The best way to create jobs and build a broad-based prosperity in Wisconsin is to invest in excellent schools, safe communities, and a solid transportation network.
But a new report released today takes a different approach, claiming that giving big tax cuts to the rich and raising taxes for others would help the Wisconsin economy. The report, released by the conservative Wisconsin Policy Research Institute, repeats the myth that tax cuts create jobs, despite growing evidence to the contrary.
The report advocates changing the state’s tax mix to rely less on the income tax and more on the sales tax, a change the group says would boost the state’s economy. But what the report fails to mention is that the result would be big tax cuts for people with the highest incomes and higher taxes for everyone else. If Wisconsin eliminated the income tax and raised the sales tax to make up for the resulting revenue loss, the top 1% of earners in Wisconsin – a group with an average income of $1.1 million – would get a tax cut of a whopping $44,000 on average. Read more
Wisconsin’s gradual economic recovery still hasn’t substantially expanded economic opportunity for working people and families. Median incomes are still well below their pre-recession level, and our state’s elevated poverty levels have yet to begin declining.
Concerns about increases in income inequality were voiced from a surprising perspective today, when Standard and Poor’s (the bond rating agency) issued a lengthy report titled “Income Inequality Weighs On State Tax Revenues.” The report concludes that “disparity is contributing to weaker tax revenue growth by weakening the rate of overall economic expansion.”
The authors offer this explanation for the correlation between income disparities and economic growth:
“…rising income inequality is a macroeconomic factor that acts as a drag on growth. There is evidence, although not conclusive at this point, that the higher savings rates of those with high incomes causes aggregate consumer spending to suffer. And since one person’s spending is another person’s income, the result is slower overall personal income growth despite continued strong income gains at the top.”
An article in today’s Washington Post sums up the findings in clearer terms:
“Even as income has accelerated for the affluent, it has barely kept pace with inflation for most other people. Read more
New Report Takes Comprehensive Look at Weaknesses, Strengths of Wisconsin’s Labor Market
Wisconsin’s economy is adding jobs at a slow pace, wage growth has stalled, and many workers don’t have the security and opportunity they need to get ahead, according to a new Labor Day report released from the Center on Wisconsin Strategy (COWS).
The report, “The State of Working Wisconsin, 2014,” provides a thorough examination of Wisconsin job numbers, wages, poverty, and job quality.
The information on Wisconsin job growth that is included in this report is helpful in deciphering the claims of political candidates who have helped bring a great deal of attention to jobs figures. The report notes that in many ways the hardships for Wisconsin workers mirror the troubles in the national economy. But beginning in 2011, rates of job growth in Wisconsin have fallen behind the national average:
“From January 2011 to June 2014, Wisconsin gained 109,200 jobs, posting growth in the labor market of 4.0 percent.
We got more evidence last week that rich Americans are getting richer and the poor are getting poorer. A new report released August 21st by the Census Bureau shows not only that the top 20% of Americans have been enjoying most of the economic gains over the last decade, but the median net worth of most Americans has actually decreased (for those in the bottom, second and middle quintiles). The following graph illustrates that trend.
Coincidentally, the new report was released a day or two after Wisconsin Congressman Paul Ryan told a reporter at the Weekly Standard that cutting tax rates for the wealthy is a higher priority than raising the child tax credit for middle class and low-income Americans. (Read the Weekly Standard blog post here.)
The new Census Bureau analysis divides American households into five quintiles and calculates the median net worth for each quintile, and how that changed from 2000 through 2011. Read more
To Reduce Income Inequality and Boost Economic Growth, Make sure every Student has an Opportunity to Attend College
Rising levels of income inequality are acting as a drag on the U.S. economy, but we can counter the economic harm by expanding opportunities to attend college, according to a new report from Standard & Poor’s, a financial services company.
Here’s the crux of the report, in a sentence:
Our review of the data, as well as a wealth of research on this matter, leads us to conclude that the current level of income inequality in the U.S. is dampening GDP growth, at a time when the world’s biggest economy is struggling to recover from the Great Recession and the government is in need of funds to support an aging population.
Pretty clear, right? Prominent policymakers, including President Obama, have warned time and again that high levels of income inequality are slowing economic growth. This report adds something new to the conversation in that it represents the viewpoint of a private sector company, and could be an indication that the business community is starting to view income inequality as a problem. Read more
Conservatives Critique “Tax Cronyism,” and Progressives Critique the ALEC Report
I was pleasantly surprised to learn recently that the American Legislative Exchange Council (ALEC) has issued a report calling on policymakers to end the wasteful subsidies given to corporations by state and local governments. Their report titled The Unseen Costs of Tax Cronyism: Favoritism and Foregone Growth criticizes special tax breaks for certain companies, which it points out tend to increase the tax burden on other companies and put them at a competitive disadvantage.
Corporations are very good at extorting costly subsidies from state and local officials, but some of those corporations and a growing number of policymakers are realizing that these incentives aren’t an effective way to promote economic growth. As WCCF intern Jelicia Diggs wrote in a recent WI Budget Project blog post, a number of businesses in the Kansas City area have prevailed on Missouri legislators to call a ceasefire to the use of incentives for pirating corporations across the border with Kansas. Read more
New Report: How Wisconsin Lawmakers Have Broken with Tradition and Undermined a Legacy of Investment
Four years ago Wisconsin was made a promise. The promise was that the best way to generate economic growth was through significant tax and spending cuts. The tax and spending cuts have occurred, but unfortunately for all of us, the promised job growth has not.
That’s the conclusion of a new Budget Project report released today, called “Breaking with Tradition: How Wisconsin Lawmakers Have Shortchanged a Legacy of Investment in the State’s Future.” The new report reviews the many changes policymakers have made recently in how Wisconsin supports it schools, communities, and workforce.
Lawmakers have made dramatic tax cuts since 2011, totaling $1.9 billion over four years. But the value of the tax cuts was not equitably distributed. Half the value of the major tax cuts packages in 2013 and 2014 went to the top 20% of taxpayers by income, and the remaining 80% shared the other half.
The tax cuts have contributed to deep cuts to public schools and higher education in Wisconsin. Read more
Immigrants are playing a very important role in boosting cities in Wisconsin and across the Midwest, according to a report issued last month. The recent report, written by the Chicago Council on Global Affairs, analyzed 2000 and 2010 decennial census data and found that the arrival of immigrants over the last decade helped reverse a trend of declining populations in cities throughout the Midwest.
Here are some of the highlights of the report, “Growing the Heartland: How Immigrants Offset Population Decline and an Aging Workforce in Midwest Metropolitan Areas,” pertaining to Midwest metropolitan areas:
- Over the last decade alone, the region’s foreign born population rose 27.4% (from 3.5 million to 4.5 million).
- Immigrant population growth accounts for 38% of metropolitan area growth in the Midwest.
- Only 67% of native-born Midwesterners live in metro-areas, compared to 88% of immigrants.
- Although this region’s native-born population in the 35-to-44 age group saw a 20.6% decrease between 2000 and 2010, the immigrant population in that age range experienced a 44.2% increase.
There has been a great deal of interest this year in the subject of income inequality – as evidenced by the fact that economist Thomas Piketty’s book, “Capital in the Twenty-First Century,” reached No. 1 on the non-fiction, best-seller list a few months ago. However, it isn’t an easy summer read, which is why I’m bringing you a very condensed version of a short synopsis that appeared a few days ago in a New York Times column by Nicholas Kristof.
Apparently, buying Picketty’s book is one thing, and getting very far into the 685-page tome is something else. An analysis of Kindle data by UW Madison mathematics professor Jordan Ellenberg suggests that Piketty’s best seller may also be this year’s most unread book. With that in mind, Kristof wrote his recent column, which he calls “An Idiot’s Guide to Inequality.”
I don’t want to discourage you from buying and reading Piketty’s book, but if it isn’t something you envision taking with you to the beach this summer, I encourage you to read Kristof’s “idiot’s guide,” which elaborates on these five points (that I have excerpted from his column):
- Economic inequality has worsened significantly in the United States and some other countries.