More to Tax Rankings Than Meets the Eye
WISTAX Study Shows How Major Taxes Here Vary by Taxpayer, Place
MADISON—Wisconsin’s income tax claims a greater share of income than all but 10 of the 41 states with a general income tax, according to federal figures. But, a new study from the Wisconsin Taxpayers Alliance (WISTAX), “State Tax Rankings: Digging a Little Deeper,” finds that rank can actually range from as high as seventh to as low as 33rd, depending on filer income. WISTAX is a nonpartisan, nonprofit organization devoted to public policy research and citizen education.
The Badger State is one of 33 with a graduated income tax; i.e., the tax rate increases with income. Eight states—Colorado, Illinois, Indiana, Massachusetts, Michigan, New Hampshire, Pennsylvania, and Utah—have flat-rate income taxes. Among states with the tax, Wisconsin was one of 10 with the most progressive income taxes in 2010, and recent tax law changes are unlikely to change that in 2014.
Increasing tax rates, a sliding standard deduction, and relatively generous credits for low-income households help explain the varied ranks by income. For example, a married couple with two children earning $20,000 per year would have the 33rd highest income tax burden in the nation. However, that rank rises to 25th at $35,000 and 15th at $50,000. Taxpayers with incomes of $75,000 or $100,000 paid income taxes that were higher than those in most states (seventh and eighth respectively). At higher incomes, the Badger State ranked between 12th and 16th.
Similarly, aggregate property tax figures can mask Wisconsin’s relative position, particularly for homeowners, WISTAX said. U.S. Census Bureau figures show Wisconsin property taxes were 11th highest in 2011. However, for residences, property taxes are as high as fourth. In 2012, property taxes in Milwaukee were $3,846 on a $150,000 home and $7,876 on a $300,000 home. When compared with other large cities in each state, Milwaukee’s property taxes were fourth highest. Moreover, both amounts were nearly double the median (half lower, half higher). For a $150,000 home, the median was $1,959; for a $300,000 home, $4,147.
Examination of property taxes in smaller communities confirms Wisconsin’s relatively high residential property taxes. On a $70,000 home in Rice Lake, taxes were $1,431 and ninth highest among 50 small municipalities throughout the country. On homes valued at $150,000 and $300,000, they were seventh highest. In all cases, taxes here were more than 75% above the median. The income and property tax figures were generated by the Minnesota Center for Fiscal Analysis.
Wisconsin’s Homestead Credit, which eases the property tax burden for low-income households, is excluded from the above calculations. For households with incomes below $8,060, the credit equals 80% of the first $1,460 in property taxes or qualifying rent for a maximum credit of $1,168.
The new WISTAX study also examined sales taxes using figures from a Washington D.C. report. At 5%, Wisconsin’s state sales tax is tied with North Dakota’s as the 33rd highest among the states. When various local sales taxes for all states (primarily the optional 0.5% county tax here) are included, Wisconsin’s sales tax averages about 5.4% and drops to 44th.
The sales tax is somewhat regressive. The 5.6% sales tax in Milwaukee claimed an estimated 3.4% of income in a household earning $25,000. That was slightly below the 3.6% average in the 50 cities studied. At $50,000 and $75,000, the tax claimed 2.0% of income, while at higher incomes it claimed less. At each income level studied, Wisconsin’s sales tax ranked between 30th and 32nd.
A free copy of The Wisconsin Taxpayer magazine, “State Tax Rankings: Digging a Little Deeper” is available by visiting www.wistax.org; emailing firstname.lastname@example.org; calling 608.241.9789; or writing WISTAX at 401 North Lawn Ave., Madison, WI 53704-5033.