Revenue Adequacy

Wisconsin has experienced an economic rollercoaster over the past 20 years. The industrial flight from the Midwest cost the state hundreds of thousands of manufacturing jobs that have been replaced primarily by lower paying service sector employment. The state lost tax revenue from both the corporations who fled and the workers whose earnings dropped significantly. In the 1970's, faced with more corporate threats to leave Wisconsin, the state government cut property taxes for corporations through the Machinery and Equipment exemptions. The scope of these cuts has expanded each budget session.

When the economy slowed in 2001, the state had no reserve—having returned the previous year's surplus to taxpayers through rebate checks—and faced a multi-million dollar deficit that is projected to continue for several more budget cycles. In the 2003-2005 budget, there were major cuts to public services and programs:

The program-cutters cite one defense for their decisions: "We cannot possibly raise taxes." In fact, Republican leaders are proposing a whole new round of revenue caps that will further reduce the funding pool for state services.

When did raising taxes become a political taboo?

Over the past 20 years, conservative leaders, theorists, and media spokespersons have conducted a concerted attack on taxes and big government. This war of words has almost shattered the social contract forged under Franklin Roosevelt, a contract that linked the collective investment of taxpayers to programs that provide both basic services and a safety net for those in crisis.

The primary targets of this "anti-tax and spend" rhetoric have been the alleged inefficiency and waste of governmental enterprises, the questionable utility of the programs themselves, and the general principle that people should meet their own needs privately and independently.

Public service systems—developed to ensure health, child care, education, roads, prisons, parks, economic oversight, police and fire protection, environmental safety, and transportation services—are in jeopardy. Wisconsin state government needs additional revenue to maintain current programming, much less respond to the emerging needs and possibilities of the 21st century. But the middle- and moderate-income taxpayers—who have heard constantly from their elected representatives that they shouldn't have to pay so much or so often—are, not surprisingly, militant in their opposition to tax increases.

IWF has three projects that are designed to promote adequate revenue collection:

1. As a part of the school finance reform campaign, IWF has analyzed a range of tax mechanisms to increase revenues for education, conducted focus groups on these options, and is promoting a small increase in sales tax based on these statewide discussions. Members of the Governor's Task Force on Educational Excellence recently recommended this increase, but the revenues generated under their plan are to be used wholly for property tax relief with no increase in education dollars. IWF is working with the Wisconsin Alliance for Excellent Schools (WAES) to mobilize support for using a portion of the new revenue for education.

2. The anti-government, anti-tax campaign has exacerbated state residents' normal antipathy to tax increases. IWF is working with state and national organizations to develop popular education materials in a variety of mediums that will rebuild the link between taxes and valued services in taxpayers' consciousness.

3. The national campaign to promote TABOR (Taxpayer Bill of Rights) amendments to state constitutions is designed precisely to downsize government, eliminate as many services as possible, and privatize those that are essential. This effort has been extremely destructive in Colorado where it was enacted in 1992 (see also Talking Points on TABOR). The TABOR initiative in Wisconsin is facing opposition but is still in active play. IWF is working with state and national organizations to publicize the negative impact of TABOR and TABOR-like amendments in order to mobilize popular opposition to the proposal.