State Republican Lawmakers Reintroduce Bill to Exempt Retirement Income from State Taxes

Sunday, July 23rd, 2023 -- 11:00 AM

(By Hope Kirwan, Wisconsin Public Radio) A pair of Republican state lawmakers have reintroduced a bill to exempt retirement income from state taxes this week.

According to Hope Kirwan with Wisconsin Public Radio, State Rep. David Steffen, R-Howard, and state Sen. Rachael Cabral-Guevara, R-Appleton, announced they were circulating the legislation for co-sponsorship on Monday. They say it's already received bipartisan support.

The bill would exempt the first $100,000 of retirement income for individuals, and the first $150,000 for married and joint filers, who are 67 or older. That includes income from IRAs, 401(k) plans and pensions.

Steffen said the change would mean 98 percent of Wisconsinites would have zero income tax liability in retirement. As more of the state's population reaches retirement age and older, he said the exemption would make the state responsive to the growing demographic and will help them stay in Wisconsin long term.

"They often are on fixed income, their level of revenue isn't increasing on a regular basis," he said. "This helps with that specific demographic, our seniors, who are often dealing with high property taxes, high inflation and don't have a mechanism to adequately address it."

But Steffen said the tax break will not only be a win for older adults. He believes the exemption could also help attract workers who are in the middle of their careers and are looking at Wisconsin as a place to finish out their working years.

"Those last 10 to 15 years of work are certainly focused on retirement for those workers, but it's also the highest earning years," he said. "It helps the state when we have people who are at their prime professional and revenue-generating self."

The lawmakers first introduced the proposed exemption in January as an amendment to the state budget. But Steffen said the state Legislature's budget writing committee did not include the exemption in their $3.5 billion income tax cut plan.

Gov. Tony Evers used his veto powers to exclude the top two income brackets from the tax cut, but preserved the breaks for other earners. Steffen said they lowered the married income cap from $200,000 to $150,000 to be more in line with what Evers has said he would support.

The Howard Republican is optimistic the governor will approve it now that the biennial budget has been passed.

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