{"id":16825,"date":"2025-06-19T20:18:04","date_gmt":"2025-06-19T20:18:04","guid":{"rendered":"https:\/\/wifamily.news\/?p=16825"},"modified":"2025-06-19T20:56:31","modified_gmt":"2025-06-19T20:56:31","slug":"much-to-like-in-republicans-tax-plan","status":"publish","type":"post","link":"https:\/\/wifamily.news\/?p=16825","title":{"rendered":"Much to like in Republicans\u2019 tax plan"},"content":{"rendered":"

This post originally appeared at https:\/\/www.badgerinstitute.org\/much-to-like-in-republicans-tax-plan\/<\/a><\/p>\n

But part should be jettisoned, and we need to keep working toward flat tax<\/em><\/h4>\n

The best part about legislative Republicans\u2019 proposed tax measure<\/a> is that it really does cut taxes in a reasonable way for a lot of Wisconsinites, says an authoritative observer of states\u2019 tax reforms.<\/p>\n

\n
\"\"<\/figure>\n<\/div>\n

The proposal, approved<\/a> by the Legislature\u2019s budget-writing Joint Finance Committee on June 12, would raise the upper limit<\/a> of the personal income tax\u2019s second-lowest bracket, meaning the tax rate on a lot of income would fall from 5.3 percent to 4.4 percent.<\/p>\n

The move, said the Tax Foundation\u2019s Katherine Loughead<\/a>, \u201cis a relatively well-structured way to provide relief for lower- and middle-income Wisconsinites.\u201d<\/p>\n

Currently, Wisconsin\u2019s marginal tax rate rises<\/a> from 4.4 to 5.3 percent at $39,150 of taxable income for married couples. That break point would rise to $67,300. For single people, the break point now is $29,370. It would rise to $50,480.<\/p>\n

As relief, the cut works well, said Loughead, because Wisconsin hits moderate incomes with relatively harsh rates. Of the 41 states with income taxes, 30 charge a lower rate than Wisconsin does on single taxpayers earning $30,000 in taxable income, said Loughead. That includes Illinois, Iowa and Michigan.<\/p>\n

\u201cA large number of lower-income Wisconsinites are currently exposed to Wisconsin\u2019s second-highest rate,\u201d said Loughead, who is research manager at the Tax Foundation\u2019s Center for State Tax Policy.<\/p>\n

The bracket change also means lower rates on a portion of the income of everyone earning more than the new upper boundaries: For every taxpayer, the tax on the 40,000th dollar earned would fall from 5.3 percent to 4.4 percent, no matter how much her total income is.<\/p>\n

As a result, the change would mean lower taxes for about 70 percent of married couples and about 51 percent of all taxpayers in Wisconsin, the nonpartisan Legislative Fiscal Bureau estimated<\/a> Wednesday. The average married couple would see a $230 tax cut. Among all other taxpayers, the cut would average $143.<\/p>\n

\u201cThere are plenty of benefits there for Wisconsinites across the board,\u201d said Loughead.<\/p>\n

She has less admiration for the other big provision passed by the JFC: exempting the first $24,000 of retirement income earned by an individual 67 or older.<\/p>\n

The measure was touted by Republicans as making Wisconsin less unattractive to retirees, to encourage them \u201cto stay and watch their grandkids grow,\u201d Rep. Mark Born (R-Beaver Dam) said<\/a>.<\/p>\n

It\u2019s well-intended, said Loughead, but \u201call tax policy decisions come with trade-offs.\u201d<\/p>\n

\u201cExempting a greater portion of retirement income would make it more difficult to reduce income tax rates for all Wisconsinites,\u201d she said.<\/p>\n

Indeed, while the exemption is available only to residents, it\u2019s available to new residents who may well have spent their working careers elsewhere.<\/p>\n

And it suffers from the flaw of every favor for a favored group: \u201cEvery dollar of revenue that is foregone in offering exemptions to a small subset of the population is a dollar of revenue that has to be generated from someone else,\u201d she said.<\/p>\n

On this count, Loughead said, Wisconsin did well to skip some ideas circulating earlier in the budget season, such as exempting tips. Such provisions \u201ccarve up the tax base,\u201d she said. Exempting tips works well for a waiter earning $30,000, for instance, but isn\u2019t much use for a janitor earning the same amount, none of it as tips.<\/p>\n

Far better, she said, to do broad rate reductions or to make Wisconsin\u2019s income-linked standard deduction phase out at a higher income. Wisconsin\u2019s personal exemption of the first $700 of income isn\u2019t adjusted for inflation, \u201cso it\u2019s lost a lot of its real value over time.\u201d<\/p>\n

The tax measures aren\u2019t yet locked in. The budget approved by the Joint Finance Committee progresses to a Senate where Republicans hold only an 18-to-15 majority. Sen. Chris Kapenga of Delafield has signaled opposition<\/a> to the overall budget bill, while Steve Nass of Whitewater expressed dissatisfaction<\/a> with it. Gov. Tony Evers, whose previous use of line-item vetoes to dramatically change bills<\/a>, is widely distrusted by lawmakers. It is unclear he\u2019ll sign a budget that can pass the Legislature.<\/p>\n

Wisconsin did dodge a bullet when lawmakers early on rejected Evers\u2019 proposal to raise the top income tax rate still further. Wisconsin\u2019s top rate, 7.65 percent, already is the 10th-highest top rate<\/a> among states and hasn\u2019t been cut in years even as lower brackets have been. Evers proposed adding a new rate of 9.8 percent on incomes over $1 million.<\/p>\n

As with the existing top rate, the still higher bracket would disproportionately hit<\/a> income earned from \u201cpass-through\u201d businesses, such as LLCs or family-owned firms, that form the bulk of businesses in Wisconsin, including the backbone of the state\u2019s manufacturing sector.<\/p>\n

Evers\u2019 higher bracket would have been swimming against the tide, said Loughead: Since 2021, 24 states reduced income tax rates, including Wisconsin, but Wisconsin is one of the few not to reduce its top rate. And \u201creducing the top marginal rate is the most likely to promote growth, compared to reducing lower marginal rates,\u201d she said.<\/p>\n

A few states \u2014 New York and Massachusetts, for instance \u2014 have raised rates, Loughead said, but that\u2019s because plans for higher spending left them short of money. \u201cWisconsin has an abundance of surplus revenue on hand,\u201d she said, and has no need to hit small or medium-sized businesses with a 9.8 percent rate \u201cthat would make the state much more like Minnesota<\/a>.\u201d\u00a0\u00a0<\/p>\n

A missed opportunity: Despite hopeful talk last session and this, the Legislature took a pass on adopting a \u201cflat\u201d income tax, in which all taxpayers pay the same rate. Wisconsin\u2019s favorable fiscal picture makes such a reform readily available<\/a>, and research, including some specific to Wisconsin<\/a>, shows it would have substantial benefits for Wisconsinites\u2019 prosperity. Fourteen states have a single-rate system<\/a>, including Illinois and Iowa, with six states enacting a flat-tax system in the past four years.<\/p>\n

It\u2019s a competitive environment that raises the stakes for what Wisconsin chooses to do.<\/p>\n

\u201cUltimately, a lot of high-income taxpayers are voting with their feet<\/a>,\u201d she said. \u201cThey are moving away from high income tax states, moving their businesses away from high income tax states toward states that have either no income tax at all or lower and flatter, more reasonable income tax structures.\u201d<\/p>\n

Patrick McIlheran is the Director of Policy at the Badger Institute.<\/em><\/p>\n

Any\u202fuse or reproduction of Badger Institute articles or photographs requires prior written\u202fpermission.\u202fTo request permission to post articles on a website or print copies for distribution, contact Badger Institute Marketing Director Matt Erdman at\u202f<\/em>matt@badgerinstitute.org<\/em><\/a>.<\/em><\/p>\n

Submit a comment<\/h2>\n

\t\t\t\t#wpforms-55718.wpforms-block-b90bfbb9-2e14-4755-923c-1f87bbd29d36 {
\n\t\t\t\t–wpforms-button-background-color: #9e1b2f;
\n–wpforms-field-size-input-height: 43px;
\n–wpforms-field-size-input-spacing: 15px;
\n–wpforms-field-size-font-size: 16px;
\n–wpforms-field-size-line-height: 19px;
\n–wpforms-field-size-padding-h: 14px;
\n–wpforms-field-size-checkbox-size: 16px;
\n–wpforms-field-size-sublabel-spacing: 5px;
\n–wpforms-field-size-icon-size: 1;
\n–wpforms-label-size-font-size: 16px;
\n–wpforms-label-size-line-height: 19px;
\n–wpforms-label-size-sublabel-font-size: 14px;
\n–wpforms-label-size-sublabel-line-height: 17px;
\n–wpforms-button-size-font-size: 20px;
\n–wpforms-button-size-height: 48px;
\n–wpforms-button-size-padding-h: 20px;
\n–wpforms-button-size-margin-top: 15px;
\n–wpforms-container-shadow-size-box-shadow: none;<\/p>\n

\t\t\t}<\/p>\n

Please enable JavaScript in your browser to complete this form.<\/p>\n
Please enable JavaScript in your browser to complete this form.<\/div>\n
\n
\n
\nName *<\/span><\/legend>\n
\n