Tax and spending rankings: Test your knowledge with our quiz

Tuesday, August 10, 2010 at 2:00 PM by

The Wisconsin Budget Project recently analyzed the new U.S. Census Bureau data (from fiscal year 2008) regarding state and local revenue and spending, and we prepared a short paper showing the rankings and how they have change since 2000. We also prepared an updated version of our tax and spending quiz about how Wisconsin compares to other states.

Before you read any further, please take a look at the quiz and see how many of the 8 multiple choice questions you can answer correctly!

Anyone who gets at least 7 of the answers right wins a one-year free subscription to our Revenue Matters e-newsletter!! (If you miss two or more, you win a free lifetime subscription to Revenue Matters!)

If you got many of the answers wrong, you have plenty of company. Although fiscal year 2008 was the third straight year that per capita taxes and spending in Wisconsin were both below the national average, that story has yet to seep into public consciousness. There are a number of reasons why few people seem to know that per capita spending in Wisconsin is well below the national average:

1) Lingering impressions from the past – Wisconsin has had relatively high spending and taxes at times in the past, especially when taxes are measured relative to income (see below). However, those rankings have dropped significantly over the last decade. For example, Wisconsin ranked 12th in per capita direct general spending in 2000, but declined to 22nd in 2008.

2) Lower income in Wisconsin –The revenue and spending ranks for Wisconsin rise quite a bit when the figures are computed relative to income, because per capita personal income in Wisconsin averages about 6 percent less here than the national average. Thus, even though our state is 1 percent below average and ranks 17th on total state and local taxes per person, Wisconsin climbs to 13th and 5 percent above average in taxes relative to income.

3) Relatively high property taxes and income taxes – The taxes that people notice the most are income and property taxes, particularly the latter, and Wisconsin is above average in both of those categories. Wisconsin’s property tax was 16.6 percent above the national per capita average in 2008 (ranking 12th) and 23.6 percent above average in property taxes relative to income (ranking 8th). Wisconsin was considerably below average in the revenue sources that people notice less, such as sales taxes and fees.

4) Differences between the tax and spending rankings – Regardless of whether one is looking at a per capita measure or a comparable measure relative to income, Wisconsin’s spending rank will be much closer to average than the tax measure. That’s because Wisconsin ranks much higher in taxes than it does for other sources of state revenue that go into spending, such as fees and federal revenue. For example, Wisconsin ranked 46th in federal revenue last year.

5) Selective omission of the facts – A balanced look at the data indicates that Wisconsin’s revenue collections and spending are pretty close to average (and slightly below average measured on a per capita basis). However, conservative groups focus almost exclusively on the measure where Wisconsin ranks the highest – taxes relative to income. There is often little or no reference to Wisconsin’s spending ranking or to the state’s below average per capita taxes. By omitting or downplaying those facts, conservative groups lead people to infer incorrectly that Wisconsin is a high spending state.

We think it is important to provide a more comprehensive and balanced perspective on how government financing in Wisconsin compares with other states. That said, we also have reservations about focusing more attention to the rankings because they don’t get at the key issue – is our money being used wisely and effectively. We don’t know any objective way to measure that, but it might be worth noting that in a recently released Gallup poll, Wisconsin tied for 16th highest is an index of “wellbeing.”

To see more detailed statistics on state and local taxes and spending, see the issue brief on the Wisconsin Budge Project’s website.

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