Cutting Taxes on Rich, Raising Them for Others Won’t Boost Wisconsin Economy

Tuesday, September 30, 2014 at 3:45 PM by

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. Meanwhile, taxpayers in the bottom 20% would be paying $750 more in taxes on average.

The report urges lawmakers to broaden the base for the sales tax by increasing the number of goods and services subject to tax. While that sounds fairly innocuous, reading the fine print reveals that this includes applying the sales tax to grocery purchases. That’s one of the most damaging tax moves you can make for families with low incomes who are struggling to put food on the table. The report shrugs off the concern, noting that a refundable tax credit could provide tax relief for people with low incomes. That’s fine in theory, but Wisconsin lawmakers have shown little interest in expanding refundable tax credits, choosing to cut them instead.

As for tax cuts, they haven’t been contributing much to job growth in Wisconsin. State lawmakers have passed tax cuts totally nearly $2 billion over four years, but job growth in Wisconsin has been slower than the national average, and the overall size of Wisconsin’s economy has grown slower than the U.S. average as well.

Cutting taxes hasn't improved job growth

Tax cuts haven’t done much to spur job growth in other states either. Lawmakers in Kansas and North Carolina made deep tax cuts, and both states have experienced disappointing levels of subsequent job growth. And as a result of the tax cuts, these states have fewer resources to support investments in public schools, higher education, and a healthy workforce – investments that, unlike tax cuts, have a proven track record for creating jobs.

To construct a strong economy in Wisconsin, we need to create opportunities for everyone to thrive. That means making the kinds of investments in our schools and communities that create shared prosperity and help make Wisconsin a good place to do business and raise families. We can’t create jobs and prosperity for Wisconsin with additional tax cuts, or by raising taxes on most people to pay for tax cuts to the rich.

Tamarine Cornelius

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