Wisconsin conservatives last week posed a plan to eliminate Wisconsin’s income tax — which is the ninth highest in the country – and instead boost the state’s sales tax from 5% to 8%.
Prof. Noah Williams, head of the UW-Madison Center for Research on the Wisconsin Economy (CROWE), said the change would $1,700 per household in tax relief — a total of $3.5 billion.
Williams said the change would also boost Wisconsin GDP by $28 billion over the first eight years and make the state more competitive and boost employment by 175,000 jobs.
That’s awfully enticing. For Wisconsin homeowners, many of whom are writing out big checks this month to pay their property taxes, the idea of a bump of $1,700 in household income is like a Christmas sugarplum.
“An average household in Wisconsin pays nearly $2,800 in income taxes,” Williams said. “While the increases sales tax would add nearly $1,100 in taxes. (Eliminating the income tax) means a tax cut of roughly $1,700 per household.”
Wisconsin would join nine other states that currently don’t have state income taxes.
Former Gov. Scott Walker endorsed the plan and said, “We would clearly have a competitive advantage. We already see the exodus coming from Illinois to Wisconsin, and Indiana and other states. This would just accelerate that.”
The proposed tax reform also garnered support from the Wisconsin Manufacturers and Commerce, Americans for Prosperity-Wisconsin, the Institute for Reforming Government, and Americans for Tax Reform.
One place it didn’t gain support was from the office of Gov. Tony Evers who sniffed, “Wasn’t he governor for eight years and had a Republican Legislature that whole time? He could have done that himself.”
According to news reports Walker did pose the idea of eliminating the state’s personal and corporate income taxes back in 2013, but it didn’t gain any momentum at the Capitol at the time.
And Wisconsin’s Main Street Alliance and Wisconsin Budget Project panned the proposal saying it would “shift the responsibility for paying taxes away from the rich and powerful and onto the back so people with low and moderate incomes.”
So let’s have that debate. Have we gone so far down the rabbit hole of hyper-partisan political division that we can’t have an honest and open discussion of the pluses and minuses of a tax reform proposal?
The numbers tell us this. Wisconsin will collect $6.3 billion in sales and use taxes this year, according to the Wisconsin Department of Revenue. That provides 32.6 percent of the state’s general purpose revenue. By comparison, the individual income tax will generate $9.3 billion, which accounts for 47.4 percent of GPR.
Wisconsin’s income tax rate is the ninth highest in the country, while the sales tax is one of the lowest. So perhaps some tax shifting is in order.
Yes, we have some questions. For starters, this reform doesn’t touch on local property taxes — that’s right, the ones many of us are paying this month — and they total about $11.2 billion each year. Wisconsin ranks sixth highest in the country for property taxes with homeowners shelling out an average of $4,027 per year. That’s the big dog in the room.
We’ve also heard radio news reports that the bump in the sales tax from 5% to 8% won’t cover the loss of $9.3 billion from the elimination of the state income tax — that it will fall $2- to $3 billion short. That’s a problem.
Still, if this reform can boost take home wages for workers, increase Wisconsin’s GDP, create more jobs and make the state more attractive to new businesses, it’s a debate worth having. The guiding light here should not be whether it benefits Democrats or Republicans, but if it helps the residents of Wisconsin.
– Kenosha News