MADISON, Wis. — The Legislature's Republican-controlled budget committee approved a bill Wednesday that would cut taxes by $540 million by the middle of 2023, largely by eliminating taxes on federal loans to business to help them through the pandemic.

The full Legislature could vote to pass it as soon as Tuesday. Democrats on the budget committee argued that the bill cost too much and was another hand-out to businesses that took the loans but still flourished during the pandemic.

"We're punching a big hole in the budget," Rep. Evan Goyke said. "We can direct our relief in a more targeted, more efficient manner."

Republicans countered that the bill brings state tax code in line with federal code.

"This isn't everyone's dream tax bill," Rep. Mark Born, a committee co-chair, said. "This bill matches federal law. Of course it's not perfect."

Gov. Tony Evers, a Democrat, would have to sign the bill for the tax cut to take effect. Asked whether Evers would veto the measure, his spokeswoman, Britt Cudaback, responded with a statement from the governor saying he would keep doing everything he can to support small businesses during the pandemic.

The federal government launched an economic stimulus project called the Paycheck Protection Program last year to help small business stay afloat amid the COVID-19 pandemic. The program offers low-interest loans to businesses. Companies typically must have fewer than 500 workers to qualify. Assembly Speaker Robin Vos' popcorn company in Burlington received between $150,000 and $350,000 through the program last year.

The loans are tax deductible under federal code but not under the state code. The bill would align the two codes, resulting in a $419 million revenue loss for the state over the next three fiscal years, according to the nonpartisan Legislative Fiscal Bureau.

The bill creates other deductions that would result in an additional $121 million in lost revenue over that span, including deductions for medical insurance costs for the self-employed and economic injury disaster loans.

Despite Democrats' warnings that the bill would create a huge hole in the budget, the lost revenue would hardly be a hit in the grand scheme of state finances. The 2019-21 state budget totaled $83.5 billion; $540 million amounts to less than 1% of that.

The lost revenue isn't a huge hit for the state. The 2019-21 state budget totaled $83.5 billion; $540 million amounts to less than 1% of that.

Wisconsin Manufacturers and Commerce, the state's largest business group and a staunch Republican backer, issued a statement praising the finance committee for signing off on the bill.

"WMC and our members urge legislators and Gov. Evers to support this legislation, which is crucial to upholding the promise that these funds would be available tax-free to all recipients," WMC attorney Cory Fish said in the statement.

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