This post originally appeared at https://www.badgerinstitute.org/evers-veto-shows-how-flat-income-tax-frustrates-progressive-strategy/

After he kicked millions of taxpayers in the head last week, Tony Evers seemed a little defensive. The Wisconsin governor suggested to an interviewer that if middle-class taxpayers were accidental targets, that was the price of progress.

It was an outstanding, if inadvertent, argument for a single-rate, or “flat,” income tax reform.

What a partial Evers veto in the biennial budget did was to kill 95% of the Wisconsin income tax relief legislators approved. The Wisconsin Legislature had cut tax rates for everyone. Evers vetoed most of the cuts, keeping only what applied to the lower two of four brackets, to income under $36,840 for couples or $27,630 for single taxpayers.

So any couple earning more than $36,840 will see no reduction in the tax on the next dollar they earn. The rate stays at 5.3%, higher than what’s levied on kajillionaires in 27 other states.

Evers previously said he’d deny relief for the 77,000 Wisconsin taxpayers in the top bracket. But it was surprising that he’d stiff-arm the 1.6 million households in the second-highest bracket.

There was some scurrying by Evers’ minions to say that everyone got some relief, on the first $37k earned. True, but take a couple making $150,000 — an average nurse-and-cop household. Republican lawmakers would have given them roughly a 17% break on their net tax, says the Legislative Fiscal Bureau, or over $1,000. After Evers’ veto, they’ll get a $51 tax cut, or 0.8%. Whoo. Hoo.

Collateral damage, collateral benefits and Wisconsin tax brackets

Why did Evers do this? Why did he veto relief for the second-highest (that is, the third lowest) bracket, which includes two-thirds of all those households that owe any income tax at all? Evers explained it to Madison’s WISC-TV: “The third category goes up to $400,000, and to me that is a little bit wealthier than middle class.”  

In other words, lest any tax relief come to a taxpayer earning more than Evers sees fit, working-class taxpayers get cut off. The governor worries less about inflicting collateral damage than he fears granting collateral benefit.

Evers’ problem, he said, was that “the broadness” of the middle-class bracket “is something I could not deal with with a veto.” He hinted that Republicans should “come back with something different.”

Democrat legislators were clearer. Sen. Chris Larson, the Milwaukee progressive who chairs his party’s Senate caucus, said the problem is that Wisconsin has too few tax brackets to properly exclude just the taxpayers Democrats don’t like.

Note to WI Republicans who are mad about the tax cut veto: give us more tax brackets and Dems will gladly create targeted tax relief for people that need it.

There’s no reason a household making $34k and $374k should pay the same tax rate.

— Senator Chris Larson (@SenChrisLarson) July 6, 2023

Larson went on to muse fondly of the 1930s, when Wisconsin had 11 brackets, the better to disproportionately load the price of government onto an electorally feckless minority.

Instead of many people bearing the cost in proportion to their income — a dollar out of 20 earned, as a tax reform suggested by the Badger Institute proposed — Larson openly longed for the power to more carefully calibrate his social engineering, to leave a smaller remainder in the pockets of those earning $300,000, since they’d just “take submarine rides” with the money anyhow.

The fact is, the wealthy already have enough money to buy their yachts and take submarine rides. They don’t need us to further cut public education, healthcare, and public safety for that.

Instead, we can invest in the things that help all Wisconsinites.

— Chris Larson (@ChrisJLarson) July 6, 2023

Had he tried, Larson couldn’t make a better argument for a single-rate reform: A “flat” tax links taxpayers’ fates so that politicians must justify their skim to all the taxpaying public, rather than pacifying enough of them with reasssurances that submarine-riding strangers will cover it for everyone else. A flat reform unites the taxpaying public, while the income redistribution built into “progressive” tax rates divides us into mutually resentful gradations of “rich” and “poor.”

The Evers veto, luck and earnings

It’s telling that Evers, Larson and the rest keep using words like “the wealthy” and “rich” to talk about their targets. The Wisconsin income tax is levied not on wealth that people have saved but on income — what they earn. If you say “rich,” with its implications of inheritance or luck, you don’t have to grapple with how taxes take what someone is working for.

And if you think it’s all luck, you’ll do stupid things such as Evers’ scheme in 2022 to blow most of a billion bucks on sending $150 “rebate” checks to every human in the state, including the 1 million-plus people who didn’t owe that much in income taxes. Clearly, the governor wanted a one-time outflinging of revenue that the state had collected in excess of its own profligacy, so the Wisconsin budget surplus couldn’t be used for sustainable tax reform.

He then settled on demanding that Republicans cut rates — but only for those earning $150,000 or less, splitting the middle-class bracket in at least two. Our theoretical Mr. and Mrs. Cop-n-Nurse, if they work hard and get raises, would move out of the range of relief and onto Evers’ list of resentables.

Presumably this is what the governor now means by “something different.” Republicans would be right to reject such divide-and-ransack tactics. A flat-tax reform looks ever a better idea.

Patrick McIlheran is the Director of Policy at the Badger Institute. Permission to reprint is granted as long as the author and Badger Institute are properly cited.

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