Income tax

Republicans may not waive Wisconsin income tax on canceled education debt

Even with a $5 billion budget surplus, Republicans could force borrowers to pay hundreds in state taxes, leaving Wisconsin among 13 states to count canceled student loans as taxable income.

Republicans who control the Wisconsin Legislature have the power to waive state income tax on education debt relief for hundreds of thousands of Wisconsinites, but a GOP lawmaker says that it would be the first time that he would oppose a tax break.

That would leave Wisconsin as one of only 13 states to treat canceled student loan debt as taxable income and force some borrowers to pay hundreds of dollars in state taxes even as Republicans have a surplus. record budget of $5 billion.

Rep. Adam Neylon (R-Pewaukee) said TMJ4 in Milwaukee about his displeasure with President Joe Biden’s announcement this week that could lead to more 200,000 borrowers in Wisconsin to see their debts completely canceled – money likely to be invested in local economies rather than in government or bank coffers.

“I’m a Republican,” Neylon said, “but this might be the first tax break I would oppose.”

If the legislature doesn’t change the law, according to a tax accountant interviewed in the report, borrowers who have $10,000 forgiven would likely face more than $530 in state income taxes.

“When you’re talking about debt relief from people who voluntarily took and participated, I think it’s almost a double win in some ways,” Neylon said.

There is no indication that Neylon expressed similar sentiments about the many PPP loans that were written off, such as that of Assembly Speaker Robin Vos of nearly $300,000.

Governor Tony Evers unveiled a plan this week to invest the surplus in a combination of tax cuts, tax credits, lower gasoline prices and caps on insulin prices. Republicans — who put the Legislature on a 10-month paid break for the rest of 2022 — are unlikely to return to session.