{"id":3762,"date":"2023-06-23T15:19:14","date_gmt":"2023-06-23T15:19:14","guid":{"rendered":"https:\/\/wifamily.news\/?p=3762"},"modified":"2023-06-23T16:05:39","modified_gmt":"2023-06-23T16:05:39","slug":"why-and-how-gov-evers-should-sign-off-on-wisconsins-big-tax-cuts","status":"publish","type":"post","link":"https:\/\/wifamily.news\/?p=3762","title":{"rendered":"Why \u2014 and how \u2014 Gov. Evers should sign off on Wisconsin\u2019s big tax cuts"},"content":{"rendered":"<p>This post originally appeared at <a href=\"https:\/\/www.badgerinstitute.org\/why-and-how-gov-evers-should-sign-off-on-wisconsins-big-tax-cuts\/\">https:\/\/www.badgerinstitute.org\/why-and-how-gov-evers-should-sign-off-on-wisconsins-big-tax-cuts\/<\/a><\/p>\n<p>First the \u201cwhy.\u201d<\/p>\n<p>The plan passed by Joint Finance late Thursday saves taxpayers $3.5 billion over two years, money that came from them in the first place because they\u2019re currently overtaxed.<\/p>\n<div class=\"wp-block-image\">\n<figure class=\"alignright size-large is-resized\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/wifamily.news\/wp-content\/uploads\/2023\/06\/Why-and-how-Gov-Evers-should-sign-off-on-those-big-tax-cuts-1024x682-1.jpg\" alt=\"Golden scissors cutting through the word taxes\" class=\"wp-image-47096\" width=\"356\" height=\"236\" \/><\/figure>\n<\/div>\n<p>We are 38<sup>th<\/sup> among the 50 states on individual income tax rates (1 being best), <a href=\"https:\/\/taxfoundation.org\/best-worst-state-income-tax-codes-2023\/\" target=\"_blank\" rel=\"noreferrer noopener\">according to the Tax Foundation<\/a>. Our top rate of 7.65% is one of the highest in the entire country between the coasts. In fact, only Minnesota has a higher top rate anywhere in the middle of America.<\/p>\n<p>That\u2019s a big part of the reason our GDP is low in comparison to Midwest neighbors, our business growth is slow and our population \u2014 especially among working-age folks \u2014 is stagnant.<\/p>\n<p>The only real question is who to \u201cgive\u201d all that money back to through future savings.<\/p>\n<p>We currently have four rates: 7.65%, 5.30%, 4.65% and 3.54%. The package passed Thursday would decrease that to three by combining and lowering the two middle brackets \u2014 which encompass married filers who earn between $36,840 and $405,550 annually \u2014 to 4.4%.\u00a0The bottom rate, where borrowers already benefit the most from a sliding scale standard deduction, would go from 3.54% to 3.5%. And the top rate would be reduced to 6.5% \u2014 the subject, of course, of most of the immediate media and progressive reaction.<\/p>\n<p>Reducing that top rate is both fair and essential if we are to prosper as a state <a href=\"https:\/\/www.badgerinstitute.org\/the-top-three-reasons-to-cut-wisconsins-top-tax-rate\/\" target=\"_blank\" rel=\"noreferrer noopener\">for three reasons<\/a>:\u00a0\u00a0<\/p>\n<h5 class=\"wp-block-heading\"><strong>1. Wisconsin\u2019s top rate is uncompetitive<\/strong><\/h5>\n<p>Our top rate is:<\/p>\n<ul>\n<li>1.65 percentage points higher than Iowa and, since Iowa is gradually moving toward a flat tax, will soon be almost 4 points higher than theirs.<\/li>\n<li>2.7 points higher than Illinois<\/li>\n<li>3.6 points higher than Michigan<\/li>\n<li>4.42 points higher than Indiana<\/li>\n<\/ul>\n<p>By standing still, we have fallen farther behind.\u00a0<\/p>\n<h5 class=\"wp-block-heading\"><strong>2. Economic benefits of tax reform depend heavily on reducing the top rate<\/strong><\/h5>\n<p>Dr. Don Bruce, a nationally known economist, estimated the <a href=\"https:\/\/www.badgerinstitute.org\/study-a-flat-rate-income-tax-would-spur-growth-and-opportunity\/\" target=\"_blank\" rel=\"noreferrer noopener\">ongoing economic benefits<\/a> of a flatter tax structure for Wisconsin \u2014 largely driven by reductions for high-income taxpayers, already shown to be most responsive to rate changes.<\/p>\n<p>Moving to a 5.1% flat tax, Bruce estimated, would over the next five years produce:\u00a0<\/p>\n<ul>\n<li>$7.2 billion in additional gross domestic product\u00a0<\/li>\n<li>$614 million in additional investment\u00a0<\/li>\n<li>About 24,000 additional jobs\u00a0<\/li>\n<\/ul>\n<h5 class=\"wp-block-heading\">3<strong>. The top rate disproportionately affects most Wisconsin businesses<\/strong><\/h5>\n<p>About 95% of Wisconsin businesses are \u201cpass-throughs\u201d \u2014 LLCs, partnerships and sole proprietorships that do not pay the corporate income tax. Instead, their earnings are \u201cpassed through\u201d to the owners\u2019 personal tax returns and taxed at the owners\u2019 marginal rate.<\/p>\n<p>As a result, about 67% of the earnings of Wisconsin pass-through businesses are exposed to Wisconsin\u2019s top rate.<\/p>\n<p>\u201cThe top marginal rate is the most important rate to reduce because it has a far greater negative effect on economic growth than lower rates,\u201d Tax Foundation expert <a href=\"https:\/\/www.badgerinstitute.org\/testimony\/katherine-loughead-2023-tax-reform-assembly-testimony\/\" target=\"_blank\" rel=\"noreferrer noopener\">Katherine Loughead testified<\/a> to the Assembly Ways and Means Committee in May.\u00a0<\/p>\n<p>That irrefutable argument works well, no doubt, with conservatives and many independents. But the truth is there are very few pro-growth Democrats left in this state \u2014 and the loudest voices on the left are the stalwart progressives.<\/p>\n<h5 class=\"wp-block-heading\">So here\u2019s the \u201chow\u201d for Gov. Evers:<\/h5>\n<p>Blame it on the Republicans, but remind the left that, first, Wisconsin \u2014 and America \u2014 has an incredibly progressive tax and transfer system and, no matter what happens with individual rates in Wisconsin, will remain that way. Nothing Joint Finance passed Thursday alters the sliding scale standard deduction or the refundable earned income tax credit.<\/p>\n<p>But there is a much bigger context here that everyone \u2014 left, right or center \u2014 should consider. As I\u2019ve written in recent months, our <a href=\"https:\/\/www.badgerinstitute.org\/its-time-to-put-away-progressive-taxes-wisconsin\/\" target=\"_blank\" rel=\"noreferrer noopener\">total tax and transfer system<\/a> \u2014 how much each of us pays in taxes and how much we get back through federal, state and local government transfer programs \u2014 is overwhelmingly progressive, according to a fascinating, comprehensive,\u202f<a href=\"https:\/\/taxfoundation.org\/who-pays-taxes-federal-state-local-tax-burden-transfers\/\" target=\"_blank\" rel=\"noreferrer noopener\">data-driven study<\/a>\u202fof taxes and transfers done by the Tax Foundation.<\/p>\n<p>On average, American households in the top quintile in 2019 had a total estimated federal, state and local average tax burden of $125,700 \u2014 five times as much per household as those in\u202fthe middle quintile and nearly 23 times as much as the average $5,500 paid by households in the lowest quintile.<\/p>\n<p>The numbers include everything from income taxes to payroll taxes to gas and sales and property and estate taxes \u2014 a total, all told, of 28 taxes at the federal, state and local level.<\/p>\n<p>Meanwhile, according to the Tax Foundation, the average household in the bottom quintile received $34,092 in government transfers \u2014 everything from housing assistance to <a href=\"https:\/\/www.badgerinstitute.org\/medicaid-wisconsins-budget-buster-on-healthcare-costs\/\" target=\"_blank\" rel=\"noreferrer noopener\">Medicaid<\/a> to welfare programs to unemployment compensation \u2014 in 2019. The average household in the middle quintile received $22,510, while the average household in the top quintile received $13,621.<\/p>\n<p>The Tax Foundation isolated those taxes that fund government transfer programs (so only some of the\u202f28 taxes cited above) and found that, after accounting for the cost of the transfer programs, the bottom quintile came out $32,400 ahead. The middle quintile came out $10,200 ahead, and the average top quintile household paid $61,000 to fund transfers to others.<\/p>\n<p>In essence,\u202fthe top two quintiles were responsible for the income redistributed to the bottom three quintiles, and the top quintile alone was responsible for funding over 90%. America needs rich people.<\/p>\n<p>See my <a href=\"https:\/\/www.badgerinstitute.org\/its-time-to-put-away-progressive-taxes-wisconsin\/\" target=\"_blank\" rel=\"noreferrer noopener\">earlier article<\/a> for more detail, but the point is this: progressivity works in two ways in America \u2014 through higher taxes on high earners\u202f<em>and<\/em> by giving a greater share of taxpayer dollars to lower-income households.<\/p>\n<p>As the Tax Foundation notes, states have different roles and challenges than the federal government \u2014 namely, \u201cactive competition with each other for people, jobs and investment \u2014 all of which are considerably more mobile at the subnational than the international level.\u201d<\/p>\n<p>America is irrefutably, overwhelmingly progressive in its total tax and transfer system. And it will remain that way.<\/p>\n<p>But we need to do everything we can in to compete and <a href=\"https:\/\/www.badgerinstitute.org\/free-market-reforms-will-make-wisconsin-thrive\/\" target=\"_blank\" rel=\"noreferrer noopener\">create opportunity for workers<\/a> in Wisconsin, and we need to alter the state tax code to do that \u2014 or see those high-earners move to other states and leave the rest of us to pay the bills.<\/p>\n<p>For progressives, that means if you want to sock it to the rich, you have to keep them here \u2014 and attract more of them.<\/p>\n<p><em>Mike Nichols is the President of the Badger Institute. Permission to reprint is granted as long as the author and Badger Institute are properly cited.<\/em><\/p>\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<div class=\"elfsight-app-996a0fda-002f-4b80-8df8-d0969c986500\"><\/div>\n<p>The post <a rel=\"nofollow\" href=\"https:\/\/www.badgerinstitute.org\/why-and-how-gov-evers-should-sign-off-on-wisconsins-big-tax-cuts\/\">Why \u2014 and how \u2014 Gov. Evers should sign off on Wisconsin\u2019s big tax cuts<\/a> appeared first on <a rel=\"nofollow\" href=\"https:\/\/www.badgerinstitute.org\">Badger Institute<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>This post originally appeared at https:\/\/www.badgerinstitute.org\/why-and-how-gov-evers-should-sign-off-on-wisconsins-big-tax-cuts\/ First the \u201cwhy.\u201d The plan passed by Joint Finance&#8230;<\/p>\n","protected":false},"author":4,"featured_media":3764,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10],"tags":[],"class_list":["post-3762","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-badger-institute"],"_links":{"self":[{"href":"https:\/\/wifamily.news\/index.php?rest_route=\/wp\/v2\/posts\/3762","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/wifamily.news\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/wifamily.news\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/wifamily.news\/index.php?rest_route=\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/wifamily.news\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=3762"}],"version-history":[{"count":2,"href":"https:\/\/wifamily.news\/index.php?rest_route=\/wp\/v2\/posts\/3762\/revisions"}],"predecessor-version":[{"id":3765,"href":"https:\/\/wifamily.news\/index.php?rest_route=\/wp\/v2\/posts\/3762\/revisions\/3765"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/wifamily.news\/index.php?rest_route=\/wp\/v2\/media\/3764"}],"wp:attachment":[{"href":"https:\/\/wifamily.news\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=3762"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/wifamily.news\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=3762"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/wifamily.news\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=3762"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}