Business Climate Rankings Consistently Fail to Reflect States’ Economic Vitality
A new business climate ranking released last week has gotten little or no press attention in Wisconsin. Perhaps that’s because the conservatives in our state who often publicize these rankings are hesitant now to draw attention to the finding that Wisconsin continues to rank 43rd in this particular analysis. But I hope the actual reason is that reporters have gradually learned that these rankings have no correlation with how states are doing economically or will be doing in the coming years.
The latest version of the Tax Foundation’s annual State Business Tax Climate Index (SBTCI), which was released on Nov. 17, says Wisconsin is ranked 43rd for the fifth year in a row (2012 through 2016). That’s down from 41st in 2011. However, you shouldn’t be alarmed because these rankings reflect little more than the Tax Foundation’s skewed wish list for corporations. Read more
Wisconsin is near average in many measures of government revenue and spending, according to new figures for 2013 that were released by the U.S. Census Bureau this week. That’s nothing new, as Wisconsin has been near the middle of the pack for about a decade now.
- Wisconsin state and local governments ranked 21st among the states in the amount of taxes, fees, and other charges that they collect from state residents on a per-person basis, and 19th 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 near the middle in nearly all of them, with two exceptions:
- Wisconsin ranked 11th in state and local taxes as a share of income.
State policy choices contribute to the growing divide in income and wealth between the richest and poorest Wisconsinites. Although most parts of the state and federal tax codes and federal entitlement programs are adjusted (“indexed”) each year for inflation each year, Wisconsin programs that assist low-income households are less likely to be adjusted for inflation. The decision to freeze those forms of assistance means they are steadily eroded over time – to the detriment of struggling low-income workers and their communities.
A recent article by Chris Rickert in the Wisconsin State Journal contrasted the erosion of several forms of public assistance – including Wisconsin Works benefits, the Homestead Tax Credit, and the state minimum wage – with a proposal by some GOP members of the state legislature to periodically adjust campaign contribution limits for inflation. I was reminded of that article by two new reports issued late last week that shed more light on the effects of not adjusting the Homestead Tax Credit and Wisconsin Works: Read more
Wisconsin lawmakers have passed tax cuts totaling $4.8 billion over six years, according to a new legislative memo released this week. These tax cuts have done little to boost job growth and have forced damaging cuts to Wisconsin’s public schools, universities, and health care system.
Lawmakers have passed dozens of tax cuts since January 2011, including millions of dollars in tax cuts that primarily benefit people with high incomes. And lawmakers aren’t slowing down – the total value of tax cuts has increased each year since fiscal year 2012, and is slated to go even higher, to nearly $1.7 billion per year in the two-year budget period that starts in July 2017.
Among the tax cuts passed since January 2011, according to the memo:
- A 2013 income tax rate reduction that gave an average tax cut of $1,440 to taxpayers earning over $300,000 but an average of just $86 for taxpayers who earn under $100,000.
New standards will substantially improve public access to important information about budget choices made at the state and local level. Because of the historic changes in accounting standards, state and local governments will soon have to report how much revenue they lose to corporate tax breaks given for economic development.
If you look at a new memo from the Legislative Fiscal Bureau (LFB) that itemizes the tax and fee changes in the biennial budget bill, you wouldn’t know that the net effect of the bill is to cut taxes. The fact that the budget bill does cut taxes isn’t obvious in the latest LFB document for a couple of reasons:
- First, the LFB memo summarizes the state-level tax changes and doesn’t examine the reductions in local property taxes that result from increases in state spending for property tax relief and restrictions on local spending.
- Second, the bill uses short-term tax increases to provide a temporary offset to larger long-term tax cuts (and the latter are beyond the two-year time horizon of the LFB analysis).
Lawmakers included four major tax cuts in the 2015-17 budget, at the same time as they were limiting resources for critically important institutions like the University of Wisconsin system and public schools. When fully implemented, the tax cuts will reduce tax revenue by more than $250 million a year.
Wisconsin lawmakers on the legislature’s budget committee will probably meet this week to make decisions about a proposed income tax cut for high earners and other changes to Wisconsin’s tax system, among other issues. They should keep in mind that new evidence shows that no state that passed large income tax cuts in recent years has seen its economy grow faster than the national average. Read more
Under Proposal to Eliminate the Alternative Minimum Tax, Only Highest Earners Would Receive a Significant Tax Cut
Lawmakers have proposed eliminating Wisconsin’s Alternative Minimum Tax, a change that would give a tax cut to some people with high incomes and exclude nearly all taxpayers with incomes under $100,000. The legislature’s budget committee is likely to vote on the proposal next week. Read more
More evidence is piling up that states that made big tax cuts in recent years – including Wisconsin – are failing to keep up with the rest of the country when it comes to job growth. Read more