April 16, 1997 - Introduced by Senators Wineke and Decker, cosponsored by
Representatives La Fave, Black, Turner, Boyle, Reynolds, R. Young and
Baldwin. Referred to Joint survey committee on Tax Exemptions.
SB167,1,8
1An Act to repeal 71.05 (6) (b) 9., 71.05 (6) (b) 21. and 71.05 (10) (c);
to amend
271.01 (14), 71.05 (8) (b), 71.05 (22) (dm), 71.05 (22) (f) 3., 71.06 (1) (intro.), 71.06
3(2) (intro.), 71.06 (2) (a) (intro.), 71.06 (2) (b) (intro.), 71.06 (2m), 71.07 (1), 71.07
4(5) (a) (intro.), 71.07 (5) (b), 71.07 (8) (intro.), 71.10 (7m), 71.125, 71.36 (1m),
571.64 (9) (b), 71.67 (4) (a) and 71.67 (5) (a); and
to create 71.05 (22) (dp), 71.06
6(1m), 71.06 (2) (c), 71.06 (2) (d), 71.07 (5) (am), 71.07 (6) (c) and 71.07 (9) (g) of
7the statutes;
relating to: modifying the structure of the individual income tax
8system.
Analysis by the Legislative Reference Bureau
This bill makes various changes in the structure of the individual income tax
system. The bill modifies the calculation of adjusted gross income (AGI), prohibits
new claims from being made under certain income tax credits and modifies the
sliding scale standard deduction and the tax rates and brackets.
Under current law, there is an income tax exclusion for individuals and
tax-option corporations for 60% of the net long-term capital gains realized from the
sale of assets held for at least one year. This bill repeals the exemption. In addition,
current law limits the offset of net capital losses against ordinary income to $500
each taxable year. Net capital losses in excess of $500 are carried forward to the next
taxable year. This bill deletes the $500 offset limitation.
In general, under current law, 50% of certain social security benefits are taxed
by this state once the recipient's income reaches $34,000 for a single individual or
$44,000 for a married couple filing jointly, while the federal government taxes 85%
of these same benefits.
This bill repeals the state's treatment of social security benefits, thus taxing the
benefits at the same rate as the federal government.
Under current law, the standard income tax deduction has 4 different
categories, each of which has a different deduction amount based on income. The
maximum standard deduction amounts in each category phase out as income
increases. The categories, the maximum standard deduction amounts and the
maximum income amounts to which the standard deduction applies before the
phaseout begins are the following: single individuals, $5,200 on Wisconsin AGI
(WAGI) of less than $7,500; heads of households, $7,040 on WAGI of less than $7,500;
married couples filing jointly, $8,900 on WAGI of less than $10,000; and married
couples filing separately, $4,230 on WAGI of less than $4,750.
This bill retains the same 4 categories and the maximum income at which the
standard deduction reaches $0. Under this bill, the categories, the maximum
standard deduction amounts and the maximum income amounts to which the
standard deduction applies before the phaseout begins are the following: single
individuals, $7,500 on Wisconsin AGI (WAGI) of less than $10,000; heads of
households, $10,160 on WAGI of less than $10,000; married couples filing jointly,
$10,000 on WAGI of less than $15,000; and married couples filing separately, $4,750
on WAGI of less than $7,130.
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 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%.
This bill expands the number of brackets to 5, lowers the bottom rate of taxation
and raises the top rate. Under the bill, 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; from more than $15,000 to $45,000; from more than $45,000
to $60,000; and more than $60,000. The brackets for married persons filing jointly
are taxable income from $0 to $10,000; from more than $10,000 to $20,000; from more
than $20,000 $60,000; from more than $60,000 to $80,000; and more than $80,000.
The brackets for married persons filing separately are taxable income from $0 to
$5,000; from more than $5,000 to $10,000; from more than $10,000 to $30,000; from
more than $30,000 to $40,000; and more than $40,000.
Under this bill, the rate of taxation for the lowest bracket for single individuals,
certain fiduciaries, heads of households and married persons is 4.0% of taxable
income, the rate for the next bracket is 5.0%, the rate for the middle bracket is 6.0%,
the rate for the next bracket is 7.0% and the rate for the highest bracket is 8%.
Under current law, after an individual calculates his or her gross tax liability,
several tax credits may be calculated to reduce his or her gross tax liability. Some
credits, like the earned income tax credit and the homestead tax credit, are
refundable. Some credits, like the school property tax credit and the married persons
credit, are nonrefundable. Generally, with a refundable credit, if the amount of the
claim exceeds the taxpayer's tax liability, or if there is no tax due, the excess amount
of the credit is paid to the claimant by a check from the state. With a nonrefundable
credit, the amount of the credit is available only up to the amount of the taxpayer's
tax liability.
Under this bill, for taxable years beginning on or after January 1, 1997, no new
claims may be filed for the following nonrefundable tax credits: the school property
tax credit, the married persons credit, the dependent credit and the senior credit.
The bill does not affect any of the refundable tax credits.
This bill also modifies the nonrefundable itemized deductions credit. Under
current law, the itemized deductions credit is calculated as 5% of the difference
between the sum of certain amounts that are allowed as itemized deductions under
the internal revenue code and the standard deduction. Some amounts that are
allowed as itemized deductions under the internal revenue code, such as casualty
and theft deductions, expenses to move from this state and interest incurred to
purchase or refinance a residence that is not a principal residence and that is not
located in this state, are not allowed in the calculation of the itemized deductions
credit.
Under this bill, the itemized deductions credit is calculated as 5% of the
difference between the sum of interest expenses for a principal residence; interest
expenses for a residence that is not a principal residence and that is not located in
this state; and charitable contributions, and the standard deduction.
This bill will be referred to the joint survey committee on tax exemptions for a
detailed analysis, which will be printed as an appendix to this 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:
SB167, s. 1
1Section
1. 71.01 (14) of the statutes is amended to read:
SB167,4,22
71.01
(14) "Wisconsin net operating loss" of persons other than corporations
3means "federal net operating loss" adjusted as prescribed in s. 71.05 (6) (a) and (b),
1(7) to (12) and (19) to (21),
except s. 71.05 (6) (b) 9., except that no deductions
2allowable on schedule A for federal income tax purposes are allowable.
SB167, s. 2
3Section
2. 71.05 (6) (b) 9. of the statutes is repealed.
SB167, s. 3
4Section
3. 71.05 (6) (b) 21. of the statutes is repealed.
SB167, s. 4
5Section
4. 71.05 (8) (b) of the statutes is amended to read:
SB167,4,186
71.05
(8) (b) A Wisconsin net operating loss may be carried forward against
7Wisconsin taxable incomes of the next 15 taxable years, if the taxpayer was subject
8to taxation under this chapter in the taxable year in which the loss was sustained,
9to the extent not offset against other income of the year of loss and to the extent not
10offset against Wisconsin modified taxable income of any year between the loss year
11and the taxable year for which the loss carry-forward is claimed. In this paragraph,
12"Wisconsin modified taxable income" means Wisconsin taxable income with the
13following exceptions: a net operating loss deduction or offset for the loss year or any
14taxable year thereafter is not allowed,
the deduction for long-term capital gains
15under sub. (6) (b) 9. is not allowed, the amount deductible for losses from sales or
16exchanges of capital assets may not exceed the amount includable in income for gains
17from sales or exchanges of capital assets and "Wisconsin modified taxable income"
18may not be less than zero.
SB167, s. 5
19Section
5. 71.05 (10) (c) of the statutes is repealed.
SB167, s. 6
20Section
6. 71.05 (22) (dm) of the statutes is amended to read:
SB167,6,421
71.05
(22) (dm) (title)
Deduction limits;
1994 and thereafter to 1996. Except
22as provided in par. (f), for taxable years beginning
on or after January 1, 1994 after
23December 31, 1993, and before January 1, 1997, the Wisconsin standard deduction
24is whichever of the following amounts is appropriate. For a single individual who has
25a Wisconsin adjusted gross income of less than $7,500, the standard deduction is
1$5,200. For a single individual who has a Wisconsin adjusted gross income of at least
2$7,500 but not more than $50,830, the standard deduction is the amount obtained
3by subtracting from $5,200 12% of Wisconsin adjusted gross income in excess of
4$7,500 but not less than $0. For a single individual who has a Wisconsin adjusted
5gross income of more than $50,830, the standard deduction is $0. For a head of
6household who has a Wisconsin adjusted gross income of less than $7,500, the
7standard deduction is $7,040. For a head of household who has a Wisconsin adjusted
8gross income of at least $7,500 but not more than $25,000, the standard deduction
9is the amount obtained by subtracting from $7,040 22.515% of Wisconsin adjusted
10gross income in excess of $7,500 but not less than $0. For a head of household who
11has a Wisconsin adjusted gross income of more than $25,000, the standard deduction
12shall be calculated as if the head of household were a single individual. For a married
13couple filing jointly that has an aggregate Wisconsin adjusted gross income of less
14than $10,000, the standard deduction is $8,900. For a married couple filing jointly
15that has an aggregate Wisconsin adjusted gross income of at least $10,000 but not
16more than $55,000, the standard deduction is the amount obtained by subtracting
17from $8,900 19.778% of aggregate Wisconsin adjusted gross income in excess of
18$10,000 but not less than $0. For a married couple filing jointly that has an aggregate
19Wisconsin adjusted gross income of more than $55,000, the standard deduction is $0.
20For a married individual filing separately who has a Wisconsin adjusted gross
21income of less than $4,750, the standard deduction is $4,230. For a married
22individual filing separately who has a Wisconsin adjusted gross income of at least
23$4,750 but not more than $26,140, the standard deduction is the amount obtained
24by subtracting from $4,230 19.778% of Wisconsin adjusted gross income in excess of
25$4,750 but not less than $0. For a married individual filing separately who has a
1Wisconsin adjusted gross income of more than $26,140, the standard deduction is $0.
2The secretary of revenue shall prepare a table under which deductions under this
3paragraph shall be determined. That table shall be published in the department's
4instructional booklets.
SB167, s. 7
5Section
7. 71.05 (22) (dp) of the statutes is created to read:
SB167,7,136
71.05
(22) (dp)
Deduction limits; 1997 and thereafter. Except as provided in
7par. (f), for taxable years beginning after December 31, 1996, the Wisconsin standard
8deduction is whichever of the following amounts is appropriate. For a single
9individual who has a Wisconsin adjusted gross income of less than $10,000, the
10standard deduction is $7,500. For a single individual who has a Wisconsin adjusted
11gross income of at least $10,000 but not more than $50,830, the standard deduction
12is the amount obtained by subtracting from $7,500 18.369% of Wisconsin adjusted
13gross income in excess of $10,000 but not less than $0. For a single individual who
14has a Wisconsin adjusted gross income of more than $50,830, the standard deduction
15is $0. For a head of household who has a Wisconsin adjusted gross income of less than
16$10,000, the standard deduction is $10,160. For a head of household who has a
17Wisconsin adjusted gross income of at least $10,000 but not more than $25,000, the
18standard deduction is the amount obtained by subtracting from $10,160 36.102% of
19Wisconsin adjusted gross income in excess of $10,000 but not less than $0. For a head
20of household who has a Wisconsin adjusted gross income of more than $25,000, the
21standard deduction shall be calculated as if the head of household were a single
22individual. For a married couple filing jointly that has an aggregate Wisconsin
23adjusted gross income of less than $15,000, the standard deduction is $10,000. For
24a married couple filing jointly that has an aggregate Wisconsin adjusted gross
25income of at least $15,000 but not more than $55,000, the standard deduction is the
1amount obtained by subtracting from $10,000 25% of aggregate Wisconsin adjusted
2gross income in excess of $15,000 but not less than $0. For a married couple filing
3jointly that has an aggregate Wisconsin adjusted gross income of more than $55,000,
4the standard deduction is $0. For a married individual filing separately who has a
5Wisconsin adjusted gross income of less than $7,130, the standard deduction is
6$4,750. For a married individual filing separately who has a Wisconsin adjusted
7gross income of at least $7,130 but not more than $26,140, the standard deduction
8is the amount obtained by subtracting from $4,750 24.987% of Wisconsin adjusted
9gross income in excess of $7,130 but not less than $0. For a married individual filing
10separately who has a Wisconsin adjusted gross income of more than $26,140, the
11standard deduction is $0. The secretary of revenue shall prepare a table under which
12deductions under this paragraph shall be determined. That table shall be published
13in the department's instructional booklets.
SB167, s. 8
14Section
8. 71.05 (22) (f) 3. of the statutes is amended to read:
SB167,7,2015
71.05
(22) (f) 3. For taxable years beginning on or after January 1, 1994, in the
16case of a taxpayer with respect to whom a deduction under s. 71.07 (8)
or an
17exemption under 26 USC 151 (c) is allowable to another person, the Wisconsin
18standard deduction shall be $500 adjusted for inflation in the manner prescribed by
19sections
1 (f) (3) to (6) and
63 (c) (4) of the internal revenue code. The department
20of revenue shall incorporate the changes in the income tax forms and instructions.
SB167, s. 9
21Section
9. 71.06 (1) (intro.) of the statutes is amended to read:
SB167,8,522
71.06
(1) (title)
Fiduciaries, single individuals and heads of households; 1986
23to 1996. (intro.) The tax to be assessed, levied and collected upon the taxable incomes
24of all fiduciaries, except fiduciaries of nuclear decommissioning trust or reserve
25funds, and single individuals for taxable years beginning on or after August 1, 1986,
1and before January 1, 1994, and upon the taxable incomes of all fiduciaries, except
2fiduciaries of nuclear decommissioning trust or reserve funds, and single individuals
3and heads of households for taxable years beginning
on or after
January 1, 1994 after
4December 31, 1993, and before January 1, 1997, shall be computed at the following
5rates:
SB167, s. 10
6Section
10. 71.06 (1m) of the statutes is created to read:
SB167,8,117
71.06
(1m) Fiduciaries, single individuals and heads of households. The tax
8to be assessed, levied and collected upon the taxable incomes of all fiduciaries, except
9fiduciaries of nuclear decommissioning trust or reserve funds, and single individuals
10and heads of households for taxable years beginning after December 31, 1996, shall
11be computed at the following rates:
SB167,8,1212
(a) On all taxable income from $0 to $7,500, 4%.
SB167,8,1313
(b) On all taxable income exceeding $7,500 but not exceeding $15,000, 5%.
SB167,8,1414
(c) On all taxable income exceeding $15,000 but not exceeding $45,000, 6%.
SB167,8,1515
(d) On all taxable income exceeding $45,000 but not exceeding $60,000, 7%.
SB167,8,1616
(e) On all taxable income exceeding $60,000, 8%.
SB167, s. 11
17Section
11. 71.06 (2) (intro.) of the statutes is amended to read:
SB167,8,2118
71.06
(2) Married persons. (intro.) The tax to be assessed, levied and collected
19upon the taxable incomes of all married persons
for calendar year 1987 and
20corresponding fiscal years and for calendar and fiscal years thereafter shall be
21computed at the following rates:
SB167, s. 12
22Section
12. 71.06 (2) (a) (intro.) of the statutes is amended to read:
SB167,8,2423
71.06
(2) (a) (intro.) For joint returns
, for taxable years beginning after July
2431, 1986, and before January 1, 1997:
SB167, s. 13
25Section
13. 71.06 (2) (b) (intro.) of the statutes is amended to read:
SB167,9,2
171.06
(2) (b) (intro.) For married persons filing separately
, for taxable years
2beginning after July 31, 1986, and before January 1, 1997:
SB167, s. 14
3Section
14. 71.06 (2) (c) of the statutes is created to read:
SB167,9,54
71.06
(2) (c) For joint returns, for taxable years beginning after December 31,
51996:
SB167,9,66
1. On all taxable income from $0 to $10,000, 4%.
SB167,9,77
2. On all taxable income exceeding $10,000 but not exceeding $20,000, 5%.
SB167,9,88
3. On all taxable income exceeding $20,000 but not exceeding $60,000, 6%.
SB167,9,99
4. On all taxable income exceeding $60,000 but not exceeding $80,000, 7%.
SB167,9,1010
5. On all taxable income exceeding $80,000, 8%.
SB167, s. 15
11Section
15. 71.06 (2) (d) of the statutes is created to read:
SB167,9,1312
71.06
(2) (d) For married persons filing separately, for taxable years beginning
13after December 31, 1996:
SB167,9,1414
1. On all taxable income from $0 to $5,000, 4%.
SB167,9,1515
2. On all taxable income exceeding $5,000 but not exceeding $10,000, 5%.
SB167,9,1616
3. On all taxable income exceeding $10,000 but not exceeding $30,000, 6%.
SB167,9,1717
4. On all taxable income exceeding $30,000 but not exceeding $40,000, 7%.
SB167,9,1818
5. On all taxable income exceeding $40,000, 8%.
SB167, s. 16
19Section
16. 71.06 (2m) of the statutes is amended to read:
SB167,9,2320
71.06
(2m) Rate changes. If a rate under sub.
(1) (1m) or (2) changes during
21a taxable year, the taxpayer shall compute the tax for that taxable year by the
22methods applicable to the federal income tax under section
15 of the internal revenue
23code.
SB167, s. 17
24Section
17. 71.07 (1) of the statutes is amended to read:
SB167,10,10
171.07
(1) Claim of right credit. Any natural person may credit against taxes
2otherwise due under this chapter the decrease in tax under this chapter for the prior
3taxable year that would be attributable to subtracting income taxed for that year
4under the claim of right doctrine but repaid, as calculated under section
1341 of the
5internal revenue code, if the income repaid is greater than $3,000 and the amount
6is not subtracted in computing Wisconsin adjusted gross income or used in
7computing the credit under sub. (5)
(a). If the allowable amount of the claim exceeds
8the claimant's taxes due under this chapter the amount of the claim not used to offset
9those taxes shall be certified to the department of administration for payment to the
10claimant by check, share draft or other draft drawn on the general fund.
SB167, s. 18
11Section
18. 71.07 (5) (a) (intro.) of the statutes is amended to read:
SB167,10,1412
71.07
(5) (a) (intro.)
Add For taxable years beginning before January 1, 1997,
13add the amounts allowed as itemized deductions under the internal revenue code
14except:
SB167, s. 19
15Section
19. 71.07 (5) (am) of the statutes is created to read:
SB167,10,1816
71.07
(5) (am) For taxable years beginning after December 31, 1996, add the
17following amounts that are allowed as itemized deductions under the internal
18revenue code:
SB167,10,1919
1. Interest that is incurred to purchase or refinance a principal residence.
SB167,10,2120
2. Interest that is incurred to purchase or refinance a residence that is not a
21principal residence that is located in Wisconsin.
SB167,10,2222
3. Charitable contributions.
SB167, s. 20
23Section
20. 71.07 (5) (b) of the statutes is amended to read:
SB167,10,2524
71.07
(5) (b) Subtract the standard deduction under s. 71.05 (22) from the
25amount under par. (a)
or the amount under par. (am).
SB167, s. 21
1Section
21. 71.07 (6) (c) of the statutes is created to read:
SB167,11,32
71.07
(6) (c) No new claim may be filed under this subsection for a taxable year
3that begins after December 31, 1996.
SB167, s. 22
4Section
22. 71.07 (8) (intro.) of the statutes is amended to read:
SB167,11,95
71.07
(8) Personal exemptions credit for natural persons. (intro.) On income
6of calendar year 1986 and corresponding fiscal years and thereafter, there may be
7deducted from the tax after it has been computed according to the rates of this section
8personal exemptions for natural persons as follows
, except that no new claim may
9be filed under this subsection for a taxable year that begins after December 31, 1996:
SB167, s. 23
10Section
23. 71.07 (9) (g) of the statutes is created to read:
SB167,11,1211
71.07
(9) (g) No new claim may be filed under this subsection for a taxable year
12that begins after December 31, 1996.
SB167, s. 24
13Section
24. 71.10 (7m) of the statutes is amended to read:
SB167,11,2114
71.10
(7m) Discharge of indebtedness; modifications. If a person excludes
15from gross income an amount of income from a discharge of indebtedness because of
16discharges of debts described under section
108 (a) of the internal revenue code, the
17person shall make the adjustments specified in section
108 (b) of the internal revenue
18code, but the net operating loss under s. 71.01 (14), not the federal net operating loss,
19and Wisconsin credits, not federal credits,
and the capital loss carry-forward as
20limited under s. 71.05 (10) (c), not the federal capital loss carry-forward, shall be
21applied, and the reduction rate for a credit carry-over is 6.93%, not 33 1/3%.
SB167, s. 25
22Section
25. 71.125 of the statutes is amended to read:
SB167,12,2
2371.125 Imposition of tax. The tax imposed by this chapter on individuals and
24the rates under s. 71.06 (1)
, (1m) and (2) shall apply to the Wisconsin taxable income
1of estates or trusts, except nuclear decommissioning trust or reserve funds, and that
2tax shall be paid by the fiduciary.
SB167, s. 26
3Section
26. 71.36 (1m) of the statutes is amended to read: