By Patrick Marley and Jason Stein

Lowering taxes for the third time in less than a year, Gov. Scott Walker signed his $541 million tax cut bill in a ceremony Monday at a farm in Cecil as he travels through central and northern Wisconsin touting it.

Speaking at Horsens Homestead Farms, about 35 miles northwest of Green Bay, Walker called it a great day for Wisconsin taxpayers and a sign of the state's shifting financial fortunes in recent years. "Now, instead of billion-dollar budget deficits, we have a surplus -- and today that money is on its way to the workers, parents, seniors, property owners, veterans, job creators and others. You deserve to keep as much of your hard-earned money as possible -- because after all, it is your money," Walker said.

With growing tax collections now expected to give the state a $1 billion budget surplus in June 2015, Walker's tax proposal will cut property and income taxes for families and businesses, and zero out all income taxes for manufacturers in the state.

Though the state's tax revenue is increasing, GOP lawmakers and Walker are trimming state spending slightly for the next three years rather than increasing it.

Walker's plan for the surplus prioritizes the tax cuts and a roughly $320 million overhaul of income tax withholding over calls from Democrats to decrease about $2 billionin state borrowing through June 2015, strengthen the state budget and offset past cuts to schools.

Mary Burke, a former state commerce secretary and bicycle company executive running against Walker for governor, has said the state should use about half of the surplus to set aside more money in the rainy day fund and reduce state borrowing. She would use the remainder for property tax relief and worker training programs.

"I'm all for tax cuts, but not when they're done in a fiscally irresponsible manner that jeopardizes the state's finances," Burke said in a statement Monday. "Walker's approach to spending the projected surplus is irresponsible.

"Those projections were made on pretty rosy assumptions at a time when the state faces unfunded transportation projects and a structural deficit heading into the next budget."

Party-line split

Lawmakers split almost entirely along party lines in supporting or opposing the tax cuts, one more sign of how keenly partisanship now cuts through the Legislature.

The Assembly approved the tax measure last week 61-35, with three Democrats joining all Republicans in favor of it. It passed the Senate 17-15 earlier this month, with GOP Sen. Dale Schultz of Richland Center joining all Democrats in opposition.

Under Walker's bill, the average income tax filer would receive a tax cut of $46 in April 2015 and the typical homeowner would save $131 over the existing law on this December's property tax bills, according to the Legislature's nonpartisan budget office.

Also, the governor has separately had his administration alter income tax withholding rates so workers have less taken out of each paycheck -- about $520 a year for a married couple making a total of $80,000 a year -- starting in April. That will result in smaller tax refunds starting in April 2015, since taxpayers will be keeping more of their money up front.

The plan also will lower income taxes for factory and farm owners by $36.8 million over the current two-year budget and $91.3 million over the following two years.

GOP supporters of the manufacturing tax cut see it as fuel for one of the state's main economic engines. Democratic opponents see it as a giveaway with a dubious payback to some of the richest people in the state, averaging about $800 for roughly 30,000 tax filers in 2015.

Burke's plan for property tax relief and separate plans put forward by Assembly and Senate Democrats would all funnel more money toward a state credit for parcels with a home or business on them. That would ensure low- and middle-income homeowners see bigger tax cuts than they would under Walker's plan.

Republicans have said this so-called first dollar tax credit provides no relief to those who own undeveloped land and could draw a legal challenge to the credit if it is increased again.

(c)2014 the Milwaukee Journal Sentinel