State Tax System Increases Inequality
Top 1% got tax cut of $10,015, bottom 20% got just $175.
Lawmakers in Wisconsin have only made this problem worse by giving massive breaks to special interests while forcing cuts to things that benefit all of us, like education and clean air and water. As a result, low- and middle-income families in Wisconsin pay a bigger share of their incomes in state and local taxes on average than the wealthiest households. Our tax system requires low-and middle-income families to pay between 9 and 11 cents out of every dollar they earn in state and local taxes—yet the wealthiest households pay just 7.7 cents out of every dollar of income on average, the lowest of any income group.
Wisconsin’s middle class, while still one of the largest in the country, is shrinking. Most of the loss occurred as people fell out of the middle class to the lower income tier, rather than climbing into the upper tier. That trend should set off alarm bells for state policymakers, who should be using the tax system and other tools to help people work their way up the economic ladder, not just help those already at the top.
A Wisconsin Budget Project analysis shows that taxpayers in the top 1% could expect an average tax cut of $10,015 in 2017 from recently-approved state tax cuts, compared to just $175 for taxpayers in the lowest 20% of earners. That means that the top 1% got a tax cut 57 times larger than the earners in the lowest income group, and that the top 1% saved more on taxes each week than the lowest income group saved over the course of the entire year.
Even though many manufacturers and other corporations already pay little or nothing in income tax, Wisconsin lawmakers are further twisting the tax system by approving public payouts that involve actually sending checks to corporations. For example, Foxconn is set to benefit from up to $4.5 billion in tax breaks and spending from state and local governments, a large portion of which takes the form of refundable tax credits. (For more, see More than $1 billion of Foxconn Payout Has No Direct Connection to Job Creation.)
In Wisconsin, the top 1% is thriving, with their share of income reaching near record levels. 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, and holds corporations accountable to pay their fair share. Instead of looking for new ways to cut taxes for corporations and people with the highest incomes, state lawmakers should turn their attention to making investments that help Wisconsin communities and families thrive.