Tuesday, December 17, 2013

Medicaid and tax "reforms" make Wisconsin seem very Confederate

If you look at some of the policy proposals coming out of the Walker Administration, it doesn't sound like anything that's done in the Upper Midwest, an area of the country that traditionally has strong human services. And that's because this Administration's heart isn't with the Midwest and its values, but instead seems in line with that third-world part of the country with high poverty, low incomes and even less hope- the American South.

1. The best example of this is Walker's folly in refusing the expanded Medicaid funds that are part of Obamacare (I've touched on how stupid this is numerous times, most recently here, where I noted a report that said turning down Medicaid funding will cost Wisconsin $1.75 billion in federal funds by 2022). Greg Sargent's "Plum Line" column at the Washington Post pointed out that of the 4.8 million people that may face gaps in their health coverage due to their states not expanding Medicaid, 80% are in the South. Slightly more than half of those people are not white (I'm sure that's mere coincidence), and Sargent relays the findings of the Kaiser Family Foundation, who broke down the states that are and are not taking the Medicaid expansion, as well as identified the backgrounds of the people who would fall into a coverage gap.

Now to its credit, the Walker plan does not have much of a coverage gap, because the state's Badgercare program would cover all Wisconsinites below the poverty line after April 1, and those with incomes above poverty are eligible to get coverage through the federal exchanges. So the only people facing a coverage gap will be those in poverty without children between January 1 and March 31 (unless the Senate refuses to pass the bill this week, then these people would be covered on Jan. 1), but even with that in mind, there are over 160,000 Wisconsinites facing a serious disruption resulting from the delay of being able to finally go on Badgercare, or from families that are barely above poverty being kicked off of Badgercare, and having to get coverage through the federal exchanges.

And this type of health insurance disruption in Wisconsin is happening for no other reason than for Scott Walker to pose against President Obama to try to impress the fraction of a fraction that TeaBag Republicans make up in the electorate. As the Kaiser Foundation's map shows, it is a stance that is completely out of step with the rest of the Midwest, as well as virtually every other state that stayed with the Union in 1861.

The Kaiser Foundation also mentions that this modern-day "nullification" approach on Obamacare could be a harbinger of longer-lasting effects down the road, much like how the South lagged the rest of the country for decades after the Civil War.
These continued coverage gaps and their varied impacts across groups will result in millions of poor adults remaining uninsured and likely lead to widening racial and ethnic as well as geographic disparities in coverage and access to care.
And this week, Scotty doubled down on the Confederate-style policies, saying his administration was considering "tax reform" measures that could include abolishing state income taxes in favor of higher sales taxes. Obviously, this is an absurd trial balloon, especially since there's no proposal on paper showing what cuts in services or hikes in sales and local taxes would need to be done to make up for the revenue shortfall from getting rid of income taxes. After looking at revenue numbers from the most recent budget, quick math indicates the state sales tax would have to go from 5% to at least 13% to make up for the loss of $7.6 billion a year in income tax. And for a whole lot of Wisconsinites, they pay more in sales taxes than income taxes, so they'd really get hurt by this idea.

The Institute on Taxation and Economic Policy breaks down who pays what taxes in each state every year, and for 2013, its "Who Pays" report on Wisconsin shows that sales and excise taxes take a bigger bite out the wallets of the bottom 60% of Wisconsin income earners than income tax does.

% of income going to various taxes, Wisconsin end of 2012
Hurt by 0% income, 13% sales tax
Lowest 20% of income- 6.2% to sales taxes, 0.0% to income taxes
20-40% of income- 5.1% to sales taxes, 2.0% to income taxes
Middle 20% of income- 4.0% to sales taxes, 3.5% to income taxes

Helped by 0% income, 13% sales tax
60%- 80% of income- 3.4% to sales taxes, 4.1% to income taxes
80%-95% of income- 2.5% to sales taxes, 4.6% to income taxes
top 5% to top 1% of income- 1.6% to sales taxes, 4.8% to income taxes
top 1% of income- 0.9% to sales taxes, 5.6% to income taxes

So go ahead Scotty, sell that one to the general public, since a majority of them would lose in this equation, on top of the large amounts of workers that have already lost due to Act 10 stealing their take-home pay, their lower property values, and the worst job performance in the Midwest. Of course, this administration probably isn't too aware of how many people would be screwed over by such a policy, since the only outside input they're allowing on any of these "tax reform" talks are in closed-door meetings with oligarchs, such as the one Lt. Gov Mini-van Rebecca Kleefsich held in Beloit last week.

And it's telling that Walker claims to be "envious" of places with no income tax. Let's take a look at a few economic stats of states with no income tax, compare them with Wisconsin and the rest of the U.S. right now, and see what Walker "envies" about them. We'll even forget the fact that 3 of these states are in the bottom 5 for population, and really aren't close to Wisconsin's demographics in any way.

Median Household income
Alaska $63,648
Washington $62,187
Wyoming $57,512
Wisconsin $53,079
Texas $51,926
U.S. $51,017
South Dakota $49,415
Nevada $47,333
Florida $46,071

Unemployment rate, October 2013
South Dakota 3.7% (2nd lowest)
Wyoming 4.6%
Texas 6.2%
Alaska 6.5%
Wisconsin 6.5%
Florida 6.7%
U.S. 7.0%
Washington 7.0%
Nevada 9.3% (highest in U.S.)

Seems like the 0% income tax groups holds up OK. Until you get to this stat, which ties in very neatly with Walker cutting people off of expanded Medicaid funding.

Percentage without health insurance
Texas 24.3% (no. 1 in U.S.)
Nevada 22.5% (no. 2 in U.S.)
Florida 20.7% (no. 4 in U.S.)
Alaska 18.4% (no. 8 in U.S.)
Wyoming 16.8%
U.S. 15.8%
Washington 14.0%
South Dakota 13.5%
Wisconsin 9.8%

But hey, who wants to be ahead of the curve by having 90% of their people insured anyway? Apparently Scotty would rather we be like the states that don't care for their poor and sick, while keeping incomes largely the same, and possibly more susceptible to economic bubbles that burst (as shown in states like Florida and Nevada). Nice priorities, huh?

Then again, Scotty doesn't care about what happens to most of us. He's already gotten his orders, and plans to carry them out any way he can.

And yes, someone from that woman's company was at the closed-door meeting in Beloit with Lt. Gov. Kleefisch. Because that's the way business gets done in "a truly red", Confederate state. As The Daily Beast's Jamelle Bouie so accurately put it today
Of course Scott Walker is looking at eliminating the income tax in his state.

I mean, why wouldn't you turn your state in a laboratory for plutocratic nonsense?


  1. You underestimate how many would be hurt by a transition from income taxes to sales taxes.

    Since sales tax receipts are ~$4.5B/yr and personal income tax receipts are ~$7.5B/yr, the state sales rate would have to rise by 7.5/4.5 = 5/3rds, so the breakeven point for any individual would be if they were paying 5/3rd as much in income taxes as they were in sales taxes, not an equal amount.

    As well as the first three quintiles, the whole of the fourth quintile is worse off in moving taxes completely from income to sales. As a group the 80-95%-ers would only just nose ahead, so the breakeven point is likely close to the 90th income percentile, not the 60th.

    So you're looking at an income of roughly $120,000 before substituting increased sales taxes for the income tax makes you better off.

    Please, Walker, shout this idea from the rooftops!

  2. I guess my question would be, is the idea of abolishing the income tax really even a serious trial balloon, or more of a fundraising pitch?

    If anything, it could make more sense to abolish the corporate income tax and offset part of the revenue loss by fully taxing capital gains (instead of only 70% like we do now). The rest could be made up by relaxing limits on property taxes, and giving more decision making power to the elected school boards and city councils. Hey, what an idea, right? Let people decide on the local level whether they want to cut services or increase taxes.

    But by eliminating corporate income taxes, you'd get rid of a layer of complexity for businesses, and could increase personal income taxes (mostly on the wealthy) without increasing rates.

    Has any state ever abolished a broad-based individual income tax after having one for multiple decades? North Carolina tried last year, and couldn't get it through. Louisiana thought about it, same result. Kansas probably came the closest, in that they switched to a bizarre system where they basically only tax wages and pensions now, and they exempt income from sole proprietorships and pass-through entities.

  3. Geoff- I didn't feel like modeling it, so thanks for that. It's also worth noting that poorer people would be more likely to spend money if they got more, but instead we're going to a more regressive system, so it'd be a double revenue loss that way.

    Dilly- Thanks for reading. I thought KS and LA may have gone through, but maybe they modified it to merely a "half-ALEC" level.

    I'll also point out that this WisGOP group has gone the exact opposite way you've suggested, and tied the hands of local governments and school boards from raising revenues via property tax or mechanisms like RTAs. As you bring up, there would seem to be a conflict there...unless the ultimate goal is to break the service entirely and force it to be sold off (which is the ultimate goal here).

  4. Your reference to the Wisconsin confederacy is short, catchy and very much to the point. Goes along with those among us who earlier began calling Walker-run Wisconsin "Wississippi."

    Forcing low-income people to make unhealthy and wasteful spending choices is a huge opportunity cost in our society. Yet now, ironically, the wealthy and their enablers are busy offloading even more uncertainty to the most miserable among us, because they themselves simply cannot be bothered with worrying about anything beyond the quarterly financials or stray dandelions along their very broad driveways.

    Elites increasingly seem to regard income security as a zero-sum game where the winners take all. And now Walker is toying with offloading more of society's overall costs onto the very people least equipped to cover them. Places like Texas may look successful to Walker, but that's only because the handful enjoying most of that "success" have been enabled by economic and technocratic segregation.