The State of Politics: Is Walker Serious About Ending Income Tax? » Urban Milwaukee
Steven Walters
The State of Politics

Is Walker Serious About Ending Income Tax?

It brings in $7.5 billion per year. How would he replace it?

By - Dec 30th, 2013 10:50 am
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Scott Walker

Scott Walker

Republican Gov. Scott Walker says he learned this lesson from the 2011 fight he picked that limited collective bargaining by public employees: First, publicly explain the changes you want to make, and why they are needed. Lay that groundwork before you try to push anything through the Legislature.

In his book, “Unintimidated,” and in many statements, Walker has repeatedly said that in 2011 he acted first and then made his case for the changes. He said that lesson was underscored when even his wife, Tonette, asked him why he was pushing to all but eliminate collective bargaining.

This time, Walker says in year-end interviews, he wants a year of discussion before what could be his next “bold” move, if he is re-elected in November and gets to prepare a 2015-17 state budget: Eliminating the individual income tax, which brings in $7.5 billion a year.

“What would have the biggest impact on the economy?” Walker said in a WisconsinEye interview.

“If you look at the top states across the country, in terms of job growth, consistently they are states that have no income tax, or very low income tax.

There’s a certain amount of appeal to me of just saying, ‘Hey, if they’re doing that, it may not be the only reason, but it’s got to be a major catalyst’.”

Walker also said he is willing to discuss eliminating, or significantly reducing, the property tax that is one of the highest in the nation.

But that’s a much more difficult task, since local governments levy about $10.5 billion a year in property taxes – $3 billion more than personal income tax collections. Credits lower the amount of taxes actually paid by property owners to about $9.5 billion.

Last year, the individual income tax brought in more than half of all general-fund taxes. The general fund is state government’s main checking account; it does not include transportation spending and other specific accounts. But the general fund pays for or subsidizes K-12 schools, local governments, Medicaid health care, prisons, the University of Wisconsin System, other state agencies and tax breaks.

Walker’s goal of wanting to see plans to eliminate a tax that brings in $7.5 billion a year not only introduces a major issue in next year’s race for governor, but prompts many other questions.

*Would the sales tax go up to eliminate the income tax?

Wisconsin’s 5 percent state sales tax brought in $4.4 billion last year, so a 1 percent increase would generate at least $880 million more per year. Wisconsin’s sales tax rate has not been increased since 1982.

Wisconsin has the lowest state sales tax in the region, compared to Minnesota (6.875 percent), Illinois (6.25 percent), and Michigan and Iowa at 6 percent. These rates do not include sales taxes added by local governments; in Illinois, they can drive the total sales tax to 9.75 percent.

In a Dec. 19 statement, the Wisconsin Budget Project, a subsidiary of the Wisconsin Council on Children and Families, estimated that Wisconsin’s 5 percent sales tax would jump to 13.5 percent if the sales tax was increased to offset the entire income tax.

“Simply swapping out the income tax for the sales tax would mean a tax hike for the vast majority of Wisconsinites, without doing anything to boost our economy,” said Budget Project Director Jon Peacock.

*Would some sales-tax exemptions end to eliminate the income tax?

In a February report, the state Department of Revenue estimated the annual cost of dozens of sales tax exemptions, including: motor fuels, $595.9 million; food, $536.9 million; sales to state and local governments and schools, $368.8 million; computer services, $176.4 million; religious, charitable, scientific and educational organizations, $149.5 million, and drugs and medicine, $143.6 million.

Every exemption has its advocates, so trying to eliminate any of them would be unpopular.

*How fair – or progressive – is Wisconsin’s income tax now? Who would be most helped if it were eliminated?

That’s the subject of another column, but here’s one interesting statistic: 31 percent of tax filers owed no income taxes in 2012, but filed to claim the Earned Income Tax Credit or other tax break. So, 69 percent of all tax filers paid all personal income taxes that year.

Some experts question Walker’s goal, saying it may be unrealistic. Says Andrew Reschovsky, an economics professor at UW-Madison’s LaFollette School of Public Affairs: “My starting assumption is that it will be impossible to replace the $7.5 billion of revenue.”

Steven Walters is a senior producer for the nonprofit public affairs channel WisconsinEye. Email stevenscwalters@gmail.com

14 thoughts on “The State of Politics: Is Walker Serious About Ending Income Tax?”

  1. Al says:

    Walker is pathological. He will say anything to get re-elected…

  2. Chris Byhre says:

    Kudos to Walker for looking at more ideas to drive job growth in Wisconsin. I would qualify someone as pathological who would lie over 30 times about his signature policy and the effect it would have on millions of people just to get re-elected, period.

  3. Jake formerly of the LP says:

    ” I would qualify someone as pathological who would lie over 30 times about his signature policy and the effect it would have on millions of people just to get re-elected, period.”

    Proving what Al said- Walker is pathological.

    There is zero evidence that states with lower income tax do better on job growth than other states. In fact, the state with the highest unemployment rate in the nation (Nevada) has no income tax. The only correlation seems to be high levels of people without health insurance (3 of the top 4 states for uninsured have no income tax) and high levels of poverty.

    That might be what bubble-worlders like Chris and Dohnal like (because they think it won’t happen to them and it allows them the chance to feel superior), but it’s not anything I think a whole lot of us in the above-ground world think is a good direction.

  4. Chris Byhre says:

    Actually Jake, as I am sure you are aware, that was a reference to the lie of the year told by Obama. Due to his failed policy we actually have less Americans with health insurance today then we did before this epic boondoggle. Maybe we need to slow things down for you so you can catch up. So there is a ‘bubble world’ and an above ground world? Here I have been just living in the real world, who knew?

  5. Elias says:

    I moved to Wisconsin last year for a job. It blew my mind when I realized it’s amongst the highest income and home tax in the nation! In Cali you pay for the weather and in New York you pay the city lifestyle! No ocean, no mountains, nothing special. I’m single with no kids but willing to work hard and all I see is that they take my money! Yes for no income tax or probably leaving the state and taking my wealth away.

  6. Thomas says:

    Elias… Think about what you’re saying. Sure, leaving with your vast stores of wealth might make you fell better in the short-term, but consider the collateral damages. Not only would you be crippling the state economically by leaving, but you would be crushing the spirits of the people of Wisconsin, who, in the short year you’ve been here, have come to view you as a state treasure. I beg you to reconsider.
    Or just shut your face-hole and get the hell out. I’d be cool with that too.

  7. Steve D says:

    The business people I know understand that it’s not just taxes but what the taxes buy, which in Wisconsin is pretty good value. Unfortunately, it also buys an arbitrary, capricious and malicious regulatory system, which I think annoys them far more. I’ve heard too many stories of people being assured they could do something, then being told later that they couldn’t.

    Civics quiz. Name a state that identifies itself with the Progressive movement. That’s right, Wisconsin. Now name the three great reforms of the Progressive era. Right again, the initiative, referendum and recall. Now name a state that does not have the initiative. The envelope please (drum roll) and the answer is …. Wisconsin?

    Bob LaFolette’s been dead a long time, and Wisconsin is not a Progressive state. Both sides of the political spectrum are reactionary. Conservative reactionaries who don’t want to think further ahead than lunch, and Liberal Luddites. The lunatic fringe has totally owned the debate over mining in Wisconsin since Day One. And NIMBY’s everywhere.

  8. Uber Liberal says:

    We need to raise taxes to 100%.

  9. jake says:

    Higher sales taxes are regressive and would hurt the rest of the 80%. At least income tax is based on just that.

    . Race to the bottom southernizing the state to create more knuckle dragging republican Neanderthals.

  10. jerry person says:

    Watch Reagan call Walker a communist. This shows Reagan would have arrested Walker to end the cold war.
    . http://www.youtube.com/watch?v=HsHXJr8tqP0

  11. Al says:

    LOL, a Daily Show moment, jerry person! Another case where the Republican Party contradicts themselves…on video! Yeah, we thinks Walker is a closet communistic fascist….

  12. Chris Byhre says:

    Or simply a case of Walker looking at a variety of different solutions in an effort to grow business in Wisconsin. Maybe Jerry and Al toe the Dem line on every single issue but it is foolish to assume that others are as closed minded.

  13. jerry person says:

    This is Reagan talking about what Walker d Wisconsin. http://www.youtube.com/watch?v=HsHXJr8tqP0

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