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MADISON — The Wisconsin Department of Revenue has collected an estimated $256.4 million that it says will go toward tax relief for lower and middle-income residents. The revenue was collected from out-of-state retailers and marketplace providers in the 12-month period ending Sept. 30.
Gov. Tony Evers’ office announced Tuesday that the amount is more than three times the $77.4 million in tax relief in 2019. Last year, Evers signed bipartisan legislation (2019 Wisconsin Act 10) that ensured the tax relief would be targeted toward lower and middle-income Wisconsinites.
“I was proud to sign legislation that received bipartisan support to ensure that the rate cuts would reduce taxes for all income groups but especially for our lower and middle-income taxpayers,” Evers said in a news release. “It is important we are able to provide this much-needed tax relief for Wisconsinites, especially during these unprecedented times.”
Leveling the Playing Field
A 2018 decision by the U.S. Supreme Court in South Dakota v. Wayfair expanded the state’s authority to require out-of-state retailers and marketplace providers to collect and remit sales and use tax during the period beginning Oct. 1, 2019 and ending Sept. 30, 2020. This revenue estimate is based on tax amounts reported by filers who registered to collect taxes after the Wayfair decision and are located outside of the state. Additional revenue reported by marketplace providers is included in this amount as the marketplace provisions included in 2019 Wisconsin Act 10 took effect on Jan. 1, 2020.
The new legislation, requiring marketplace providers and to collect and remit sales and use tax on taxable sales they facilitate online on behalf of third-party sellers, is intended to create a more level playing field between brick and mortar stores and online retailers.
Larger Tax Cut for Lower Brackets
Prior to 2019 Wisconsin Act 10, the rate cuts related to collections from out-of-state retailers subject to the Wayfair decision were to be applied to all income tax brackets, which would have disproportionately benefitted higher income earners. Under 2019 Wisconsin Act 10, the rate cuts were instead focused on the lower two brackets, concentrating income tax relief for lower and middle-income Wisconsin taxpayers.
According to state estimates, the average Wisconsin household with an income of $59,523 will receive a tax cut of about $137. Under previous state legislation, the same household would have received a tax cut of about $70. By contrast, a household with an income of $1 million dollars will receive a tax cut of approximately $145 under the current state law compared with an approximately $1,841 tax cut under the previous law.