Wealthy Get Best Deal From State Taxes
The one percent pays 6.2% of income in taxes, middle class pays 10%.
Wisconsin is a better place when we all do well. Unfortunately, while the wealthiest have seen their incomes skyrocket in recent decades, incomes have stagnated for the middle class and those who struggle hardest to make ends meet. It’s becoming harder to make it to the middle class and stay there.
Wisconsin’s state and local tax system, like the tax systems in most states, makes this problem worse. If you look at who pays taxes in Wisconsin, it turns out that middle-class and low-income families pay a bigger share of their incomes in state and local taxes than the wealthiest households in the state. We call on financially-stressed families to pay 8.9 cents out of every dollar they earn in state and local taxes, while the wealthiest households pay just 6.2 cents out of every dollar of income. And many corporations pay little or nothing in income 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 people work their way up the economic ladder. Instead, lawmakers have cut back on two tax credits that help struggling families climb into the middle class.
State spending on both the Homestead Credit, which caps property taxes for people with low incomes, and the Earned Income Tax Credit, which boosts tax refunds for working families with children, is projected to drop by more than 20% between 2011 and 2016. That’s because lawmakers made changes to those credits that reduced credit amounts and increased the amount of taxes paid by Wisconsin residents with low incomes – at the same time that lawmakers were passing tax cuts slanted towards the highest earners.
In Wisconsin, the top 1% is thriving, with their share of income reaching its highest level ever. We need to make sure our tax system doesn’t give the top 1% an additional advantage at the expense of taxpayers of more modest means. Instead of looking for new ways to cut taxes for people with the highest incomes, state lawmakers should turn their attention to measures that put a little more money in the pockets of families trying to make ends meet. Reversing recent cuts in the state’s tax credits for low-income households would be a good start.