Erik Gunn

Business Lobby Wants End To State Income Tax

A higher state sales tax would replace it; cutting taxes for rich, raising them for poor.

By , Wisconsin Examiner - Feb 4th, 2022 12:25 pm
Wisconsin Manufacturers and Commerce. File photo by Riley Vetterkind / Wisconsin Center for Investigative Journalism.

Wisconsin Manufacturers and Commerce. File photo by Riley Vetterkind / Wisconsin Center for Investigative Journalism.

A proposal to replace the state income tax with a higher state sales tax will save the wealthiest Wisconsin residents tens of thousands of dollars while increasing taxes for the poorest, a new analysis concludes.

The analysis, produced for the Wisconsin Budget Project, pegs the average tax cut for the top 1% of the state’s earners at more than $75,000 a year.

The 40% of taxpayers in the state whose incomes are the lowest would not see any tax relief at all, the analysis finds. They would pay, on average, $250 to $450 more a year.

The proposal is “a radical change that would raise taxes on people with the lowest incomes to cover part of the cost of giving huge tax cuts to the wealthy and powerful,” writes Tamarine Cornelius, an analyst for the Wisconsin Budget Project and Kids Forward, in a summary of the findings.

“The plan would result in the largest tax cuts going to white households, with households of color receiving smaller tax cuts or having to pay more in taxes,” Cornelius adds. “The enormous cost of the proposal would make it difficult for the state to provide even basic public services that schools, businesses, and families need to thrive.”

The Wisconsin Budget Project analysis projects the likely impact on state taxpayers of a plan advanced in December to end the state’s income tax and replace it with an 8% sales tax statewide. The analysis was compiled using calculations provided by the Institute for Taxation and Economic Policy in Washington, D.C.

The groups advancing the sales tax hike and income tax repeal include Wisconsin Manufacturers & Commerce, the state’s largest business lobby, along with Americans for Tax Reform, an anti-tax group, and Americans for Prosperity-Wisconsin, a pro-corporate, anti-government organization. In announcing the proposal, they have described it as providing “massive middle class and small business tax relief.”

The Wisconsin Budget Project analysis, however, finds that the vast majority of savings don’t go to middle-class taxpayers, but instead to the top 1% of taxpayers.

That group, with incomes starting at $603,000 a year and averaging $1.7 million a year, would get an average tax cut of 4.7%, or $78,122 a year, the analysis finds. That average tax cut is more than the annual incomes of 60% of Wisconsin residents.

The middle 20% of the population, people with incomes from $44,000 to $74,000, would see their taxes drop by $357 a year on average, or less than 1% of their income.

Taxes for the poorest 20% of the population would rise by $460 a year on average, or 1.7% of their income. For the second poorest 20%, taxes would go up $250 a year, or a little less than half of 1% of their income.

The plan becomes more advantageous at higher incomes, cutting taxes by 1.6% of the incomes of people in the second-highest 20% of earners, whose incomes are between $74,000 and $117,000.

The gap between how the proposal affects white people and how it affects people of color is largely because on average white people’s incomes are higher than those of other racial and ethnic groups, Cornelius told the Wisconsin Examiner.

But it also reflects differences in shopping patterns across demographic groups, which would in turn change their likely sales tax burden as a result of the higher sales tax, she said. And it reflects demographic differences in who takes the state’s earned income tax credit. The analysis assumes that the credit, which is associated with the income tax, would be eliminated along with the income tax itself.

Even as the plan would make poorer residents pay more, it would cut state revenues by $5.3 billion, “forcing the harmful elimination of entire categories of services that make Wisconsin an attractive place to live, work, and do business,” Cornelius writes. The revenue reduction is more than the combined cost of the state’s prison system, the Wisconsin technical college system and BadgerCare, the state’s health care program for low-income people, she observes.

New analysis: Lobbyists’ tax proposal helps the rich most, raises taxes for the poor was originally published by the Wisconsin Examiner.

7 thoughts on “Business Lobby Wants End To State Income Tax”

  1. GodzillakingMKE says:

    WMC is a terrible organization with horrible people running it.

  2. sbaldwin001 says:

    Two points:

    1) This needs to be examined by a more independent group if it is to have any credibility.

    2) The State of Kansas tried something similar to this in 2012. The results were disastrous, and state taxes were reinstated in 2017. Economic analysis after the “experiment” showed that it harmed growth when compared to previous years. Worse, the state missed critical payments and its credit was downgraded. Infrastructure, education, health care all suffered. (See Wikipedia – Kansas Experiment).

  3. NieWiederKrieg says:

    If you’ve ever wondered what a Ku Klux Klan rally looks like when all the members gather without hoods and robes to hide their identities, check out this leadership and staff photo of the Wisconsin Manufacturers and Commerce….

  4. Ryan Cotic says:

    Sounds like a good plan worth exploring to see if this would encourage economic growth in the state. Hard to say if this would actually work though in practice.

  5. gerrybroderick says:

    Ryan. Read #2.

    Nothing like a state totally dependent on a sales tax to further subvert the well-being of the poor. The Manufacturers Association’s board meetings are little more than latter-day Bund meetings. I can’t help but wonder how much their membership has donated in support of our own American Fuhrer.

  6. Thomas Williams says:

    Had to reread this! Was at first concerned it was trickle down economics but then realized it wasn’t! No this is flood UP economics!! Poor people spend money foolishly on food, housing, and necessities! This is of little use to those marketing and buying luxury autos, vacations, and the ever lovely McMansion! The WMC just can’t abide either the idea of communal responsibility or that they and their members receive any benefit from government like police, fire protection, public education, etc. it’s so hard to take them seriously but we need to do so as proposals like this aren’t just dumb and based on greed they are dangerous. Peace TW

  7. Mingus says:

    These alleged :”tax breaks” end up with the poor and the middle class with fewer services with cuts in schools and local government workers while having to pay for increased school fees and charges for recreation and quality of life programs. Many of the residents in rural areas will vote for the legislators who support abolishing the income tax so that can be assured that they can keep their guns and can defend their families from the mythological bad guys

Leave a Reply

You must be an Urban Milwaukee member to leave a comment. Membership, which includes a host of perks, including an ad-free website, tickets to marquee events like Summerfest, the Wisconsin State Fair and the Florentine Opera, a better photo browser and access to members-only, behind-the-scenes tours, starts at $9/month. Learn more.

Join now and cancel anytime.

If you are an existing member, sign-in to leave a comment.

Have questions? Need to report an error? Contact Us