AB200: Bill Text

LRB-2339/1

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2017 - 2018 LEGISLATURE

2017 Assembly BILL 200

April 5, 2017 - Introduced by Representatives C. Taylor, Subeck, Riemer, Crowley, Sargent, Zamarripa, Hebl, Considine, Berceau, Anderson, Stuck, Goyke, Brostoff, Sinicki, Pope, Kolste and Ohnstad, cosponsored by Senators Wirch, Johnson and Risser. Referred to Committee on Ways and Means.

AB200,1,8 An Act to amend 71.05 (23) (b) 1., 71.06 (1q) (intro.), 71.06 (2) (i) (intro.), 71.06 (2) (j) (intro.), 71.06 (2e) (a), 71.06 (2e) (b), 71.06 (2m), 71.06 (2s) (d), 71.125 (1), 71.125 (2), 71.17 (6), 71.64 (9) (b) (intro.), 71.67 (5) (a) and 71.67 (5m); and to create 71.05 (23) (be), 71.06 (1r), 71.06 (2) (k), 71.06 (2) (L), 71.06 (2e) (bg) and 71.07 (5n) (e) of the statutes; relating to: increasing certain individual income tax rates and expanding the number of brackets, increasing the personal exemption for certain individuals, and sunsetting the manufacturing and agriculture tax credit.

Analysis by the Legislative Reference Bureau

This bill makes changes to the individual income tax rates and brackets structure, increases the personal exemption amount for certain taxpayers, and sunsets the manufacturing and agriculture tax credit.

Changes to rates and brackets

Under current law, there are four income tax brackets for single individuals, certain fiduciaries, heads of households, and married persons. 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 4.0 percent of taxable income; the rate for the second bracket is 5.84 percent; the rate for the third bracket is 6.27 percent; and the rate for the highest bracket is 7.65 percent. Before applying bracket indexing, the four brackets for individuals, certain fiduciaries, and heads of households, to which the above rates apply, are as follows: taxable income from $0 to $7,500; taxable income exceeding $7,500 but not exceeding $15,000; taxable income exceeding $15,000 but not exceeding $225,000; and taxable income exceeding $225,000. In general, this rate and bracket structure first applied to taxable year 2013 and was enacted in 2013 Wisconsin Act 20, the state's 2013 Biennial Budget Act, although the rate for the lowest bracket was 4.40 percent for taxable year 2013 and became 4.0 percent in taxable year 2014.

Under this bill, which first applies to taxable year 2017, there are five income tax brackets for single individuals, certain fiduciaries, heads of households, and married persons. The brackets are indexed for inflation. The rate of taxation under the bill for single individuals, certain fiduciaries, heads of households, and married persons for the four lowest brackets remains the same as current law, 4.0 percent, 5.84 percent, 6.27 percent, and 7.65 percent, and the rate for the new fifth bracket is 8.25 percent.

Before indexing for inflation, for taxable year 2017, for single individuals, certain fiduciaries, and heads of households, the lowest bracket applies to taxable income of over $0 up to $7,500; the second bracket applies to taxable income over $7,500 up to $15,000; the third bracket applies to taxable income over $15,000 up to $225,000; the fourth bracket applies to taxable income over $225,000 up to $500,000; and the new fifth, or top bracket, applies to taxable income over $500,000. For married joint filers, the lowest bracket applies to taxable income of over $0 up to $10,000; the second bracket applies to taxable income over $10,000 up to $20,000; the third bracket applies to taxable income over $20,000 up to $300,000; the fourth bracket applies to taxable income over $300,000 up to $1,000,000; and the new fifth, or top bracket, applies to taxable income over $1,000,000.

Personal exemptions

Under current law, an individual income tax personal exemption exists in the amount of $700 for each taxpayer who is required to file an income tax return and $700 for the taxpayer's spouse, except if the spouse is filing separately or as a head of household. A taxpayer may also claim a $700 exemption for each dependent for whom he or she is entitled to claim an exemption under the Internal Revenue Code. In general, an additional exemption of $250 may be claimed by a taxpayer, and spouse, who has reached the age of 65 before the close of the taxable year to which his or her tax return relates.

This bill increases the personal exemption amount for certain taxpayers starting with taxable year 2017. Under the bill, if a single individual has Wisconsin adjusted gross income (WAGI) of less than $12,000, his or her personal exemption is $8,260. The personal exemption amount for such an individual phases down to approximately $700 as his or her WAGI increases from $12,000 to the maximum income threshold of $60,000. If such an individual's WAGI is more than the maximum income threshold, the individual calculates his or her exemption under current law.

Similarly under the bill, the personal exemption amount for a head of household and a married individual filing separately is increased to $8,260 per person, and to $16,520 for a married couple filing jointly, for those whose WAGI, or joint WAGI in the case of a married couple filing jointly, is less than $14,000 (head of household), $20,000 (married joint), or $10,000 (married separate). The exemption amount phases down to approximately $700 ($1,400 for a married couple filing jointly) as WAGI increases to the maximum income threshold, which is $70,000 (head of household), $100,000 (married joint), or $50,000 (married separate). If a taxpayer's WAGI is more than the maximum income threshold, the taxpayer calculates his or her, or the couple's, exemption under current law. The bill does not make any change to the current law exemption provisions for dependents or individuals who are age 65 or above.

Manufacturing and agriculture credit

This bill provides that a taxpayer may not file a new claim the manufacturing and agriculture tax credit for taxable years beginning after December 31, 2016, although credits claimed for taxable years beginning before January 1, 2017, may be carried forward to taxable years that begin after December 31, 2016.

Because this bill relates to an exemption from state or local taxes, it may be referred to the Joint Survey Committee on Tax Exemptions for a report to be printed as an appendix to the bill.

For further information see the state and local 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:

AB200,1 Section 1. 71.05 (23) (b) 1. of the statutes is amended to read:

AB200,3,6 71.05 (23) (b) 1. A personal exemption of $700 if the taxpayer is required to file a return under s. 71.03 (2) (a) 1. or 2. and $700 for the taxpayer's spouse, except if the spouse is filing separately or as a head of household. For taxable years beginning after December 31, 2016, the exemption under this subdivision may not be claimed by a taxpayer who is eligible for, and claims, the exemption under par. (be).

AB200,2 Section 2. 71.05 (23) (be) of the statutes is created to read:

AB200,4,3 71.05 (23) (be) For taxable years beginning after December 31, 2016, a personal exemption calculated as follows if the taxpayer is required to file a return under s. 71.03 (2) (a) 1. or 2.:

AB200,4,11 1. For a single individual who has a Wisconsin adjusted gross income of less than $12,000, an exemption of $8,260. For a single individual who has a Wisconsin adjusted gross income of at least $12,000, the exemption is the amount obtained by subtracting from $8,260 15.75 percent of Wisconsin adjusted gross income in excess of $12,000 but not less than $0, except that if the single individual's Wisconsin adjusted gross income is more than $60,000, the individual may not claim the exemption under this paragraph but the individual may claim the exemption under par. (b).

AB200,4,19 2. For a head of household who has a Wisconsin adjusted gross income of less than $14,000, an exemption of $8,260. For a head of household who has a Wisconsin adjusted gross income of at least $14,000, the exemption is the amount obtained by subtracting from $8,260 13.50 percent of Wisconsin adjusted gross income in excess of $14,000 but not less than $0, except that if the head of household's Wisconsin adjusted gross income is more than $70,000, the individual may not claim the exemption under this paragraph but the head of household may claim the exemption under par. (b).

AB200,5,3 3. For a married couple filing jointly that has an aggregate Wisconsin adjusted gross income of less than $20,000, an exemption of $16,520 for the married couple. For a married couple filing jointly that has an aggregate Wisconsin adjusted gross income of at least $20,000, the exemption is the amount obtained by subtracting, for the married couple, from $16,520 18.90 percent of aggregate Wisconsin adjusted gross income in excess of $20,000 but not less than $0, except that if the married couple's Wisconsin aggregate adjusted gross income is more than $100,000, the couple may not claim the exemption under this paragraph but the married couple may claim the exemption under par. (b).

AB200,5,11 4. For a married individual filing separately who has a Wisconsin adjusted gross income of less than $10,000, an exemption of $8,260. For a married individual filing separately who has a Wisconsin adjusted gross income of at least $10,000, the exemption is the amount obtained by subtracting from $8,260 18.90 percent of Wisconsin adjusted gross income in excess of $10,000 but not less than $0, except that if the individual's Wisconsin adjusted gross income is more than $50,000, the individual may not claim the exemption under this paragraph but the individual may claim the exemption under par. (b).

AB200,3 Section 3. 71.06 (1q) (intro.) of the statutes is amended to read:

AB200,5,18 71.06 (1q) Fiduciaries, single individuals, and heads of households; after 2012 to 2016. (intro.) 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, 2012, and before January 1, 2017:

AB200,4 Section 4. 71.06 (1r) of the statutes is created to read:

AB200,5,24 71.06 (1r) Fiduciaries, single individuals, and heads of households; after 2016. 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, 2016:

AB200,5,25 (a) On all taxable income from $0 to $7,500, 4.0 percent.

AB200,6,2 (b) On all taxable income exceeding $7,500 but not exceeding $15,000, 5.84 percent.

AB200,6,4 (c) On all taxable income exceeding $15,000 but not exceeding $225,000, 6.27 percent.

AB200,6,6 (d) On all taxable income exceeding $225,000 but not exceeding $500,000, 7.65 percent.

AB200,6,7 (e) On all taxable income exceeding $500,000, 8.25 percent.

AB200,5 Section 5. 71.06 (2) (i) (intro.) of the statutes is amended to read:

AB200,6,10 71.06 (2) (i) (intro.) For joint returns, for taxable years beginning after December 31, 2012, and before January 1, 2017:

AB200,6 Section 6. 71.06 (2) (j) (intro.) of the statutes is amended to read:

AB200,6,13 71.06 (2) (j) (intro.) For married persons filing separately, for taxable years beginning after December 31, 2012, and before January 1, 2017:

AB200,7 Section 7. 71.06 (2) (k) of the statutes is created to read:

AB200,6,16 71.06 (2) (k) For joint returns, for taxable years beginning after December 31, 2016:

AB200,6,17 1. On all taxable income from $0 to $10,000, 4.0 percent.

AB200,6,19 2. On all taxable income exceeding $10,000 but not exceeding $20,000, 5.84 percent.

AB200,6,21 3. On all taxable income exceeding $20,000 but not exceeding $300,000, 6.27 percent.

AB200,6,23 4. On all taxable income exceeding $300,000 but not exceeding $1,000,000, 7.65 percent.

AB200,6,24 5. On all taxable income exceeding $1,000,000, 8.25 percent.

AB200,8 Section 8. 71.06 (2) (L) of the statutes is created to read:

AB200,7,2 71.06 (2) (L) For married persons filing separately, for taxable years beginning after December 31, 2016:

AB200,7,3 1. On all taxable income from $0 to $5,000, 4.0 percent.

AB200,7,5 2. On all taxable income exceeding $5,000 but not exceeding $10,000, 5.84 percent.

AB200,7,7 3. On all taxable income exceeding $10,000 but not exceeding $150,000, 6.27 percent.

AB200,7,9 4. On all taxable income exceeding $150,000 but not exceeding $500,000, 7.65 percent.

AB200,7,10 5. On all taxable income exceeding $500,000, 8.25 percent.