A Middle Ground on Taxes

It’s Sunday morning, so maybe you don’t feel like getting your geek on. No problem. We’re here to nerd out for you.

The Wisconsin State Journal ran a long, dense and wonderful story today about the Republicans’ flat tax proposal. Don’t feel like pawing through all those numbers? Let me summarize it in four simple points.

The income tax has become more progressive. Yep. Despite the fact that Wisconsin has gone from 16 tax brackets in 1962 to only four today, rich people pay more than they have in 40 years. In 1980 the richest one percent of Wisconsinites contributed 13% of income tax revenues, but in 2020 that was up to 22%. So, the top one percent pays almost one quarter of all the income taxes.

The flat tax would be a huge windfall for those same rich folks. Under the Republican proposal if you earn between $40,000 and $50,000 you’ll get a $290 tax break. Earn over a million dollars? You’ll walk away with $112,000.

The flat tax would blow a hole in the state budget. When fully implemented it would cost the state $5 billion a year. That will turn our current surplus into an ongoing structural deficit.

Speaker Robin Vos is sounding reasonable. Vos says that he likes the flat tax but understands that Gov. Tony Evers doesn’t and he wants to work with him on some sort of compromise. Evers’ Revenue Secretary Peter Barca says that, while the flat tax is out, maybe something can be done on the highest rate. And given the increase in the burden for the richest Wisconsinites pointed out above, there seems to be room for that.

And let me add a fifth point that was not covered in the story. The only weakness in the State Journal’s story is that it left unchallenged Republican claims that the flat tax would help our economy. Over in my other column in Isthmus I dug into that. It turns out that when you look at unemployment, median income or in/out migration there is no clear advantage to having a flat tax, or for that matter no income tax at all. In fact, states with progressive taxes do somewhat better overall.

So there. You got a strong dose of numbers in a small tablet and now you can go about your day.