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National Tax Foundation Prescribes Poison Pill for Wisconsin - October 2009
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Tax day article - April 2009
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IWF seeks moratorium on all tax breaks in the legislative pipeline - March 2009
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IWF Tax Gap estimate confirmed by state - March 2009
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Property taxes are really regressive- February 2009
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Progressive tax reform surges in Wisconsin - February 2009
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All options on the table New report outlines possible sources of additional tax revenue - November 2008
National Tax Foundation Prescribes Poison Pill for Wisconsin
If national think tanks could be sued for malpractice, Wisconsin would collect a sizable settlement.
In its recent report, 2010 State Business Tax Climate Index, the Washington, D.C.-based Tax Foundation lays out how Wisconsin could ‘improve’ its tax policies. It recommend taxing groceries, eliminating business development incentives, slashing the state investment in health, education and transportation, and making everyone pay a flat income tax rate.
“It’s a total losing proposition for middle class families, small business, students and senior citizens,” states Jack Norman, Research Director for the Institute for Wisconsin’s Future (IWF).
According to the IWF critique, the Tax Foundation uses cascades of numbers to mask a predictable anti-government rant. The Tax Foundation is governed by a Board that includes campaign advisors from the George W. Bush, Dick Cheney and John McCain campaigns as well as conservatives notable for their work with wealthy individuals and corporations.
Conservative pundits in Wisconsin cheered the report, eager to cite national experts to justify reduced taxes and reduced state investments in essential infrastructure. Given their “just say no” mindset, these conservative pundits have failed to look closely at the policy conclusions embedded in the Tax Foundation report.
At a time when businesses, workers and taxpayers need to gear up for rebuilding the state economy for long-term prosperity, the Tax Foundation report would send the state down river to a Mississippi Delta quality of life. Where are the lawyers when you need them?
Click here for IWF’s critique of the Tax Foundation report.
Tax day article
As anti-government groups gathered to protest taxes on April 15, IWF pointed out the ironic fact that tax costs are down for most Wisconsin residents while vital services continue. 2009 is a good year for most taxpayers.
IWF seeks moratorium on all tax breaks in the legislative pipeline
The Legislature should immediately stop work
on the thirty or more new or expanded tax breaks
already introduced this session.
There are two reasons for halting action on these
proposed tax credits, deductions and exemptions:
1. Given the budget crisis, it makes no sense
to cut state revenue. Some of the proposed tax
breaks may be sensible proposals, but with the
huge cuts proposed in state services, this is
not the time to enact new breaks.
2. The nonstop proliferation of tax breaks over the past twenty years has not only riddled the state tax base with holes, but has led to an enormous increase in the complexity of Wisconsin’s tax code and tax forms.
For details, see:
• IWF working paper: Simplifying Wisconsin Taxes
IWF Tax Gap estimate confirmed
by state
Hearing on “Invest
in Revenue”
set for March 25
Wisconsin’s Department of Revenue has confirmed IWF’s January estimate that the state’s tax gap—the difference between taxes owed and taxes collected—exceeds one billion dollars.
IWF included the estimate in its report, Investing in Revenue: How Wisconsin can profit by using the Minnesota model for closing the tax gap. The report urged the state to invest in the Revenue Department’s capacity to collect taxes, saying as much as $100 million annually could be collected with a modest investment in Revenue resources.
On March 4, 2009, the Milwaukee Journal Sentinel’s Steven Walters reported on Page One that “Unpaid taxes in Wisconsin reach $1 billion.” Walters noted: “The total of delinquent taxes owed state government rose about 27% in a year, going from $800 million to $1.03 billion on July 1, according to Revenue Department figures requested by the Journal Sentinel.”
Walters also reported that “Senate President Fred Risser (D-Madison) plans a March 25 committee hearing on the Revenue Department's tax-collection efforts, including the controversy over whether the agency needs more - and not fewer - workers.” Risser chairs the Senate’s Committee on Ethics Reform and Government Operations.
Property taxes are really regressive
Modest-income homeowners and homeowners over 65 years old are bearing the brunt of Wisconsin’s property tax increases, according to a path-breaking new report on the unpopular tax.
Homeowners in the bottom 40% of income had a property tax burden more than twice that of homeowners in the upper 40%, according to the study by Rebecca Boldt and Bradley Caruth, both of the state’s Department of Revenue, and Andrew Reschovsky of UW-Madison. Tax burden measures the tax as a percentage of income.
The three researchers used pioneering techniques to track property taxes and income for three-quarters of a million Wisconsin homeowners who stayed in the same house between 2000 and 2005. Previous studies of property taxes have almost never been able to connect property taxes to individual homeowners and their incomes.
The study found tremendous variation in property tax burdens, with 41% of homeowners actually seeing a decrease in property taxes, after adjusting for inflation. But falling property taxes were most likely to be seen only by higher-income homeowners.
For lower-income and older homeowners, property tax burdens generally grew during the five-year period. By 2005, the poorest fifth of homeowners paid 6.3% of their total income in property taxes, about three times the ratio paid by the richest fifth, after taking state and federal tax relief programs into account. [see chart]
The authors argue that Wisconsin’s two property tax-credit programs are too small and poorly targeted.
For the full report click here.
Progressive tax reform surges in Wisconsin
It was the best week for tax reform that Wisconsin has seen in a long, long time, the culmination of years of preparatory work.
On Feb. 19, 2009, Gov. Jim Doyle signed into law a budget-repair bill that includes several breakthrough tax reforms, including the adoption of combined reporting for corporate income tax, to close loopholes that allow multi-state corporations to avoid state taxes.
And on Feb. 17, Doyle proposed a budget for the upcoming 2009-’11 biennium that would include additional progressive tax reforms, including two income tax increases for the wealthiest taxpayers, one to increase the top marginal income tax rate and the other to increase capital gains taxes.
The budget-repair bill squeezed through the Legislature with the tightest of margins, including a 50-49 vote in the Assembly that killed the last chance of combined reporting opponents. The legislation included a variety of tax modernization items:
* Combined reporting for corporate income,
to shut the loopholes used by some major corporations
to avoid paying taxes and to create a level playing
field so all firms play by the same rules;
* Bringing Wisconsin into the national Streamlined
Sales Tax project, to hasten the day when sales
tax can be charged on Internet sales;
* Extending the sales tax to a number of digital
products that have avoided taxation;
* Creating a hospital assessment that will bring
hundreds of millions of federal dollars to the
state and increase payment levels for many of
Wisconsin’s hospitals.
The budget proposal for 2009-’11 will be debated in the Legislature over the coming months. Tax reforms in the governor’s proposal include:
• A higher individual income
tax rate for the wealthiest taxpayers in the
state, those earning over $300,000 a year;
• Scaling back the exemption of capital gains
income from 60% to 40%, reducing a benefit that
goes almost entirely to the state’s wealthiest
taxpayers;
• A new assessment on oil companies, to help
fund road repair and building.
Taken together, these structural changes will move Wisconsin’s tax system into the 21st century. The reforms will help create a tax system that is more fair to taxpayers—individual and businesses alike—while increasing support for vital public infrastructure and services.
These revenue policies are major steps forward in the long-term effort to rebuild an adequate funding base so that major public systems, including transportation, education, public safety and community development, are capable of providing a strong foundation for economic growth and recovery.
See IWF’s latest report on combined reporting: Combined Reporting: How Closing Corporate Loopholes Benefits Wisconsin.
Funding-reform plan unveiled
The School Finance Network, a coalition of nine statewide education groups, just released its long-anticipated reform plan around the state. For details on the plan and how to get involved in the campaign to enact it, go to www.sfnwisconsin.org
On January 27, over 40 leaders from Eau Claire and Altoona discussed possible ways to increase state revenue in order to boost state aid for community services and infrastructure. Dr. Jack Norman, IWF Research Director, reviewed a range of ways that Wisconsin could expand its revenue base based on the latest IWF reports on strengthening the Department of Revenue and modernizing tax policy. The groups discussed the options as one step in developing a plan for long-term state fiscal reform.
More state revenue without raising taxes:
Beefing up tax enforcement pays dividends
Wisconsin could generate nearly $100 million a year by increasing tax-enforcement efforts in the Department of Revenue, according to IWF’s newest report: Investing in Revenue: How Wisconsin can profit by using the Minnesota model for closing the tax gap.
A $25 million investment in tax-enforcement resources for the Department of Revenue (DOR) could return $200 million in additional revenue in the coming state budget 2007-’09 biennium, the report argues. That is $175 million that state budget makers would not have to find through spending cuts or tax increases when they address the state’s deficit. It can be part of a multifaceted approach to addressing Wisconsin’s current budget deficit and establishing budget stability in the future.
IWF’s optimism about the benefits of stepped-up tax enforcement is based on results in Minnesota, which has followed that path since 2001 with outstanding results. IWF urges lawmakers to take a close look at Minnesota’s experience, which could be replicated here.
Click here for a copy
of the report.
See
the story in the Milwaukee Journal Sentinel.
All options on the table
New report outlines possible sources of additional
tax revenue
In the wake of reports that Wisconsin’s budget shortfall for the coming biennium could exceed $5 billion — the deepest hole the state has faced in decades — the Institute for Wisconsin’s Future (IWF) and the Wisconsin Council on Children and Families (WCCF) have released an inventory of options for reforming the state’s tax system and finding a balanced approach for filling the deficit.
The Catalog of Tax Reform Options for Wisconsin includes a number of suggestions for bringing additional tax revenue to the state, to help protect essential public structures in a time of economic distress. No specific item is endorsed, but the report stresses that some combination of the recommended measures is necessary for a balanced approach to addressing the looming deficit while preserving vital public services and infrastructure.
Areas covered include changes to the sales tax, personal income taxes, business taxes, transportation taxes, and miscellaneous taxes.
Click here to see the report.
Read WCCF's op-ed in the Capital Times
Read op-ed in Milwaukee Journal Sentinel
Also stories in Wisconsin State Journal (Nov.
29)
and Milwaukee Journal Sentinel (Nov. 28)
Hear Jack Norman on At Issue with Ben Merens