An income tax subtraction for qualified tips and for qualified overtime compensation; state aid for school districts; surplus refund payments; increasing funding for special education and school age parents programs; state aid to technical colleges and the technical college district revenue limit; and making an appropriation. (FE)
SB1 is a broad fiscal and tax package introduced in a May 2026 special session. It would create new Wisconsin income tax subtractions for qualified tips and qualified overtime compensation, mirroring federal deductions but without the federal sunset date, so the state tax benefit would continue after 2028 unless changed later. The bill also creates a one-time surplus refund payment for eligible 2024 Wisconsin individual income tax filers, with payments of $300 for most individuals and $600 for married joint filers, subject to income tax liability and residency/dependency limits.
On the education side, the bill increases funding for special education and school age parents programs by $85 million in fiscal year 2025-26 and $230 million in fiscal year 2026-27. It also creates a new “per pupil state aid” program for school districts, funded at $302.5 million in 2026-27, and changes the aid formula so the payment counts as state aid for revenue-limit purposes. In addition, it raises annual state aid to technical college districts by $50 million and reduces the amount those districts may raise through property taxes by an equivalent amount.
The bill would amend Wisconsin income tax law, school finance statutes, technical college funding provisions, and the homestead credit income definition. It adds new deductions under ch. 71 for tips and overtime, creates a new state-aid category for school districts under s. 121.105, increases appropriations for DPI special education and school age parents aid, and boosts technical college district aid while lowering local levy capacity. It also establishes a new nonstatutory refund-payment program administered by DOR and DOA, with claims and enforcement rules tied to existing income tax refund procedures.
The bill appears to be framed as a major relief and funding measure, with benefits directed to taxpayers, school districts, special education programs, and technical colleges. Because there were no recorded committee transcripts or votes provided, there is no documented floor or committee debate to gauge support or opposition. Based on the structure of the bill, it likely has appeal to both tax-relief advocates and education-funding supporters, while also implicating state budget priorities.
The main likely points of contention are fiscal cost, the use of surplus funds for direct payments, and the policy choice to create permanent state tax subtractions for tips and overtime after the federal deductions expire. Education finance provisions may also be debated because the bill changes how per pupil aid is counted for revenue limits and shifts some technical college funding from local property taxes to state aid. Another possible issue is eligibility design for the surplus refund payments, including exclusions for dependents, deceased taxpayers, part-year residents, and nonresidents with insufficient Wisconsin-source income.