Steven Walters
The State of Politics

10 Questions and Answers About Taxes

The April 15 deadline approaches. How will the Walker tax cuts will affect you?

By - Feb 24th, 2014 10:04 am
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By April 15, more than 2.9 million of us will have an intimate moment with the Wisconsin Department of Revenue. By filing our 2013 personal income taxes, we’re sharing 12 months of our financial wins, losses and near-misses.

So pause for a moment, look up from that pile of W2s, the summary of interest paid from your mortgage lender, the stacks of doctor and dental receipts, copy of your property tax bill, and statements of charitable deductions. We will now take your questions about Wisconsin’s individual income tax.

Will I get a bigger refund this year than last year?

Probably. Most taxpayers will get a bigger income tax refund this spring, because Republican Gov. Scott Walker and Republicans who control the Legislature cut income taxes when they passed the state budget last June. But there was no change in tax withholding tables, so you didn’t see that tax cut in your paychecks last year. Instead, you’ll see that tax cut with a bigger refund this spring.

But, hasn’t Walker ordered changes to withholding tables? What’s up with that?

Yes, the governor has ordered the state Revenue Department to revise withholding tables, starting April 1, so less will be taken from your paycheck after that. It’s the first change in withholding tables since 2009.

How much more you’ll see in take-home pay depends on how much you earn. But Revenue Secretary Rick Chandler uses this example: If your total household income is about $80,000 a year, you’ll get an extra $58 per month in take-home pay. That’s the good news.

The bad news? Getting more money in your paychecks will lower your spring 2015 tax refund, although Chandler estimates that three out of every four taxpayers will still get refunds next year. The lower spring 2015 refunds come after the November elections, however. Capitol politicians want you to see more take-home pay before the Nov. 4 election.

I prefer to keep getting the biggest spring 2015 tax refund possible. Can I keep my withholding where it is – and not get more in take-home pay after April 1?

Yes. Chandler said in a WisconsinEye interview that all you have to do is fill out a Department of Revenue form your employer has, indicate that you don’t want your current withholding adjusted, and that request will be honored.

Now that I’ve made a first pass through our tax documents, I see how much our family made last year. What was the average income of Wisconsin income taxpayers in 2012?

According to a State Revenue Department summary, there were 2.94 million income tax returns filed in 2012, and they reported taxable income of $150 billion. The 2.94 million included all categories of filers – married filing jointly, single filers, and heads of households. The average taxpayer’s income was $50,959 in 2012.

But how many taxpayers filed  returns to qualify for the Earned Income Tax Credit that helps low-income single parents, or other tax breaks, and ended up not owing any income taxes in 2012?

Of the 2.94 million filers, 902,240 – or 30.6 percent – had no tax liability that year.

What about those at the top? How many taxpayers reported taxable incomes of more than $1 million in 2012?

The DOR summary said 5,320 taxpayers reported taxable incomes of more than $1 million in 2012 – a 35 percent increase from 2011. Those 5,280 taxpayers reported taxable income that totaled $15.28 billion, or an average taxable income of $2.87 million per taxpayer.

How much in income taxes did those millionaires pay?

About $992 million, or 14 percent of the $6.98 billion in total income taxes paid in 2012. That means each millionaire paid an average of $187,909 in Wisconsin income taxes that year.

All those millionaires paid income taxes, right?

Actually, no. Of the 5,320 taxpayers who reported $1-million-plus taxable incomes, 40 paid no income taxes in 2012.

All this talk about Wisconsin’s “middle class.” How much did they pay in income taxes in 2012?

Let’s define “middle class” taxpayers as those with taxable incomes of between $30,000 and $80,000 in 2012. The DOR report says 947,300 – or about one out of every three taxpayers – reported taxable incomes in that range. They reported incomes that totaled $47.8 million, or $50,480 per taxpayer. And, they paid $1.46 billion in income taxes, or 21 percent of all income taxes collected.

Anything else I should have asked?

You might have asked what was the average amount of taxpayer’s income that was taxed. In 2012, the overall effective income tax rate was 4.6 percent. There, now you can go back to that stack of paperwork.

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

4 thoughts on “The State of Politics: 10 Questions and Answers About Taxes”

  1. Andy says:

    Fun facts!

    Just one question… How was it decided that middle class was $30-80,000? I’m sure that family of 4 living on $90,000 a year don’t feel too rich.

  2. Kyle says:

    Andy – I bet they feel pretty rich with their healthcare subsidy!

    Also, when was it an issue that people want their refund as high as possible? These people are welcome to give some of their money to me every month, and I will give it back – interest free! – early next year, provided they fill out the proper paperwork in a timely manner.

  3. Kevin says:

    Andy,

    There’s not really a good consistent definition of “Middle Class” (which is part of the problem) but 30,000 – 80,000 seems reasonable enough given that it’s about a third of the working pop. and somewhere near the middle of the data set (starting about 2x minimum wage)

    Regarding your hypothetical family of four, I’m sure they don’t feel very rich but in some sense they are. “Rich” is probably not the best word but given that:

    a. A single person can live very comfortably on ~$25k without any direct assistance (assuming a job with decent healthcare included)

    b. Doubling the number of people in a household (going from 1 to 2 or 2 to 4) does not double the cost of living.

    A family of four should be able to afford a nice residence, let their kids do sports and other activities, drive a nice car, go on a nice vacation every year, save a decent amount for retirement, etc. It’s still a far cry from a 4000 sq ft house, driving luxury cars, private schools, and Caribbean cruises every year – that starts to become more of a reality around 120-150k+ but it’s plenty to live a comfortable life where money is a limiting factor but not an active concern.

    It’s also worth noting that many many families of four survive on well under 90k. It might be a stretch to call them rich (especially since 90k is enough to pay a lot of taxes without getting a lot of gov. benefits) but it is certainly “well off” which I would argue takes you above “Middle Class”

  4. Andy says:

    Kevin… I suppose if you consider 30k as middle class, especially for a family, then yes I guess that’s a completely different league than 90k. That being said, I have a hard time calling 30k middle class. So I suppose that’s where our disagreement stems from.

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