Walker signs tax cut on health savings accounts

DEFOREST (AP) - Contributions to health savings accounts would become tax deductible under the first bill Gov. Scott Walker signed into law on Monday, three weeks after he took office.

Walker was surrounded by four Republican state lawmakers when he signed the measure at EVCO Plastics in DeForest. The bill passed the Legislature on Thursday with bipartisan support.

The new law applies to this tax year and will benefit taxpayers on returns filed in 2012. The change brings Wisconsin into line with the federal law and 46 other states.

Only 1.3 percent of Wisconsin taxpayers, or about 35,300, took the federal tax deduction on health savings accounts in 2008, based on Department of Revenue data. Of them, the new tax benefit would equate to an average savings of $168 per person, according to the nonpartisan Legislative Fiscal Bureau. The actual amount deducted averaged about $2,600 per person.

The accounts allow workers and employers to make pretax contributions into a spending account to be used on future health care expenses. The private plans come with deductibles of at least $1,200 for individuals and $2,400 for family coverage.

Democrats who opposed eliminating Wisconsin income taxes on the plans said doing so would benefit few people, would do nothing to create jobs and would not be significant enough to motivate poor people to open the accounts.

"This is another tax giveaway to the very wealthy and elite people that's not going to improve the quality of health care in the state or create jobs," state Democratic Party Chairman Mike Tate said during a Monday conference call.

Opponents also pointed to the tax break's cost - roughly $49 million in tax revenue over the next two years - which would only deepen Wisconsin's projected two-year, $3 billion budget hole. And Walker on Monday said emergency action would likely be needed by the Legislature to balance the budget this year, something he would outline in more detail in his State of the State speech next week.

Walker defended the HSA tax cut, saying it would give workers and employers another health care option as part of the process of turning around Wisconsin's economy. Walker hasn't said yet how he will pay for the measure, saying that will be revealed in the budget he announces next month.

Versions of the bill passed by the Legislature in both 2004 and 2006 were vetoed by then-Gov. Jim Doyle, a Democrat.

Wisconsin Manufacturers and Commerce, the state's largest business group, backed the HSA tax cut, saying it can be an effective tool to help lower health insurance premiums.

The measure is one of two that have passed the Republican-controlled Legislature since Walker took office three weeks ago. Walker has yet to act on the other bill, a major overhaul of civil litigation rules that also passed on Thursday.

The Legislature on Tuesday is scheduled to pass three other Walker proposals. One would provide a tax break for every new job a company creates. The others would eliminate a company's income tax burden for the first two years after they move to Wisconsin. The third would make $25 million more available in economic development incentives, although that money is not anticipated to be used over the next two years.