With the enactment of the 2025-2027 Wisconsin State Budget, the legislature is in summer recess.  As the dust settles from a long budget process, we can start to unpack specific changes that were made to state law.

Let’s take a closer look at one of the more significant pieces of the budget bill: tax cuts.  With the state of Wisconsin facing a surplus of roughly $4 billion, NFIB advocated for a large portion of that surplus to be used for cutting taxes.  The final package resulted in three main provisions that will lower the tax burden by $1.5 billion.

The first provision will reduce income tax rates by expanding the second lowest tax bracket.  Specifically, individuals making more than $29,370 or couples making more than $39,150 will see the reduced tax rate.

Second, there is now a new exemption for all retirement income.  This piece will allow individuals age 67 or older to exclude up to $24,000 (or up to $48,000 for married-joint filers) of their income from state taxes.  Retirement income is based off the federal definition and includes common items like pension, IRA, and 401k income.

The final piece of the package eliminates the state 5% sales tax on residential natural gas and electricity.  The estimated savings to taxpayers is estimated to be about $178 million over the two-year budget biennium.

Overall, the budget represented a compromise between Republicans and Democrats.  It was passed and signed into law by Governor Evers in early July.