Income tax

Proposal to scrap Wisconsin income tax would blow $9.3 billion hole in state budget

Already a failure in Kansas, the idea would cut a huge chunk — last year, 46% — of what the state uses for schools, roads, medical assistance and vital services.

A Republican-drafted proposal to phase out state income tax would further tilt Wisconsin’s tax system in favor of rich and hungry essential services like public schools and medical assistance over time, despite its author’s claims that the proposal is an economic boon, according to an analysis by the progressive Wisconsin Budget Project.

Sen. Roger Roth (R-Appleton) recently began rallying co-sponsors for legislation that would reduce state income tax whenever the state brings in more revenue than expected, and he doesn’t. there would be no mechanism to increase income tax to compensate for shortfalls. , ensuring that the tax would eventually be eliminated.

“Wisconsin instituted the oldest income tax in the nation, but now is the time for fundamental tax reform that promises to transform our state’s economy,” wrote Roth, who also recently announced his candidacy for the position of lieutenant governor. other legislators looking for co-sponsors.

Roth’s office did not respond to a request for comment from UpNorthNews.

Without income tax or some way to make up for the shortfall, Wisconsin could lose billions of dollars every year. According to Department of Revenue. A similar proposal by former Gov. Scott Walker would have raised the state sales tax from 5.5% to 8% to offset some of that revenue shortfall, but Roth’s legislation does not include such a provision.

Income tax accounted for 46% of Wisconsin’s tax revenue in 2021. (Screenshot, Wisconsin Department of Revenue)

“It would starve the state of resources, and the resources we had would then be disproportionately paid for by people who can’t afford them,” said Tamarine Cornelius, director of the Budget Project.

Under Wisconsin’s current tax system, the top 20% already pay less as a proportion of their income than the bottom 80%, according to an analysis by the Institute on Taxation and Economic Policy (ITEP), a left-wing think tank.

For example, the top 1% of households, who earn $512,600 or more a year, pay an average of 7.7% of their income in taxes, according to ITEP. The bottom 80% pay between 10.1% and 10.6% of their household income.

Income tax is what is called a progressive tax, ie the more money a person earns, the more this tax is applied as a percentage of his income. A sales tax is regressive because it applies equally to everyone, making it a bigger burden on people with less money to spend.

Eliminating Wisconsin’s income tax would make those disparities even greater, Cornelius said, because it would eliminate the state’s only progressive tax.

“Already, [the rich] are not paying their fair share,” she said. “Well, that would energize that.”

Main Street Alliance, a progressive small business advocacy group, said it opposes the elimination of state income tax because it would require substantial cuts to essential government services.

“Fundamentally, small businesses depend on these services — having an educated workforce, having these essential government services,” said Shawn Phetteplace, Midwest regional manager for Main Street Alliance.

Nine other states have no income tax. Some, like Florida and Nevadaare driven by massive tourism industries.

But in Kansas, for example, a sharp cut in income taxes — with the goal of eliminating the tax altogether eventually — resulted in huge budget shortfalls for roads, bridges, and schools, and the government-controlled legislature. the Republicans repealed the cuts only a few years after their first promulgation. Cornelius and Phetteplace said they fear a similar disastrous outcome in Wisconsin.

“We are not in Florida. We are not Texans. We have some tourism, but not enough to be able to realistically make a state income tax repeal work,” Phetteplace said.