Governor Walker’s Tax Shift Plan Would Raise Taxes for Most

Thursday, December 19, 2013 at 2:16 PM by

Governor Walker has said he is interested in eliminating the state’s income tax and raising the sales tax to make up for lost revenue, a move that would result in a tax increase for all but the wealthiest taxpayers.

To replace the revenue lost by the income tax, the state sales tax rate would need to be raised to 13.5%, giving Wisconsin the highest state sales tax rate in the nation.

The tax shift endorsed by Governor Walker would mean the bottom 80% of taxpayers would be paying more in taxes – some of them, a lot more. For example, a taxpayer in the lowest 20% by income would pay nearly $750 more in taxes, on average. Taxpayers in the top 1% — a group with an average income of $1.1 million – would receive a tax cut averaging nearly $44,000.

How Would an Income Tax Swap Affect Who Pays Taxes in Wisconsin?

The following table shows the average tax change by income group if the individual and corporate income taxes were repealed, and the sales tax was raised to 13.5% to make up for the revenue loss. The analysis assumes that refundable tax credits aimed at helping low-income individuals would not be eliminated – if those credits were eliminated, then the tax increases for those with lower incomes would be even larger than shown in the table below. The analysis was conducted by the Institute for Taxation and Economic Policy.

Measured in percentage terms, taxpayers with the lowest incomes would pay 5.4% more of their income in taxes under the tax shift, as shown in the chart below. Those with the highest incomes would pay 4.1% less of their income in taxes.

Governor's Tax Shift Plan Would Raise Taxes for Most

There’s a lot we don’t know yet about what the governor plans for the income tax. But one thing is clear: repealing the income tax would mean that all but the wealthiest taxpayers would be paying more in taxes, not less.

Tamarine Cornelius

9 Responses to “Governor Walker’s Tax Shift Plan Would Raise Taxes for Most”

  1. Dave says:

    This is assuming your numbers are actually correct.

    Since you don’t provide a link to the Governor’s plan in your blog article, there’s no way to fact check whether or not you’re simply just making shit up. The only thing you actually credit to the Governor is the first half of the first sentence, and then it’s all just YOUR speculation based on that one sentence.

    • Jon Peacock says:

      I’m sure that other analyses would come to the same conclusions regarding the effects of eliminating the income tax and replacing it with the sales tax.
      If you want to quibble with the analysis because there isn’t a concrete proposal yet, that’s fair. The Governor has floated a trial balloon and at this point it’s ill defined. Depending on the specifics of a plan like this, it might raise taxes for low-income taxpayers less than we described, or it might be even harder on those taxpayers(if it eliminates the refundable tax credits).
      We’ll ask the Institute on Taxation and Economic Policy to update the analysis as more details emerge. We also encourage the Dept. of Revenue to share their own analysis once the proposal is more concrete.
      Our goal is open, informed public debate about budget choices. We don’t think that debate has to deferred until the Governor and DOR open up the closed door meetings they have been holding around the state as they develop their plan.
      Jon Peacock, WI Budget Project director

  2. Leon Breunig says:

    Another one of Walker’s great ideas for the rich.

  3. […] noted by the Wisconsin Budget Project, eliminating the state income tax and raising the sales tax would result in a tax increase for all but the wealthiest taxpayers. To replace the revenue lost by the income tax, the state sales tax rate would need to be raised to […]

  4. Michele says:

    Did the analysis take into account the increase in online shopping, which currently does not collect sales tax (unless the website has a physical presence in the state)? This is a BAD IDEA. I doubt it will fly.

    • Jon Peacock says:

      You raise a very good point. The analysis isn’t a projection of what the effects of such a tax shift would be at some future date. It’s just showing what the effects would be right now — based on current assumptions about income and sales tax revenue. If more sales shift to the Internet and Congress doesn’t allow states to tax those sales (by businesses that don’t have a physical presence in the state), then the shift to low-income taxpayers would be much greater than the analysis calculated. That would also be the case if a large increase in the sales tax resulted in more people making purchases online or in bordering states.

  5. The man is out of his tree. He does not care about any one but him self.

  6. jerry person says:

    Scott Walker remembers creating jobs as assemblyman in Wisconsin . It was easy with ALEC. 32000 UNION public sector jobs. It is not as easy this time with out using your tax dollars. Scott Walker has created ALL Wisconsin`s budget problems working for ALEC. In 1997 Walker and Prosser as state assemblymen championed for ALEC with truth in sentencing telling the legislatures it would not cost a dime it was to give judges not parole boards the control over sentencing. Then Walker filibustered to stop sentencing changes after the fact misleading ALL the legislatures. With out the sentencing changes Wisconsin`s prisons quadrupled over night. Most people sentenced to 2 years now had to serve as much as 6o years. It shows Wisconsin has wasted 100 billion if you add the numbers to the state budget since 1997. Not including the building new or remodeling of 71 courthouses & 71 county jails & 441 police stations and dozens of prisons 28 billion plus interest. The total is over 28 BILLION plus the 60 Billion spent by social services to support prisoners families because the bread winner was a political prisoner as US Att gen Eric Holder explained. Then farming out prisoners in several states until the courts realized it was not allowed in the Wisconsin constitution. Wisconsin then hired 32000 union public sector workers to fill the jobs housing the prisoners from deputies , judges, district attorneys all owe Walker for creating there jobs. 32000 UNION PUBLIC SECTOR JOBS. This cost taxpayers over 3.8 billion or a half million per day to house these EXTRA prisoners per day in Milwaukee county alone. Wisconsin claims it has 24,000 prisoners compared to Minnesota`s 5500. Wisconsin`s corrections population is 104,000 with many in half way house and county jails and county prisons that are not counted.