Section 4. 71.06 (2) (d) (intro.) of the statutes, as created by 1997 Wisconsin Act 27, is amended to read:

AB632,3,17 71.06 (2) (d) For married persons filing separately, for taxable years beginning after December 31, 1997 and before January 1, 1999:

AB632, s. 5 Section 5. 71.06 (2) (e) of the statutes is created to read:

AB632,3,20 71.06 (2) (e) For joint returns, for taxable years beginning after December 31, 1998:

AB632,3,21 1. On all taxable income from $0 to $20,000, 4.85%.

AB632,3,22 2. On all taxable income exceeding $20,000, 6.0%.

AB632, s. 6 Section 6. 71.06 (2) (f) of the statutes is created to read:

AB632,3,25 71.06 (2) (f) For married persons filing separately, for taxable years beginning after December 31, 1998:

AB632,4,1 1. On all taxable income from $0 to $10,000, 4.85%.

AB632,4,2 2. On all taxable income exceeding $10,000, 6.0%.

AB632, s. 7 Section 7. 71.06 (2e) of the statutes, as created by 1997 Wisconsin Act 27, is amended to read:

AB632,4,17 71.06 (2e) Bracket indexing. For taxable years beginning after December 31, 1998 1999, the maximum dollar amount in each tax bracket, and the corresponding minimum dollar amount in the next bracket, under subs. (1m) and (2) (c) and (d) shall be increased each year by a percentage equal to the percentage change between the U.S. consumer price index for all urban consumers, U.S. city average, for the month of August of the previous year and the U.S. consumer price index for all urban consumers, U.S. city average, for the month of August of the year before the previous year, as determined by the federal department of labor. Each amount that is revised under this subsection shall be rounded to the nearest multiple of $10 if the revised amount is not a multiple of $10 or, if the revised amount is a multiple of $5, such an amount shall be increased to the next higher multiple of $10. The department of revenue shall annually adjust the changes in dollar amounts required under this subsection and incorporate the changes into the income tax forms and instructions.

AB632, s. 8 Section 8. 71.06 (2m) of the statutes, as affected by 1997 Wisconsin Act 27, is amended to read:

AB632,4,23 71.06 (2m) Rate changes. If a rate under sub. (1), (1m), (1n) or (2) changes during a taxable year, the taxpayer shall compute the tax for that taxable year by the methods applicable to the federal income tax under section 15 of the internal revenue code.

AB632, s. 9 Section 9. 71.06 (2s) (a) of the statutes, as affected by 1997 Wisconsin Act 27, section 2261fm is amended to read:

AB632,5,13 71.06 (2s) (a) For taxable years beginning after December 31, 1996, and ending before January 1, 1998, with respect to nonresident individuals, including individuals changing their domicile into or from this state, the tax brackets under subs. (1) and (2) shall be multiplied by a fraction, the numerator of which is Wisconsin adjusted gross income and the denominator of which is federal adjusted gross income. In this paragraph, for married persons filing separately "adjusted gross income" means the separate adjusted gross income of each spouse, and for married persons filing jointly "adjusted gross income" means the total adjusted gross income of both spouses. If an individual and that individual's spouse are not both domiciled in this state during the entire taxable year, the tax brackets under subs. (1) and (2) on a joint return shall be multiplied by a fraction, the numerator of which is their joint Wisconsin adjusted gross income and the denominator of which is their joint federal adjusted gross income.

AB632, s. 10 Section 10. 71.06 (2s) (b) of the statutes, as created by 1997 Wisconsin Act 27, is amended to read:

AB632,6,3 71.06 (2s) (b) For taxable years beginning after December 31, 1997, and before January 1, 1999, with respect to nonresident individuals, including individuals changing their domicile into or from this state, the tax brackets under subs. (1m) and (2) (c) and (d) shall be multiplied by a fraction, the numerator of which is Wisconsin adjusted gross income and the denominator of which is federal adjusted gross income. In this paragraph, for married persons filing separately "adjusted gross income" means the separate adjusted gross income of each spouse, and for married persons filing jointly "adjusted gross income" means the total adjusted gross income of both spouses. If an individual and that individual's spouse are not both domiciled in this state during the entire taxable year, the tax brackets under subs. (1m) and (2) (c) and (d) on a joint return shall be multiplied by a fraction, the numerator of which is their joint Wisconsin adjusted gross income and the denominator of which is their joint federal adjusted gross income.

AB632, s. 11 Section 11. 71.06 (2s) (c) of the statutes is created to read:

AB632,6,17 71.06 (2s) (c) For taxable years beginning after December 31, 1998, with respect to nonresident individuals, including individuals changing their domicile into or from this state, the tax brackets under subs. (1n) and (2) (e) and (f) shall be multiplied by a fraction, the numerator of which is Wisconsin adjusted gross income and the denominator of which is federal adjusted gross income. In this paragraph, for married persons filing separately "adjusted gross income" means the separate adjusted gross income of each spouse, and for married persons filing jointly "adjusted gross income" means the total adjusted gross income of both spouses. If an individual and that individual's spouse are not both domiciled in this state during the entire taxable year, the tax brackets under subs. (1n) and (2) (e) and (f) on a joint return shall be multiplied by a fraction, the numerator of which is their joint Wisconsin adjusted gross income and the denominator of which is their joint federal adjusted gross income.

AB632, s. 12 Section 12. 71.125 (1) of the statutes, as affected by 1997 Wisconsin Act 27, is amended to read:

AB632,6,23 71.125 (1) Except as provided in sub. (2), the tax imposed by this chapter on individuals and the rates under s. 71.06 (1), (1m), (1n) and (2) shall apply to the Wisconsin taxable income of estates or trusts, except nuclear decommissioning trust or reserve funds, and that tax shall be paid by the fiduciary.

AB632, s. 13 Section 13. 71.64 (9) (b) of the statutes, as affected by 1997 Wisconsin Act 27, is amended to read:

AB632,7,17 71.64 (9) (b) The department shall from time to time adjust the withholding tables to reflect any changes in income tax rates, any applicable surtax or any changes in dollar amounts in s. 71.06 (1), (1m), (1n) and (2) resulting from statutory changes, except that the department may not adjust the withholding tables to reflect the changes in rates in s. 71.06 (1m), (1n) and (2) (c) and, (d), (e) and (f) for any taxable year that begins before January 1, 2000. The tables shall account for the working families tax credit under s. 71.07 (5m). The tables shall be extended to cover from zero to 10 withholding exemptions, shall assume that the payment of wages in each pay period will, when multiplied by the number of pay periods in a year, reasonably reflect the annual wage of the employe from the employer and shall be based on the further assumption that the annual wage will be reduced for allowable deductions from gross income. The department may determine the length of the tables and a reasonable span for each bracket. In preparing the tables the department shall adjust all withholding amounts not an exact multiple of 10 cents to the next highest figure that is a multiple of 10 cents. The department shall also provide instructions with the tables for withholding with respect to quarterly, semiannual and annual pay periods.

AB632, s. 14 Section 14. 71.67 (4) (a) of the statutes, as affected by 1997 Wisconsin Act 27, is amended to read: