The Truth About State Taxes
They were never lower than under Jim Doyle, as new data shows.
Poor Jim Doyle. Never Mr. Excitement as a governor, he was the sort of charisma-challenged chieftain even Democrats had trouble getting excited about. In the 2010, as Wisconsin was getting ravaged by the Great Recession, Scott Walker and the Republicans swept to power by pounding on him mercilessly, though he wasn’t the opposing candidate.
The GOP caricature of Doyle of course included the idea that he was taxing us to death and running up a structural deficit, but the latest figures from the Wisconsin Taxpayers Alliance remind us once again that this was not the case. Indeed, the record suggests that taxes in Wisconsin were lower under Doyle than under any governor in the last five decades, as compared to other states. It remains to be seen how Walker will do in that regard.
The Taxpayers Alliance loves to tracks Wisconsin’s ranking in state/local taxes compared to other states, and for almost forever this state was in the top ten. Going all the way back to 1963, when the state first adopted a sales tax, Wisconsin had consistently ranked in the top 10, in every year except 1980 and 1968.
One of the peak levels of taxation came under Republican Gov. Tommy Thompson, who increased taxes to the point that they took 13.1% of personal income in Wisconsin in 1996, when the state ranked 3rd in taxes nationally. The state still ranked 4th when Thompson left office.
Under Doyle, the state’s ranking dropped all the way to 14th in 2007, virtually unheard of in Wisconsin, and taxes dropped to a low point of taking 11.2% of personal income in 2009. As the most recent WisTax figures show, that went up a bit by Doyle’s last budget year, 2010-2011, or Fiscal 2011, when state-local taxes took 11.8 percent of state residents’ personal income, and Wisconsin ranked 10th among the states.
Dale Knapp, a researcher for WisTax, says he doesn’t expect major changes in this ranking for Walker’s first two budget years. “You may see a small change,” he predicts. “The only change was that property taxes were flat and my guess is that they were going up nationally.’
But that’s only an educated guess. The rankings can surprise because they are not just about this state’s fiscal discipline but about how we compare to other states. Knapp expects the state’s ranking to improve for FY 2014 (2013-2014), mostly due to income tax cuts in Walker’s last budget, but that ranking won’t be compiled till probably 2016.
I should note that these rankings have always been misleading, in that they don’t include all fees and revenue collected by state and local governments. Wisconsin has no toll roads while Illinois gouges people with its tolls. This state also has lower fees for things like garbage collection, sewers and university tuition. When all taxes and fees are considered, Wisconsin collected 15.2 percent of personal income, slightly above the national average of 15 percent for all the states. When you consider that Wisconsin has generally ranked near the bottom among states in federal funding (even before Walker turned down considerable federal funding), it suggests that state spending here is right at the national average.
Another way of measuring this is to look at total state-local spending. The WisTax figures show the 2011 state/local expenditures per person were $8,351 nationally and almost exactly the same, $8,383 in Wisconsin.
So why the constant drumbeat that Wisconsin overspends compared to other states? The WisTax rankings help beat the drum. (The organization’s website claims it promotes “good government” but “cheaper government” might be more accurate.) Perhaps most important in beating the drum has been the media, which loves rankings, along with talk radio and Republicans. Thompson, memorably, used the state’s ranking to tar Democrat Tony Earl as “Tony the Taxer,” but Tommy the Taxer drove spending and taxes far higher. Yet Democrats typically let Thompson get away with his absurd insistence he was a fiscal conservative. Had he been a Democrat, Republicans would have accused him of socialism.
The reality is that there was never much difference between Republican and Democratic governors when it came to government spending. Since the early 1960s, the most fiscally conservative governors were Republican Lee Dreyfus and Democrat Jim Doyle.
Walker may change our rankings history with his latest budget. On the other hand, his last budget undermined most of the early progress he made in reducing the state’s long-term “structural” or GAAP deficit, as I’ve previously noted. The reality is that government services cost money and the main difference between the two parties has been which services they spend on.
More on Detroit vs. Milwaukee
City Budget Director Mark Nicolini offered me yet more thoughts on how Milwaukee differs from Detroit:
-Prior to going bankrupt, almost all of Detroit’s debt had fallen to junk status, whereas Milwaukee’s is AA with a “stable” ranking.
-From 2008 through 2012, Detroit’s expenditures exceeded revenues by an average of $100 million annually. Detroit deferred payments of items like the pension fund by $103 million in the last year alone and its unrestricted deficit was $327 million by the end of 2012. Milwaukee has deferred no pension payments, actually has a surplus and has done no long-term operational borrowing.
-Detroit’s general obligation debt per capita is $12,358 per capita or about 10 times higher than Milwaukee’s $1,272.
I could go on with Nicolini’s figures but will save that for a special, accountants-only edition of Murphy’s Law. In the meantime you’ll find a lively discussion on the Detroit vs. Milwaukee issue in the comments after my last column.