Increasing certain individual income tax rates and expanding the number of brackets, increasing the personal exemption for certain individuals, and sunsetting the manufacturing and agriculture tax credit. (FE)

taxable income from $0 to $7,500; taxable income exceeding $7,500 but not exceeding $15,000; taxable income exceeding $15,000 but not exceeding $225,000; and taxable income exceeding $225,000. In general, this rate and bracket structure first applied to taxable year 2013 and was enacted in 2013 Wisconsin Act 20 , the state's 2013 Biennial Budget Act, although the rate for the lowest bracket was 4.40 percent for taxable year 2013 and became 4.0 percent in taxable year 2014.

Under this bill, which first applies to taxable year 2017, there are five income tax brackets for single individuals, certain fiduciaries, heads of households, and married persons. The brackets are indexed for inflation. The rate of taxation under the bill for single individuals, certain fiduciaries, heads of households, and married persons for the four lowest brackets remains the same as current law, 4.0 percent, 5.84 percent, 6.27 percent, and 7.65 percent, and the rate for the new fifth bracket is 8.25 percent.

Before indexing for inflation, for taxable year 2017, for single individuals, certain fiduciaries, and heads of households, the lowest bracket applies to taxable income of over $0 up to $7,500; the second bracket applies to taxable income over $7,500 up to $15,000; the third bracket applies to taxable income over $15,000 up to $225,000; the fourth bracket applies to taxable income over $225,000 up to $500,000;

and the new fifth, or top bracket, applies to taxable income over $500,000. For married joint filers, the lowest bracket applies to taxable income of over $0 up to $10,000; the second bracket applies to taxable income over $10,000 up to $20,000; the third bracket applies to taxable income over $20,000 up to $300,000; the fourth bracket applies to taxable income over $300,000 up to $1,000,000; and the new fifth, or top bracket, applies to taxable income over $1,000,000.

Personal exemptions Under current law, an individual income tax personal exemption exists in the amount of $700 for each taxpayer who is required to file an income tax return and $700 for the taxpayer's spouse, except if the spouse is filing separately or as a head of household. A taxpayer may also claim a $700 exemption for each dependent for whom he or she is entitled to claim an exemption under the Internal Revenue Code.

In general, an additional exemption of $250 may be claimed by a taxpayer, and spouse, who has reached the age of 65 before the close of the taxable year to which his or her tax return relates.

This bill increases the personal exemption amount for certain taxpayers starting with taxable year 2017. Under the bill, if a single individual has Wisconsin adjusted gross income (WAGI) of less than $12,000, his or her personal exemption is $8,260. The personal exemption amount for such an individual phases down to approximately $700 as his or her WAGI increases from $12,000 to the maximum income threshold of $60,000. If such an individual's WAGI is more than the maximum income threshold, the individual calculates his or her exemption under current law.

Similarly under the bill, the personal exemption amount for a head of household and a married individual filing separately is increased to $8,260 per person, and to $16,520 for a married couple filing jointly, for those whose WAGI, or joint WAGI in the case of a married couple filing jointly, is less than $14,000 (head of household), $20,000 (married joint), or $10,000 (married separate). The exemption amount phases down to approximately $700 ($1,400 for a married couple filing jointly) as WAGI increases to the maximum income threshold, which is $70,000 (head of household), $100,000 (married joint), or $50,000 (married separate). If a taxpayer's WAGI is more than the maximum income threshold, the taxpayer calculates his or her, or the couple's, exemption under current law. The bill does not make any change to the current law exemption provisions for dependents or individuals who are age 65 or above.

Manufacturing and agriculture credit This bill provides that a taxpayer may not file a new claim the manufacturing and agriculture tax credit for taxable years beginning after December 31, 2016, although credits claimed for taxable years beginning before January 1, 2017, may be carried forward to taxable years that begin after December 31, 2016.

Because this bill relates to an exemption from state or local taxes, it may be referred to the Joint Survey Committee on Tax Exemptions for a report to be printed as an appendix to the bill.