Would eliminating Wisconsin’s income tax be good for the state’s businesses and residents?

From the pages of In Business magazine

Welcome to our new column "Political Posturing," featuring opposing views on current issues important to Wisconsin's business community. In this column, Wisconsin Business Alliance Executive Director Lori Compas and conservative columnist David Blaska offer their opinions from the left and the right, respectively. Feel free to share your own take in the comments section below.

Repealing the income tax would be wrong for Wisconsin.

By Lori Compas

Repealing the income tax is a bad idea: it would harm our businesses and increase the tax burden of most Wisconsinites. Thankfully, Gov. Walker appears to have seen the light and scrapped the idea, but it’s worth exploring the many ways it would hurt Wisconsin’s economy.

If the income tax were repealed, economists say the state would need to increase the sales tax to pay for roads, schools, police protection, and other services that we all need and use. And that increase would be steep, to around 13.5%.

Such a drastic sales tax hike would obviously harm Wisconsin businesses, particularly those near state borders and those facing competition online.

To add insult to injury, most Wisconsinites would end up paying more in taxes. That’s because the majority of people today spend most or all of their earnings, while the state’s wealthiest residents can afford to save and invest more of their income, thus bypassing the sales tax. The top 20% cohort is the only group that would benefit from this regressive tax shift; the other income groups would all pay more. In fact, the nonpartisan Wisconsin Budget Project estimates that taxpayers in the middle 20% would pay an average of $755 more in taxes per year than they pay now.

This, in turn, would weaken consumers’ buying power, further harming Wisconsin retailers.

Some argue that states with no income tax perform better than other states, but those assertions are misguided. Of the nine states that do not charge income tax, six fared worse than the average state in economic growth per capita over the last decade, five did worse than average in terms of median income growth, and six had higher than average annual unemployment rates, according to the nonpartisan Institute on Taxation and Economic Policy. No-tax states that performed better in some measures had unique economic circumstances — like vast oil reserves — that mitigated the lack of income tax revenues. Wisconsin does not have this luxury.

Such a regressive tax scheme would be bad for business and wrong for Wisconsin. 

Lori Compas is a small business owner and the executive director of the nonpartisan Wisconsin Business Alliance, wisconsinbusinessalliance.com.

(Continued)

Walker believes taxpayers can spend their money more wisely.

By David Blaska

Immediately after accepting his party’s presidential nomination in 1984, Walter Mondale gave his concession speech by promising to raise taxes. (“He won’t tell you; I just did.”)

Since that debacle, some Democrats have been more “nuanced” around the T word — just not in Wisconsin. No, he’s not eliminating the income tax. But Scott Walker’s State of the State speech detailing the third round of tax cuts in less than a year was “full of [expletive],” a Milwaukee Democrat tweeted. Senate Democratic leader Chris Larson kvetched that the governor “is spending our windfall in the same irresponsible way.” Who but a big-government liberal would call a tax reduction “spending”? 

Instead, our liberal acquaintances would “invest” the unanticipated $912 million surplus in more money for things like teacher fringe benefits, poverty schemes, and that all-purpose boondoggle, “crumbling infrastructure.”

So let’s phrase Walker’s Blueprint for Prosperity in progressive-ese: The governor is directing almost $1 billion toward a two-year stimulus where it will do the most good — to real Wisconsin people. Money to buy a new snowblower, spend a romantic weekend at Elkhart Lake, save for college tuition. All of which supposes that people can be trusted to spend the money for things they really want and need. 

“Overwhelmingly, people across the state tell me that one of the best ways to fuel the economic recovery is to reduce their tax burden,” Walker said.

New York Gov. Andrew Cuomo, a Democrat, is singing from the same hymnal: “You have a lot of hardworking families … who are getting crushed in this state by taxation. They understand that more tax cuts … will attract more businesses and grow more revenue.”

But not in Wisconsin. Walker’s probable opponent, Mary Burke, is listening to different voices. Wisconsin’s taxes, she told Madison progressives, “are more in the middle.” Not according to the Tax Foundation, which lists Wisconsin’s state-local Tax Freedom Day the 11th latest among the 50 states. And not according to the people of Wisconsin, if you can believe a governor elected twice within two years. 

David Blaska is a Madison columnist and In Business blogger. Find his blog at ibmadison.com/blogger/bring-it

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