Wisconsin’s Tax System Requires the Least from Those who Have the Most
To build a strong economy and broad-based prosperity in Wisconsin, we need to make sure everyone has the chance to thrive economically. But Wisconsin’s tax system is stacked against people with low and moderate incomes, making it harder for those taxpayers to make ends meet or get ahead. Meanwhile, the very richest Wisconsin residents pay a much smaller share of their income in state and local taxes.
Wisconsin’s middle class, once one of the strongest in the country, is shrinking faster than in any other state. That trend should set off alarm bells for policymakers, who should be using the tax system and other tools to help Wisconsin’s middle class grow and prosper. Instead, lawmakers have created a tax system in which middle-income taxpayers pay a much higher share of their income in state and local taxes than do the very richest taxpayers.
Wisconsin taxpayers in the top 1% by income, who earn at least $399,000 a year, pay $6.20 in state and local taxes out of every $100 they earn, on average. That’s far lower than the $10.20 out of $100 paid by middle-income taxpayers in state and local taxes on average. The share of income paid in taxes by the richest 1% is also much lower than the share paid by taxpayers in the lowest income group, who have incomes of $22,000 or less.
Wisconsin lawmakers should be working to insure that everyone in Wisconsin pays their fair share. But some of their recent decisions have cut taxes for taxpayers with the highest incomes while increasing taxes for others. Examples include:
- A tax cut for capital gains, or profit that comes from the sale of stock, a business, or real estate. Roughly half the value of that 2011 tax cut went to people who earn $200,000 or more.
- A tax increase for working parents trying to lift their families out of poverty. In 2011, lawmakers made deep cuts to the state’s Earned Income Tax Credit, increasing the amount of taxes working families pay.
- A tax increase for taxpayers who struggle with property taxes. Lawmakers have frozen the formula that calculates the value of the Homestead Credit, which benefits people with high property taxes relative to their income. That means the credit loses value each year, fewer people are eligible for the credit, and taxes paid by working-class families and individuals increase.
In Wisconsin, the top 1% is thriving. The share of income going to the top 1% in Wisconsin has reached its highest level ever, with nearly 1 out of every 5 dollars of income in Wisconsin going to the top 1%. Wisconsin’s tax system widens the chasm between the very highest earners and everybody else, contributing to hardships for Wisconsin’s families, communities and businesses. Instead of focusing on tax cuts that largely benefit the highest earners, state lawmakers should turn their attention to measures that could grow the state’s economy and lift families out of poverty, such as increasing the minimum wage and reversing the recent cuts in the state’s tax credits for low-income households.