Wealthiest Wisconsinites Pay Much Lower Share of Their Income in State and Local Taxes
New 50-State Study Provides Detailed Profiles and Comparisons of Tax Systems
Like most state tax systems, Wisconsin takes a much larger share from middle- and low-income families than from wealthy families, according to the fourth edition of “Who Pays? A Distributional Analysis of the Tax Systems in All 50 States,” released today by the Washington-based Institute on Taxation and Economic Policy (ITEP).
Combining all of the state and local income, property, sales, and excise taxes Wisconsin residents pay, the average overall effective tax rates by income group are 9.6% for the bottom fifth of Wisconsinites; 10.7% for the middle fifth: and 6.9% for the top 1%. The full report is online at www.whopays.org.
The report’s findings illustrate why state lawmakers need to be very careful about the effects of new tax proposals on the distribution of state and local taxes. They need to consider the combined effect of all state and local taxes, rather than focusing only on the income tax.
The sort of income tax cut that is currently being discussed won’t provide any assistance to the lower two-fifths of state tax filers, and would disproportionately benefit taxpayers making more than $150,000 per year. Those income tax cuts would make Wisconsin’s state and local tax system even more heavily tilted against low-and middle-income households.
The report notes that two changes made in the last state budget – cutting the Earned Income Tax Credit and ending adjustments for inflation in the Homestead Credit – have increased the share of taxes paid by low-income Wisconsinites. Read more in the Budget Project press release.