More Tax Cuts for the Best-Off Won’t Help Wisconsin Economy
A prominent conservative advocacy group is asking Wisconsin legislators to pass additional tax cuts for the richest residents. New tax cuts for people with the highest incomes would do little to create jobs, and would undermine Wisconsin’s ability to build the strong schools and communities necessary to support a strong state economy.
Wisconsin Manufacturers and Commerce is making tax cuts for the rich a high priority, but state lawmakers have already done quite a bit to cut taxes for people at the top. The top 1% of Wisconsin taxpayers – a group with an average income of $1.1 million – got an average tax cut of $2,518 in 2014, thanks to a combination of three major tax cut packages lawmakers passed in 2013 and 2014. In contrast, taxpayers in the bottom fifth of earners, a group with an average income of $14,000, received an average tax cut of just $48 this year.
The highest earners already pay a smaller share of their income in taxes, on average, than people who earn less. Efforts to lower taxes for people at the top will shift even more of the responsibility for paying taxes to residents who can least afford it. Wisconsin taxpayers in the top 1% of earners paid just 6.6% of their income in state and local taxes, the smallest share of any income group. In comparison, taxpayers in the bottom 20% of earners paid 9.3% of their income in state and local taxes. We should be directing our efforts to keep taxes affordable for people with low incomes, rather than allowing the richest residents to pay an even smaller share of their income in taxes.
WMC is asking legislators to eliminate the top income tax bracket, even though lawmakers already reduced the number of income brackets in 2013, from five brackets to four. Eliminating yet another bracket would have the effect of further reducing the progressivity of Wisconsin’s tax structure. For example, if lawmakers eliminated Wisconsin’s top income bracket, taxpayers earning over $1 million a year would pay the same income tax rate as taxpayers earning $30,000 a year. That’s not a common-sense solution to giving Wisconsin’s economy the boost it needs.
Scrapping the top income tax rate would reduce resources for Wisconsin needs to support investments in the state’s public schools, university system, and education for our youngest residents – investments that help create the building blocks for broad prosperity and a strong economy. WMC estimates that eliminating the top income tax bracket would give a tax cut of $250 million per year to the state’s richest residents, meaning there would be $250 million less in resources available to support Wisconsin’s schools, communities, and families.
With the state already struggling to close a budget shortfall of $197 million in this budget year and $2.2 billion in the upcoming two-year budget period, Wisconsin can’t afford more tax cuts for the best off. The tax cuts lawmakers have already passed to wealthy residents haven’t boosted job creation or the state’s economy, and we shouldn’t be doubling-down on a failed approach.