News of the Day

Republican lawmakers say a nearly $3 billion tax cut proposal will bring relief to middle class Wisconsinites, including retirees.

An Assembly bill introduced Tuesday would use the state’s surplus to cut income taxes for Wisconsin’s third tax bracket from 5.3 to 4.4 percent starting in tax year 2023. That affects individuals with $27,630 to $304,170 in annual taxable income or joint filers making between $36,840 to $405,550.

“The third bracket is a large bracket, but it’s clearly where the middle class of Wisconsin is,” said state Rep. Mark Born, R-Beaver Dam, who co-chairs Wisconsin’s joint budget committee.

The new bill also would expand tax cuts for retirees who are at least 67 years old. It includes a tax exemption for retirement income up to $100,000 for individuals or up to $150,000 for joint married filers.

Wisconsin is projected to end the two-year budget cycle with a $4 billion surplus, and Republicans say much of that extra money should go to tax relief.

Thus far, the tax cut bill has at least one Republican senator as a co-sponsor — Sen. Rachael Cabral-Guevara of Appleton, who said she believes there’s “across the board” support for tax cuts in the state Senate.

The IRS announced Friday that it’s putting an administrative transition period in place until 2026 to extend the new requirement that catch-up contributions made by higher-income individuals participating in a 401(k) or similar retirement plan be treated as after-tax Roth contributions. The change delays the implementation of a rule that Congress approved last year as part of the Secure 2.0 Act.

Americans aged 50 and older have previously been able to make catch-up contributions to put extra cash into their retirement accounts above the contribution limit. For example, eligible savers can deposit a catch-up contribution of up to $7,500 into their 401(k) plans or other retirement accounts above the $22,500 cap in 2023.

Under the Secure 2.0 Act, which became law as part of a year-end appropriations package enacted by Congress in December 2022, the new catch-up contribution rule would require higher-income earners put their catch-up contributions in after-tax accounts subject to Roth rules.

The policy applies to individuals who earned more than $145,000 from a single employer in the prior year and to catch-up deposits into 401(k), 403(b) or 457(b) retirement plans. In effect, this means that higher-income earners wouldn’t receive the same tax break they’ve previously enjoyed once the Secure 2.0 changes are implemented because they wouldn’t be permitted to make pretax catch-up contributions, which reduce the size of the saver’s income subject to tax.

The IRS’ two-year delay allows savers to continue to make pretax catch-up contributions through 2025 as the agency implements the policy change. It also clarified that plan participants ages 50 and up can continue to make catch-up contributions after 2023 regardless of their income level.

“The administrative transition period will help taxpayers transition smoothly to the new Roth catch-up requirement and is designed to facilitate an orderly transition for compliance with that requirement,” the IRS said in the announcement.

Gross Domestic Product. Consumer Price Index. Unemployment rate. These are some of the economic indicators that policymakers such as the Federal Reserve pay attention to in order to gauge the health of the U.S. economy.

But there’s another key, if often overlooked, metric that economists and officials use to guide fiscal and monetary policy decisions — one that measures how well the average worker is at, well, working.

Enter the labor productivity metric.

“It’s an attempt to figure out how efficient workers are,” said Jason Furman, Harvard Kennedy School professor and former chairman of the Council of Economic Advisers under President Barack Obama. “If you can produce a lot of output with an hour of work, you’re very productive. If you can’t produce very much, it’s quite low.”

But labor productivity in the U.S. has been falling. Prior to the data from the most recent quarter, the country had seen five consecutive quarters of year-over-year declines in worker productivity.

According to EY-Parthenon chief economist Greg Daco, this prolonged productivity slump is the first such instance since the Bureau of Labor Statistics began tracking the data in 1948. And while the reasons behind the decline may be up for debate, the economic impacts are wide-ranging and can be felt across the board.

“Sluggish productivity means sluggish growth. It means sluggish wage growth and increase in living standards,” said Furman. “It matters for just about everything in the economy.”

Yesterday, Assembly Speaker Robin Vos (R-Rochester) announced the formation of four bipartisan task forces:  the Speaker’s Task Force on Artificial Intelligence; the Speaker’s Task Force on Childhood Obesity; the Speaker’s Task Force on Truancy in K-12 Education; and the Speaker’s Task Force on Human Trafficking.

“These are important issues to our state that our Assembly members and the public would like addressed,” said Speaker Vos.  “The task forces will travel around Wisconsin obtaining input and innovative ideas in order to compile recommendations.”

Each task force has an Assembly Republican chair and an Assembly Democratic vice chair.  The Speaker has asked the chairs to tap into the knowledge of community experts and those affected in the individual issue areas.  The committees will begin this September with the hope of completing work before the end of the year.

Speaker’s Task Force on Artificial Intelligence

The Speaker’s Task Force on Artificial Intelligence (AI) aims to study the transformative potential of artificial intelligence while ensuring its responsible and ethical deployment. The Task Force shall consider the use of AI tools by the public and private sectors, including automated decision tools, facial recognition, and generative AI. With AI’s growing impact on various sectors, the task force will drive informed policy discussions for a future that balances innovation with societal well-being.

Representative Nate Gustafson (R-Neenah), chair, and Representative Steve Doyle (D-Onalaska), vice-chair, will lead the task force on artificial intelligence.

Speaker’s Task Force on Childhood Obesity:

Childhood obesity is a critical health concern that demands attention.  The task force will study circumstances contributing to childhood obesity, including physical activity, nutrition, medical and other root causes and factors. Through research-driven initiatives and community engagement, the task force aims to combat obesity and its associated health risks among children, fostering a generation of healthier citizens.

Representative Karen Hurd (R-Fall Creek), chair, and Representative Robyn Vining (D-Wauwatosa), vice-chair, will lead the task force on childhood obesity.

Speaker’s Task Force on Truancy:

Recognizing the impact of truancy on educational attainment and future opportunities, the Speaker’s Task Force on Truancy in K-12 Education will work to identify root causes and implement effective interventions. The members of the task force will examine the relationship between truancy and student academic success, evaluate the current practices to hold parents and schools accountable for student attendance, and increase awareness and resources, ensuring every child has access to quality education and a promising future.

Representative Amy Binsfeld (R-Sheboygan), chair, and Representative Dora Drake (D-Milwaukee), vice-chair, will lead the task force on truancy.

Speaker’s Task Force on Human Trafficking:

The task force’s goal is to create a society where the safety and well-being of every person are paramount and where exploitation has no place. The task force will explore innovative solutions to combat human trafficking through prevention, supporting and empowering survivors, and prosecuting traffickers.

Representative Jerry O’Connor (R-Fond du Lac), chair, and Representative Jodi Emerson (D-Eau Claire), vice-chair, will lead the task force on human trafficking.

A growing number of Americans are falling behind on their monthly credit card payments, a trend that may be a harbinger of economic troubles ahead, according to a new report from Wells Fargo.

Findings from the bank indicate that credit card delinquencies are surging among commercial banks – particularly at small lenders. In fact, late credit card payments at banks that are outside the top 100 in asset size recently surged to a record high.

The report comes amid signs that Americans are increasingly relying on their credit cards to cover everyday expenses.

The New York Federal Reserve reported earlier in August that total credit card debt surged to $1.03 trillion during the three-month period from April to June, an increase of $45 billion – or 4.6% – from the previous quarter. It marks the highest level on record in Fed data dating back to 2003.

The dual increase in credit card usage and delinquency rates is particularly concerning because  interest rates are high right now. The average credit card annual percentage rate, or APR, hit a new record of 20.63% last week, according to a Bankrate database that goes back to 1985. The previous record was 19% in July 1991.

Governor Tony Evers today signed Executive Order #211 creating the Governor’s Task Force on Workforce and Artificial Intelligence.

This task force will gather and analyze information and produce an advisory action plan to identify the current state of generative artificial intelligence’s (AI) impact on Wisconsin’s labor market and develop informed predictions regarding its implications for the near term and future. The action plan will also identify how these workforce impacts may affect Wisconsin’s key industries, occupations, and foundational skillsets, explore initiatives to advance equity and economic opportunity in the face of these changes, and based on the impacts identified, recommend solutions related to workforce development and educational systems.

The Governor’s Task Force on Workforce and Artificial Intelligence will be administered by the Wisconsin Department of Workforce Development (DWD) and will be chaired by DWD Secretary Amy Pechacek or a designee. The governor will appoint additional members to serve on the Task Force, including Wisconsin Department of Administration Secretary Kathy Blumenfeld or a designee, Wisconsin Economic Development Corporation Secretary and CEO Missy Hughes or a designee, representatives from the University of Wisconsin and Wisconsin Technical College Systems, and other individuals who may include representatives from state and local government, the business community, educational institutions, organized labor, the technology sector, and other leaders from relevant workforce sectors and industries.

Executive Order #211 is available here.

The Securities and Exchange Commission (SEC) adopted a rule this week that will require publicly traded companies to report significant cyber incidents that are “material” to investors.

Companies will have four business days to report to the agency from the time they determine that the incident was material. Under the new rule, companies will have to disclose the incident’s nature, scope, timing and impact. Companies will also have to explain the processes they have in place to assess, identify and manage risks from cyber threats.

Last year, Congress passed a legislation that would require companies in critical sectors to report substantial cyberattacks within 72 hours and ransomware payments within 24 hours to the Cybersecurity and Infrastructure Security Agency.

Mortgage rates jumped to their highest level in more than two decades, making home-ownership even less affordable for many would-be buyers.

The average interest rate on a 30-year, fixed-rate home loan climbed to 7.09% this week, according to mortgage giant Freddie Mac. That’s the highest it’s been since April 2002 and comes after the Federal Reserve has raised interest rates aggressively in a bid to fight inflation.

Mortgage rates have more than doubled in the last two years, sharply raising the cost of a typical home loan. The monthly payment on a $350,000 house today, assuming a 20% down payment, would be $1,880, compared to $1,159 in 2021, when interest rates were below 3%.

“A lot of buyers have been priced out,” said Robert Dietz, chief economist of the National Association of Home Builders. “If you don’t have access to the bank of mom and dad to get that down payment, it’s very challenging.”

Chief economist Lawrence Yun of the National Association of Realtors agreed. “There are simply not enough homes for sale,” Yun said in a statement describing the sluggish pace of home sales in June. “Fewer Americans were on the move despite the usual life-changing circumstances.”

Mortgage rates are closely tied to the 10-year Treasury yield, which has also been climbing recently on the expectation that the Federal Reserve may have to keep interest rates higher for longer to bring inflation under control.

The Wisconsin Department of Revenue (DOR) released its annual Equalized Values Report. The report shows Wisconsin’s total statewide equalized property value as of January 1, 2023, was $842 billion, a 13% increase over the prior year. This is the second consecutive year showing a double-digit statewide increase. Growth occurred in all property classes and was led by residential and manufacturing property. Equalized values are based on data from January 1, 2022, to December 31, 2022.

Report highlights:

o $83.1 billion due to market value increases (11%)
o $13.1 billion due to new construction (2%)

Equalized values are calculated annually and used to ensure statewide equity in property tax distribution. The equalized value represents an estimate of a taxation district’s total taxable value and provides for the fair apportionment of school district and county levies to each municipality. Changes in equalized value do not necessarily translate into a change in property taxes.

The Labor Department said Friday that its producer price index, which measures inflation at the wholesale level before it reaches consumers, climbed 0.3% in July from the previous month. On an annual basis, prices are up 0.8%. It marked the first increase in wholesale inflation since June 2022.

Excluding the more volatile measurements of food and energy, so-called core inflation rose 0.3% for the month – a reversal from the 0.1% decline in June. The figure was up 2.4% on a 12-month basis.

And the services index climbed 0.5%, the biggest jump since August 2022, the Labor Department said in the report. About 40% of the increase can be traced to a 7.6% rise in prices for portfolio management, according to the report. The cost for machinery and vehicle wholesaling; outpatient care; chemicals and allied products wholesaling; securities brokerage, dealing and investment advice and transportation of passengers also moved higher.