Kansas’ Experiment Yields Valuable Lessons

Monday, June 12, 2017 at 1:12 PM by
Kansas map

Wisconsin lawmakers should heed the warnings from Kansas

Wisconsin lawmakers advocating for additional tax cuts should consider the example of Kansas, a state that has pushed through enormous tax cuts and that has been held up by tax-cut proponents as a model worth replicating. The massive tax cuts in Kansas damaged the state’s schools, colleges and universities, and key services – and failed to improve Kansas’s economic performance.

The tax cuts passed in Kansas are larger than the ones that have been passed in Wisconsin, but otherwise they share many characteristics. In both states, tax cuts helped the rich much more than most state residents, making income inequality worse. And both states raised taxes on low-income families working to climb into the middle class.  

In the face of disappointing economic growth, Kansas lawmakers have acknowledged that they need to take a different approach, one that invests in assets that help businesses thrive, communities prosper, and hard-working families climb the economic ladder. Read more

Proposed Changes to Transportation Finance Camouflage Tax Increase on Gas

Friday, May 12, 2017 at 5:44 AM by

State lawmakers have proposed changes to the way gas is taxed that would result in buyers paying more in taxes for each gallon of gasoline purchased.

The tax increase is part of a broad package proposed by Assembly Republicans that also includes raising the vehicle registration fees for some car owners, allowing counties to add a 0.5% sales tax to fund local roads, and directing the Wisconsin Department of Transportation to ask for an exemption from federal requirements that bar new toll roads. The transportation package is paired with a package of income tax cuts that would give extremely large tax breaks to earners with the highest incomes, while shutting out Wisconsin residents with low incomes (see New Income Tax Proposal Overwhelmingly Favors Highest Earners, May 2017).

Rather than increase the gas tax directly, lawmakers have proposed decreasing one tax and increasing another, in what seems to be an attempt to mask the fact that consumers would pay more in taxes when they buy gas. Read more

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New Income Tax Proposal Overwhelmingly Favors Highest Earners

Thursday, May 11, 2017 at 8:02 AM by

Republicans in the Wisconsin Assembly have proposed a package of tax cuts that would give extremely large tax breaks to earners with the highest incomes, while shutting out Wisconsin residents with low incomes.

The tax package has multiple components, the largest of which is the gradual flattening of the state’s income tax rates. The proposal would reduce income tax rates over ten years to a flat rate of 3.95%. Currently, the bottom income tax rate is 4.0% and the top marginal rate is 7.65%, so the proposal would result in a 0.05 percentage point reduction in the tax rate for income in the bottom bracket, and a 3.7 percentage point reduction for income in the top bracket.

Wisconsin’s income tax system as it currently stands is progressive, meaning that taxpayers with higher incomes pay a higher share of their income in taxes. The progressive nature of the state’s income tax partially – but not completely – offsets the regressive nature of the state’s sales tax and property tax. Read more

Categories: 2017-19 biennial budget, Blog, income taxes, STATE BUDGET, STATE TAXES | Comments Off on New Income Tax Proposal Overwhelmingly Favors Highest Earners

Wisconsin Left with Little to Show for Nearly Eliminating Requirement that Manufacturers Pay Income Tax

Wednesday, May 3, 2017 at 7:40 AM by

The number of manufacturing jobs in Wisconsin has grown more slowly than the national average, despite a major new tax break that nearly wipes out income taxes for manufacturers.

The number of manufacturing jobs in Wisconsin grew by 1.4% between September 2013 and September 2016, less than the national rate of 2.1%. These figures are based on the Quarterly Census of Employment and Wages, the “gold standard” measure of jobs figures. September 2016 is the most recent month for which jobs figures are available from the QCEW; that month’s figures are preliminary. The manufacturing tax break started with tax year 2013 and was phased in over a four-year period.

Manuf-jobs

The slow growth of manufacturing jobs in Wisconsin is notable because over that same period Wisconsin gave manufacturers a tax break worth $457 million, through a tax credit that nearly wipes out income tax liability for manufacturers and some other businesses. But lawmakers didn’t require manufacturers to create any jobs to receive the tax break – in fact, even manufacturers that are laying off employees or sending Wisconsin jobs overseas can receive the tax cut. Read more

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High Cost, Little Benefit to Tax Gimmick Under Consideration

Thursday, April 20, 2017 at 7:39 AM by

Governor Walker has proposed a back-to-school sales tax holiday, a gimmick that would reduce the resources available to support Wisconsin’s schools, university system, and communities, without providing any real economic benefit.

Under the proposal, purchases of school supplies, computers, and clothing would be exempt from the sales tax for one weekend in August. This move would cost the state an estimated $11 million a year in lost tax revenue, and local governments an additional $750,000 a year in lost revenue. This reduction in revenue would make it harder for Wisconsin to make the kinds of investments in education, health, and workforce systems that can spur economic growth.

A sales tax holiday would do little to boost consumer spending or give a tax break to Wisconsin families with low incomes. There are a whole host of downsides to a sales tax holiday, including:

  • Instead of encouraging consumers to spend more money, sales tax holidays simply shift the timing of the spending;
  • A sales tax holiday on back-to-school items involves lawmakers picking winners and losers among types of goods that should be exempt from the sales tax;
  • Sales tax holidays are not an effective tool for giving a tax cut to individuals with low incomes, since a large amount of savings is also given to people in higher income groups as well.
Read more
Categories: 2017-19 biennial budget, Blog, sales tax, STATE BUDGET | Comments Off on High Cost, Little Benefit to Tax Gimmick Under Consideration

Governor Proposes Expanding Tax Credit that Encourages Work and Improves Children’s Opportunities

Tuesday, April 18, 2017 at 6:54 AM by

Governor Walker has proposed increasing the state’s Earned Income Tax Credit for some families, a move that would improve child well-being and expand economic opportunity for families with low and moderate incomes. He included the measure in his proposal for the budget period that runs from July 2017 to June 2019.

Expanding Wisconsin’s EITC would give a much-deserved break to working parents with low and moderate incomes. The EITC lets working families keep more of what they earn to help meet basic needs and pay for things that allow them to keep working, such as child care and transportation. This tax credit offers working parents a hand up by encouraging and supporting work. It’s a modest investment that can make a big difference in the lives of families.

The EITC also boosts local communities and economies across the state. It puts more money in the pockets of low-wage workers, who then spend it at local businesses to pay for things like groceries and child care. Read more

Categories: 2017-19 biennial budget, Blog, EITC | Comments Off on Governor Proposes Expanding Tax Credit that Encourages Work and Improves Children’s Opportunities

To Build a Strong Economy and Create Jobs, Invest in What Works

Monday, April 17, 2017 at 8:07 AM by

Tomorrow is April 18th, the deadline for most people to file their income tax forms without penalty. (April 17 is a holiday in Washington, D.C., pushing off the deadline for filing until today.) We hear a lot of negative messages about taxes on this day.  But this Tax Day, let’s remember that creating jobs and building broad-based prosperity requires investing in what works – and we can’t do that without taxes.

To build a strong Wisconsin economy, we need to invest in assets that help businesses thrive and help hard-working people climb into the middle class. That means Wisconsin needs to continue our tradition of supporting high-quality schools and preschools, an affordable university system, a healthy workforce, and a clean environment.

Taxes make these investments possible.

When state lawmakers cut income taxes for the wealthy or for corporations, we undermine our ability to support important services that Wisconsin businesses and residents rely on every day.  Read more

Categories: Blog, income taxes | Comments Off on To Build a Strong Economy and Create Jobs, Invest in What Works

Wisconsin’s Tax System Exacerbates Growing Gap between Rich and Everyone Else

Friday, April 14, 2017 at 8:02 AM by

Wisconsin is a better place when we all do well. Unfortunately, while the wealthiest have seen their incomes skyrocket in recent decades, incomes have stagnated for the middle class and those who struggle hardest to make ends meet. It’s becoming harder to make it to the middle class and stay there.

Wisconsin’s state and local tax system, like the tax systems in most states, makes this problem worse. If you look at who pays taxes in Wisconsin, it turns out that middle-class and low-income families pay a bigger share of their incomes in state and local taxes than the wealthiest households in the state. We call on financially-stressed families to pay 8.9 cents out of every dollar they earn in state and local taxes, while the wealthiest households pay just 6.2 cents out of every dollar of income. And many corporations pay little or nothing in income taxes.

Best off pay smallest share of income in taxes

Wisconsin’s middle class, once one of the strongest in the country, has shrunk more quickly than in any other state. Read more

Wisconsin Governments Near Average in Revenue and Spending

Monday, March 13, 2017 at 11:55 AM by

Wisconsin is near average in many measures of government revenue and spending, according to figures for 2014 that were recently released by the U.S. Census Bureau. That’s nothing new, as Wisconsin has been near the middle of the pack for about a decade now.

A new analysis from the Wisconsin Budget Project found:

  • Wisconsin state and local governments ranked 24th among the states in the amount of taxes, fees, and other charges that they collect from state residents on a per-person basis, and 21st when that amount is measured as a share of personal income.
  • Wisconsin ranks 25th in total government spending per person and also 25th when the amount is measured as a share of income.

There are many different ways to measure public revenue and spending, and Wisconsin ranked very close to the middle in nearly all of them, with two exceptions:

  • Wisconsin ranked 16th in the share of income that governments collect from state residents in taxes.
Read more
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Big Tax Break for a Wealthy Few Continues to Snowball

Thursday, February 2, 2017 at 12:07 PM by

A tax break that has cost far more than originally anticipated has resulted in enormous tax breaks for a wealthy few, according to a new analysis from the Wisconsin Budget Project.

The Manufacturing and Agriculture Credit nearly wipes out state income tax liability for manufacturers and agricultural producers in Wisconsin. Only about three out of every thousand individual income tax filers receive this tax break, but in 2017 alone the credit will cost the state $299 million in reduced revenue. Looking ahead, the cost of the credit swells even more, ballooning to more than $650 million for the upcoming two-year budget period that starts in July 2017.

The cost of this tax cut has taken lawmakers by surprise. In fact, the credit is now estimated to cost more than double what lawmakers originally thought when the amendment creating the credit was quietly slipped into the 2011-13 budget bill.

Nearly all the value of the tax break goes to the very wealthy. Read more

Categories: Blog, income taxes, STATE TAXES | Comments Off on Big Tax Break for a Wealthy Few Continues to Snowball