Bruce Murphy
Murphy’s Law

The Truth About State Taxes

They were never lower than under Jim Doyle, as new data shows.

By - Jul 25th, 2013 01:04 pm
Sign-up for the Urban Milwaukee daily email
Jim Doyle

Former governor Jim Doyle.

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.

Categories: Murphy's Law

24 thoughts on “Murphy’s Law: The Truth About State Taxes”

  1. Stacy Moss says:

    Sometimes you get what you pay for.

    All of this hand wringing about taxes is meaningless apart from quality of the services government provides.

    When I moved to the midwest from the South (as a kid) I couldn’t believe the differences in the roads I rode my bike on.

  2. Steve says:

    Stacy,
    Assuming you are talking about city streets: The differences between road surfaces in the Northern and Southern states is directly because of a FAR harsher climate in the Northern states. It’s simply much more expensive to make a road surface that can hold up to ice/snow/salt.

  3. Dohnal(Wis. Conservtive Digest says:

    Ahh, dummies that was the problem. We had sufficient income but spending went way overboard even with the billions that Obama sent him. Now the management is better and we can cut taxes.
    Doyle will always be remembered as a completely inept tax raising manager with no charisma and Walker the opposite, sort of like Bruce Murphy, no charisma or gravitas..

  4. Mike Bark says:

    A few things about taxes that tend to be overlooked:

    - Jim Doyle never really tinkered with the Wisconsin tax code until nearly the end of his term. Then he passed a massive tax increase that saw the top rate jump from 6.75% to 7.75%, the introduction of combined reporting and several other increases. So tax rates and the rest of the code was essentially the same code that he inherited for the vast majority of his tenure.

    - Scott Walker and the Republicans must have essentially agreed with those tax increases because despite having total legislative power the only thing they’ve really done to Doyle’s tax increases is lower the top rate to 7.6% instead of 7.75%. In other words, they’ve kept the vast majority of Doyle’s increases in tact.

  5. tim haering says:

    Nice, column, mein herr. But if our taxes look low compared to other states, it could be that other states’ taxes rose faster than ours. Did WISTAX mention that? I’m just not ready to give Doyle the SEG fund raider any props for anything. MY old boss TGT gave us the 3-Legged Stool, Doyle gave us the SEG Fund Raid. Which is the superior legacy? Even though the legs were never the same length, I’ll take the 3-legged Stool.

  6. mike Bark says:

    Ultimately using the “taxes as an overall % of income” is not a great metric in this analysis because Doyle didn’t impose his will on taxes until his tenure was almost over. So his tax rates were essentially the same as Thompson’s in a time when incomes were still moving up.

    Then he passes a massive tax increase and we’ve been in a period where incomes have been depressed.

  7. Stacy Moss says:

    Steve…..

    I wasn’t clear. When I was a kid the roads in Wisconsin were much better than the roads in the deep south…..

  8. Bruce Murphy says:

    Mike, WisTas also analyzes taxes for each state per capita, but Wisconsin’s ranking was even lower by that metric. And the tax rates take in far more than just the income tax, including various fees, what kind of legislative caps are put on property taxes, spending by municipalities, schools, voc-tech systems, etc. It’s complex, and wouldn’t be accurate to say that Doyle (who served for 6 yrs) simply had same system as under Scott McCallum, much less the same one as under Thompson

  9. Dohnal(Wis. Conservtive Digest says:

    Doyle got into trouble because he spent too much and also got into a recession at en but the fact is that under Doyle, supposedly a friend of education, nothing happened, MPS is much worse. In case you ever read the Wis. Constitution the state is in charge of eduction. he talked education as all the Left does but nothing every happens except the people that vote for the Left get more money.

  10. bruce murphy says:

    Correction, Doyle served eight yrs, long time to measure his impact on relative taxes.

  11. Dave K. says:

    Mr. Dohnal, please be respectful to Mr. Murphy and the other commentators.

    Name calling, bullying, and baiting are not appropriate in a public forum. Clearly you’re an intelligent person, and you’re better than that. I respect your passion for your politics, but as my mom always said, “you get more flies with honey than with vinegar”. Please reconsider your tone.

  12. dohnal(Wis. Conservtive Digest says:

    Oh, the poor dear, how can he possibly handle this milk toast debate. Bruce, I can send you some crying towels? You are more than capable of matching swords with me and the Conservatives with your worn out logic.

  13. bruce murphy says:

    Bob, I’m afraid I’m handicapped in matching swords as I lack charisma and gravitas, not to mention a sword.

  14. Tim says:

    @Dave K., you can’t reason with crazy.

  15. Dave K. says:

    Mr. Dohnal’s rhetoric (or logical fallacies) make me wonder if he’s actually a Liberal troll posing as a conservative. No true believer would cast such a horrible light on their cause. Great Americans like Jefferson, Lincoln, and Reagan used carefully chosen words to be inclusive and to show the power of the pen over injustice and oppression. Reagan himself was a big-tenter and many called him the “great communicator”. Mr. Dohnal’s bluster, insults, tantrums, illiteracy, logical and constant bullying only serve to make “conservatives” look like thugs and bullies and uneducated fools. I’m sure that’s not the image that any conservative organization would want on their vision or mission statements. I’m sure Mr. Dohnal didn’t woo his wife by calling her names or insulting her. I would call on Mr. Dohnal to try to “woo” others to his cause in much the same way.

    Mr. Dohnal, prove to us that you’re a good, and steadfast conservative and use logic, reason, and human kindness to convince us of your arguments. Otherwise I’ll assume you’re a Liberal troll just looking for some attention and a fake fight.

  16. Tim says:

    It’s interesting to note that Dave K. is considering only 2 options when viewing Bob Dohnal’s activity here.

    He’s either a “Liberal troll” or must change his behavior to become a “steadfast conservative”.

    As I’m seeing it, Bob Dohnal is doing nothing out of the ordinary for most “steadfast conservatives” that I’ve met in the last 10 years. Bob Dohnal is no outlier in the conservative movement, most of America sees this (sometimes with pride, sometimes with derision) as the average Joe of the Republican party today.

    Bob Dohnal is not a Republican extremist, he is the base.

  17. Dohnal(Wis. Conservtive Digest says:

    I am far more base than you can imagine, I helped invent the base form 1964 on. As for Murphy, he is so used to dealing with the witless Left that he has little problem dealing with halfwits on right.
    sayonara, going down to Potawatomi to hear one of the best US Senators ever from wis.

  18. Dohnal(Wis. Conservtive Digest says:

    it is interesting to note that the recent changes by Walker on pensions reduced Wisconsin to only 14% underfunded compared to the disasters in all the Leftist states. Il. 241%, conn 190% also Ca underfunded by over 100 billion. Leftwing Politicians vote them selves goodies then laugh at the taxpayers.

  19. hankdog says:

    I have always wondered if dohnal and dave blaska from Madison are twins separated at birth. Both use insults, bluster, bullying and semi- or half-truths in their screeds. But little substance. I voted R up through Bush I and Dreyfuss, respectively. But if those two (dohnal and blaska) represent the base they will never get me back. Their loss.

  20. dohnal(Wis. Conservtive Digest says:

    We do not want you back. To irritate the Left all you have to do is tell the truth.

  21. hankdog says:

    So when are you going to start, Mr./Mrs/Ms dohnal?

  22. dohnal(Wis. Conservtive Digest says:

    Keep tuned!

  23. verycynical says:

    There is a wealth of stuff here to comment on but let me zero in on the statement that the writer would take the three-legged stool of school funding over SEG raiding any day. Oh my goodness … the lack of insight is breathtaking. The three-legged stool was designed to lower property taxes not fund quality education. Over two decades the resources going from the state to public schools — because of the design of the writer’s hallowed three-legged system — fell further and further behind inflation, much less the “cost” of a quality education. By the time Jim Doyle raided the highway SEG fund, his only other choice was to further cut aid to public schools (something he also did, unfortunately). It was left to Scott Walker to raid the pool of resources for our public schools (something legislators never sought to protect like highway funds) to give to the road builders. The three-legged stool of school funding was great politics and theater for the Governor and lawmakers on both sides of the aisles (giving tax breaks instead of school aid) but it was really bad for kids and their public schools.

  24. Dohnal(Wis. Conservtive Digest says:

    Taxes and funding of schools is plenty high in this state, more than triple the rate of inflation. NJ and states that pend more do not have any better schools.
    Taxes are not the problem, the Unions and the Feds are the problem in schools.
    Our education system was fine, teachers were a little underpaid but that was correcting in the 50′s. Then the Union came along. Big problems all the time. Then we get the dept. of education, then the Bush program, then the Obama program, now Common Core. Meantime education achievement decreased. The Unions a gone and so should the Feds. The teachers are forced to teach the tests and do bookwork. We do not need that. We have a lot of great teachers that can rise to the challenge if we let them. Free them from the omnipresent administrators and let them teach kids.
    Break upu the Milwaukee school system, it will never work.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>