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On Sunday the Milwaukee Journal Sentinel published an interesting article about the capital gains tax breaks that Governor Scott Walker is proposing in his biennial budget. The article’s title “Walker’s proposed capital gains tax break gets lukewarm backing” says it all. Capital gains tax breaks are costly and are extremely regressive because most capital gains income is received by the richest taxpayers.
Wisconsin already allows a tremendously generous 30 percent exclusion for capital gains income, which ITEP estimates cost more than $150 million in 2010. The Governor is proposing two changes to how capital gains are currently taxed: “a 100 percent exclusion for capital gains realized on Wisconsin-based capital assets held for five or more years and a 100 percent capital gains tax deferral for gains reinvested in Wisconsin-based businesses.”
If implemented, these changes would cost the state about $36 million over the next two fiscal years. At a time when the state is facing a $3.6 billion dollar shortfall, surely there are better ways that $36 million could be used.