Report Finds Tax Shift to State’s Poorest
Since 1980 taxes for bottom 20% doubled while rate for top 1% dropped by 30%.
100 Dollar Bill. Photo by Dave Reid.
While Wisconsin has cut taxes for upper- and middle-income taxpayers over the last decade, low-income residents are paying more in taxes, a new report shows.
The Wisconsin Policy Forum report released Wednesday confirms other analyses of how the tax burden has shifted following a series of tax cuts beginning in 2011, the most recent in the 2021 budget.
“Wisconsin’s income tax remains relatively progressive,” the report states. But the gap between the tax rates for the highest income groups and those with the lowest incomes has been shrinking, making the tax “less progressive over time.”
For the bottom 20% of Wisconsin taxpayers with incomes of less than $8,460 a year, average tax rates have risen from 1980 to 2020, the report states. The tax rate for that lowest one-fifth of taxpayers was about two-tenths of a percent of their incomes 1980; by 2020, the rate had more than doubled to half of a percent — 0.5%.
Meanwhile, tax rates for the top 1% of taxpayers fell to 5.5% from 7.9% over the same period.
Income is becoming more concentrated among the highest-earning state taxpayers, the report finds, and “incomes have risen much more quickly for top earners in Wisconsin.” After adjusting for inflation, the average income of the top one-tenth of 1% in 2020 was four times what it was in 1980. For the bottom 20% of taxpayers, average income in 2020 was less than half what it was for that group in 1980.
A tax cut included in the 2021-23 budget that took effect in July 2021 was the largest of dozens of reductions in state individual and corporate income taxes since 2010, according to the report. The change, which reduced the tax rate for payers in the state’s third income tax bracket to 5.3% from 6.27%, will reduce state tax revenue by $1 billion a year starting in 2022.
And state tax revenues will be $2.7 billion less annually than they would have otherwise as a result of 82 changes — three cuts for every increase — in state taxes for individuals and corporations since 2011. That is equivalent to the general fund budgets of the University of Wisconsin System plus the Departments of Corrections and of Agriculture, Trade, and Consumer Protection for one year.
Report: Taxes fall for most in state, except for the bottom 20% of earners was originally published by the Wisconsin Examiner.
The poorest person in the City of Milwaukee pays more taxes every year than Donald Trump, Bill Gates, Elon Musk, Warren Buffet, and Mark Zuckerberg combined.
Both the report and this article are purposely deceptive by intermixing different definitions of income and then combining the results into one study/article.
The authors of the report provide no source data or tabular data showing their results, instead only cherry picking numbers or percentages to support their point of view. Even the IRS provides this type of tabular data when releasing their annual tax rate analysis (the IRS releases a yearly summary that says the top x % pay x% of the taxes)
Intermixing 2 vastly different definitions of income in these articles & reports is yet another daily example of how politicians & the media consistantly manipulate citizens & voters.
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For those interested…
The authors of the report state multiple times the problem encountered when using “WI Adjusted gross income” for their analysis & calculations. However they make no attempt to analyze, reconcile, or compare their self-admitted skewed results obtained using WI AGI for certain calculations. And then midway through the report the authors stop using WI AGI and switch to using a completely different measurement called “personal income”. then in the later portion they intermix the 2 concepts knowing that only nerds like me will actually read it till the end.
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An easy example of the difference between “personal income” and “WI AGI” is:
husband & wife retired, both collecting $30k / year in social security. And they have $1 million in their retirement account that pays them another $30k a year.
$30k husband social security
$30k wife social security
$30k from retirement account
=$90k PERSONAL INCOME
to get their WI AGI, retirees subtract 4 basic items immediately on page 1 of their WI tax return to suddenly become “poor” and they pay no WI income tax
$90k personal income
-$60k WI doesn’t tax social security
-$7k WI deducts Medicare B & D Premiums
-$21k WI Standard Deduction
-$2k WI personal exemption
=$0 WI AGI
WI DOR website today states that the bottom 20% is WI AGI below $9070.
There is a world of difference between the 2 definitions of income!!! Multi-millionaire retirees are classified in the bottom 20% for most of the report, and there has been a huge increase in retired baby boomers (majority of which have $0 WI AGI) during the specific timeframe of this study, which likely skews the results even more.
it is a shame that the report nor this article didn’t honestly address or provide better explanation of this 1 basic item.
WI DOR income tax statistics can be found here if you’d like to learn more
https://www.revenue.wi.gov/Pages/RA/Individual-Income-Tax-Statistics.aspx
And I guess Ward will say cost of living affects the rich more than the poor and that Republicans haven’t shifted the tac burden away from the wealthy and corporations