Wisconsinites are paying lowest taxes yet! What, you didn't notice?

Not sure if you heard, but the
Wisconsin Policy Forum says that Wisconsin's tax burden is the lowest it's been in decades!

State and local taxes as a share of income fell in 2019 for the eighth consecutive year in Wisconsin, as growth in taxes was countered by stronger growth in the income of state residents. The tax burden in the state dropped to 10.3%, down from 10.4% in 2018, reaching its lowest level in Wisconsin Policy Forum records that date back to 1970. (See Figure 1.)…

The share of Wisconsinites’ income going to state and local taxes has generally fallen for more than two decades, particularly in recent years. The state-local tax burden is now 1.4 percentage points lower than in 2011, when it was 11.7%, and 2.9 percentage points lower than in 1994, when it was 13.2%.

Don’t you all feel rich, rich, rich with these lower taxes? You don’t? Why not? It’s likely because this measure looked at taxes as a percentage of overall income in the state, which doesn’t account for who is getting those gains.

State and local tax revenues increased by 4.5% in fiscal year 2019 (i.e. the year ended on June 30, 2019) – the most since 2011 and nearly twice as much as they rose in 2018. Nevertheless, personal income in Wisconsin grew more quickly. Total personal income, which includes wages and salaries, investment income, and government benefits, rose 5.1% to $299.93 billion in calendar year 2018, the most recent year available, leaving state residents as a whole better able to pay the higher taxes.

That 5.1% increase in income in 2018 is more than twice the 2.5% increase in 2018 in median household income for Wisconsinites, which was barely more than the rate of inflation. That indicates that the richer Wisconsinites with incomes well above the state's median household income of $60,773 were the ones grabbing more money in 2018. Remarkably, the tax burden would likely have been lower except for the incentives in the GOP's Tax Scam in DC, which encouraged individuals to identify their businesses as corporations, which made them pay more taxes to the state, while getting a much larger tax break from the Feds.

Corporate income tax revenues rose by nearly 50% in 2019 – their largest percentage increase since 1964 – to $1.34 billion. Corporate taxes react quickly to economic conditions and part of their rise was due to the growing economy. In addition, the federal tax legislation boosted corporate collections at the state level by incentivizing business entities to shift taxable income from the 2017 tax year into 2018. As noted earlier, the federal law and state legislation have also led certain business entities to file and pay their taxes at the corporate level. DOR has also said collections have risen because of funding provided to hire additional auditors.

Local taxes also went up overall, but like state taxes, it wasn't as much as incomes did, and only rose 1.8% overall in 2019. The Policy Forum notes that a big reason why the local tax increases were limited was due to the shell game of WisGOP spending choices that traded used state spending to pay for part of people's property taxes.

In 2019, gross property tax collections rose 1.7%, or $182 million, to $11.2 billion. However, the actual net taxes paid by property owners did not rise as much because of an increase in the overall state credits that are deducted from property tax bills. Those three credits – the lottery credit, school levy tax credit, and first dollar credit — reduced property taxes by a combined $1.3 billion in 2019. As a result, in 2019 net property taxes grew 1.2%, or $117.6 million, to nearly $9.9 billion.

Unlike property taxes, some other types of local taxes have gone up quite a bit in recent years, which is shown if you dig a bit deeper into the Policy Forum data. For example, local wheel taxes brought in nearly 6 times as much to local governments in 2019 as it did 5 years prior to then.

In addition to the growth in wheel taxes, there are 4 counties in Northeastern Wisconsin that didn’t have the 0.5% sales tax when the Age of Fitzwalkerstan began in 2011, but have chosen to add it in the last 3 years. That's because there were few revenue options that they had left due to cuts in shared revenues and limited property taxes from Walker and WisGOP. And it is due to these new sales taxes, more than economic strength, that explains why local sales taxes jumped by more than $115 million (36.6%) between 2014 and 2019

On top of that, the premier resort sales tax for tourist towns has been expanded to more communities in recent years, which has allowed this tax revenue to go up by $4 million (62.5%) since 2013. Which shows that not only have there been fewer property taxes compared to income since 2011, but the mix of local revenues have increasingly been shifted toward sales taxes and registration fees. That's shift is noteworthy because sales taxes and wheel taxes tend to be more regressive (most people pay at least some floor amount, which takes up a larger % of income for poorer people), while property tax reductions tend to benefit richer Wisconsinites (who are more likely to own homes and more expensive properties). So as richer Wisconsinites get more money as inequality grows, they also benefit from a local tax system that is becoming more regressive over time. So has the allegedly lower tax burden led to more job growth in Wisconsin? Nope, and in fact, we’ve slowed down noticeably in recent years as the (average) tax burden declined.

So the lower tax burden may be a nice stat to have, but is it really worth the economic stagnation, additional Scott-holes and deteriorating schools and services? I'd say no, and given the higher property taxes and additional shell games that are happening in 2020, we're going to have a tougher time digging out when the musical chairs game that is our country's economic "growth" eventually runs out.