Proposal Cuts Taxes for 1%

A group of big business lobbyists is pushing a radical change to Wisconsin’s tax structure — one that would give huge tax cuts to the wealthy and powerful while shifting the responsibility of paying taxes to people with lower incomes. The change would also require significant cuts to the critical services that Wisconsin businesses, schools, and communities need to thrive. This one-two punch would make it more difficult for Wisconsin families to get by, while funneling additional resources into the pockets of the top 1%.

The powerhouse behind this proposed change is Wisconsin Manufacturers & Commerce, an influential lobby group that has been successful in loosening environmental safeguards, making it more difficult to qualify for unemployment benefits, and implementing tax loopholes for manufacturers.

WMC wants Wisconsin to increase the state sales tax to 8%, making it the highest of any state, and eliminate the state income tax, which is the state’s single biggest source of revenue. This extreme proposal would dramatically reshape who pays taxes, give huge tax cuts to the top 1%, and require people with lower incomes to make up the difference.

The sales tax and the income tax have very different characteristics. The sales tax is regressive, meaning that people with lower incomes pay a higher share of their income in that tax. In contrast, Wisconsin’s income tax is progressive, meaning that people with higher incomes pay a higher share of their income in that tax. Because of these characteristics, increasing the sales tax and cutting the income tax results in a tax shift that burdens  people with lower incomes, giving people at the top big tax cuts.

The top 1% in our state already pay a much lower percentage of their income in state and local taxes than other Wisconsinites. The new tax shift plan would further skew the tax system in favor of the wealthy and would widen the growing economic divide in Wisconsin.

This isn’t the first time this proposal has been floated. Back in 2013, then-Gov. Scott Walker considered the idea of eliminating the income tax and raising the sales tax to make up for the lost revenue. The 2013 proposal was a little different than the current one, but we can still take lessons from what we learned back then. The Wisconsin Budget Project, the initiative that I lead, conducted an analysis that found that people in the top 1% would have gotten an average annual tax cut of $44,000 from the 2013 proposal. In contrast, people with the lowest incomes would have wound up paying $700 more in taxes. On average, 80% of Wisconsin residents would have paid higher taxes.

Back then, Walker didn’t push the idea after it became clear that eliminating the state income tax would radically reorder our tax system in favor of the extremely wealthy. But the idea has returned, and with an additional damaging twist: the latest proposal doesn’t replace all of the revenue that would be lost by eliminating the income tax. Instead, it  pairs a tax shift with an enormous tax cut, one that would strip billions from kids’ classrooms, our health care system, and public infrastructure — the very things that Wisconsin businesses and families need to succeed.

Increasing the sales tax to make up for a cut in income taxes moves the responsibility for paying taxes away from the rich and powerful, and onto the backs of people with low and moderate incomes. We can’t create broad-based prosperity for Wisconsin by raising taxes on the families who can least afford it, just to pay for tax cuts for the rich.

Change backed by business group would cut taxes for the top 1% was originally published by the Wisconsin Examiner.

Tamarine Cornelius is a research analyst at the Wisconsin Budget Project