Walker must balance his appeal to the national party's base against local concerns. Walker tries to sell tax cuts

MADISON, Wis. — Wisconsin Senate Republicans huddled on the top floor of the Capitol building earlier this week with a mission: Convince skeptical GOP colleagues that Gov. Scott Walker’s half-billion-dollar tax cut proposal is a good idea.

They have some work to do.


With a nearly $1 billion projected budget surplus expected next year, Walker wants to slash property and income taxes as he heads into reelection this fall — a move many say could also grease a 2016 presidential bid should he decide to run.

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But while adding tax cuts to his trophy collection of GOP achievements may bolster his résumé, liberal critics say he’s putting his national ambitions ahead of the state’s fiscal needs.

And he’s facing headwinds from a handful of Senate Republicans who say the tax cuts should come after paying off a slew of unpaid bills due in just a few years. Walker’s plan would actually worsen the longer-term deficit outlook.

“We’re recreating the problem,” said Dale Schultz, a 22-year state Senate Republican. “The tax plan sets us up for a very bad time in the future.”

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Two years after surviving an ugly recall election for curbing union bargaining rights, Walker, who inherited a $3.6 billion deficit when taking office, is causing a rift within the party over his tax plan. While the state Assembly passed the cuts Tuesday, the Republican-controlled Senate doesn’t yet have the votes to follow suit.

Walker’s dilemma illustrates the line governors walk when they consider higher office — balancing appeal to the party’s base against local concerns.

“Walker is probably trying to appeal to the Republican national primary constituency as opposed to the population in Wisconsin, which leans somewhat Democratic,” said Paul Sracic, chair of political science at Youngstown State University in Ohio.

His Democratic foes are more direct, accusing him of sharpening his chops for 2016 at the expense of the state.

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“The national spotlight is all he cares about,” said Senate Minority Leader Chris Larson (D), who worked with Walker during the governor’s stint serving Milwaukee County. “The long-term future of whatever entity he is governing is secondary to his political ambitions.”

Walker became a hero to the tea party wing of the party with his hardball tactics against unions, and gets an average 5.8 percent support among Republican primary voters, according to a compilation of recent polls from RealClearPolitics. Former GOP Govs. Mike Huckabee of Arkansas and Chris Christie of New Jersey, and Rep. Paul Ryan of Wisconsin lead the pack.

Walker’s plan couples $400 million in property tax relief with almost $100 million for a slight income tax reduction for the bottom bracket.

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But Walker won’t stop there. His administration just announced it will use $300 million from the $977 million surplus to tweak tax withholding so that a family of four, for example, will pay about $500 less in taxes this year.

More boldly, he’s eyeing elimination of the income tax completely, and he’s not shy about promoting his plan as a model for the rest of the country.

Walker told POLITICO he hopes his spending and tax cuts “will inspire others,” including “states all across this country and maybe eventually Washington.”

“That will help make not only a better Wisconsin but a better America,” he said in an interview this past week.

Yet Walker denies he is trying to turn heads nationally, arguing that he is “keeping the promise I ran on … that I would lower the tax burden every year I’ve been in office.”

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“If keeping your word and doing things that make the economy better and helping people in Wisconsin are good for [2016], I’ll let other people determine that,” he said Tuesday.

GOP strategist John Weaver said there is no doubt that adding a big tax cut to his résumé will help him with potential Republican primary voters. But the former adviser to Sen. John McCain (R-Ariz.) also said accusations that Walker is putting his résumé first are a cheap shot.

“The fact that someone is ambitious does not mean their policies are bad, but it’s a natural attack-line to say, ‘Oh, they’re only doing this to get press and become the face of national Republicans,” Weaver said.

First, though, Walker has to win over Wisconsin Republicans with deficit concerns.

Sitting below a massive hanging bearskin, fishing hooks and the blue Wisconsin flag, Schultz , the GOP senator, wouldn’t speculate on Walker’s motives, but backs saving the state surplus to protect against expected future deficits.

“Look, I like tax cuts as much as anybody,” the retiring farm owner said in an interview from his office. “But when my constituents tell me that we should not create structural deficits … pay our bills first … I have an obligation.”

The state known for its battered cheese curds and craft beer is expecting the surplus at the close of the July 2013-June 2015 period.

But it will be short lived: The nonpartisan Legislative Fiscal Bureau says the state will face a $700 million shortfall during the next two-year budget cycle.

Walker’s tax cuts will bloat that deficit another $100 million to more than $800 million for 2015-2017.

“You can’t run for election saying structural deficits are bad then do something to increase it,” said Republican state Sen. Luther Olsen, who considers Walker a “good friend” and supports some tax cuts — but also wants part of the money for deficit reduction.

The Senate is expected to pass some version of Walker’s tax cuts eventually, but it will likely be a deal that also lowers the deficit.

With its slim majority, Senate GOP leaders can afford only one defector against Walker’s bid. So his Republican allies are working feverishly to convince their colleagues that the deficit will easily disappear in the coming years.

“It’s the Laffer curve: when you reduce the tax burden the economy will grow,” said Joint-Finance panel co-chair Sen. Alberta Darling (R), who survived her own recall election for supporting Walker’s controversial “Act 10” legislation curbing bargaining rights.

A few floors down, complex deficit calculations are scribbled on two chalkboards in a conference room off the Senate floor — courtesy of Senate President Michael Ellis (R), a former teacher with a loud bark.

Ellis said the fiscal office’s accounting methods assume tax receipts will hold steady, but Wisconsin’s tax receipts have been growing by about 3 percent annually over the past decade.

“They’re idiots … That’s bull — of course you’re gonna get more revenue,” he snaps.

Walker says the state needs about only 1.8 percent revenue growth over the next year or two to squash these “bogus” deficit worries.

Bob Lang, head of the state financial office, says that growth assumption is realistic — but he cautions that unforeseen spending, for something like a natural disaster or excess Medicaid claims, could drain the surplus.

The Senate hang-up has caused palatable tension between Senate Republicans and the Assembly, which passed Walker’s bill just three weeks after it was introduced — without holding a traditional joint-finance hearing with the Senate.

Senate Majority Leader Scott Fitzgerald (R) called the speedy pace “inappropriate.” That led Assembly Speaker Robin Vos (R) to respond at a news conference Tuesday by bragging that at least his chamber has the votes to “stand behind Gov. Walker.”

One GOP Senate aide, who would not speak for attribution, quipped that in Madison, it’s not only Walker who has eyes on 2016: several Assembly leaders want to be on Walker’s good side if he does make it to the White House.

While Republicans squabbled this week, Walker’s Democratic gubernatorial challenger took aim at his proposal across the street at her campaign office.

“He is spending money we don’t have yet,” said Mary Burke, a former Trek Bicycling executive, at a news conference, decrying the tax cuts as “irresponsible.”

The surplus Walker’s counting on to pay for the tax cuts is expected — but not yet in the bank.

Republicans often use phrases like “get our fiscal house in order” and “fiscally responsible” — but here in Wisconsin this past week, Democrats used them as ammunition against Walker.

“Walker used the structural deficit as a reason to tear apart the fabric of our state,” with cuts, said Assembly Minority Leader Peter Barca (D), a former U.S. congressman from Kenosha. “Should the economy falter nationally, then we could go back to significant structural deficits that would polarize our state.”

Senate Democrats are considering their own proposal to use the surplus to pay off the deficit completely. Assembly Democrats want to pay down the deficit by about $250 million and tailor the tax cuts more toward lower-income Wisconsinites.

Rep. Cory Mason (D), who sits on the joint-finance panel, said Walker’s tax cuts, as well as his recent decision to refuse federal Medicaid funding, make sense only “through the lens of winning a presidential primary.”

“If you’re a governor trying to manage the fiscal ship of state to make sure you’re in a good place in the next budget, none of this makes sense — unless you’re a governor who’s running for president who can say: ‘I did more tax cuts than other governors,’” he said.

Larson, who served as a county official with Walker, said the governor took a similar tack in Milwaukee County: delaying improvements to parks, cutting transit routes and slashing mental health funding in the name of fiscal restraint, and then touting his record across the state before moving up to the governor’s mansion.

Larson says Walker’s always looking for a “big headline.” “He’s not interested in long term stuff. It’s all dazzle, flash, dance, then disappear” to the next promotion.

But Walker said good policy and good politics are not mutually exclusive.

“I would be a fool not to think something that’s good for the taxpayers would also be good for the voter,” he said in an interview. “I don’t see why [Democrats] think that’s a shocking concept.”