For progressive taxes, take Wisconsin, or Minnesota

You want progressive taxes? You want to sock it to the rich?

Well then, you should be right at home in progressive Wisconsin. The 3940 fat cats with more than $1 million in income in 2011 (.1% of the total taxpayers) paid 11.5% of the state incomes taxes that year. That’s 115 times their population weight

Those with incomes above $500,000 (.4% of the total) paid 17.3%. They are punching 43 times their weight.

In contrast, at the other end of the income scale, filers with incomes of $30,000 or less – about half of all filers – paid just 3.8% of all state income taxes.

These numbers from the non-partisan Wisconsin Taxpayers Alliance showed that taxpayers in the high income brackets paid at an average rate of about 6.5%. The top rate is 7.75%.

These high rates explain why we have so few rich people in Wisconsin. When they retire, they move to Florida or Arizona for at least six months and one day to avoid the 6.5% hit. Wouldn’t you if you were in their shoes?

Oddly, in one way, the absence of more high income folks has a positive sounding spin. While the state lags the nation by about 4% in per capita income, the median (50th percentile) household income is above the U.S average by about two points.

The Wisconsin middle class doesn’t get much of a break in terms of taxes either. They pay about 6.15%.

Gov. Walker has proposed small tax cuts to help those in the middle. If passed, the middle rates would fall to 5.94%.

With the recent windfall of $500 million in added revenues for 2013-2015, thanks to a slowly improving economy, he may be able to do more. Such cuts play well in a gubernatorial or presidential campaign.

The high end taxpayers in Wisconsin won’t be impressed by small cuts in the middle and lower brackets. Their attorneys and accountants will be advising them to take up residence in states with no or low income taxes. Florida and Texas are at zero, and Arizona’s top rate is 4.54%.

Then there are those long winters. The snow birds will keep flying south.

Gov. Walker misfired when he tried to lure Illinois residents to move north after the Illinois Democrats raised taxes. Rates there are still lower than Wisconsin’s.

But he should be able to reap some political hay in competition with Minnesota where the Democrats in charge raised $2.1 billion in new revenues, partly by taking its top income tax rate to 9.85%, the fourth highest in the nation. Some of the exodus will be pass-through corporations — S Corporations or LLCs — that pay taxes at the individual level.

Western Wisconsin will see an influx of Minnesotans, at least among those who can’t flee south.

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  • Garden Variety

    Counting the % of number of taxpayers that millionaires make up is completely irrelevant. Did those 3940 people earn 11.5% of the income in the state, or more perhaps? This post is (un) intellectually dishonest.

    • JohnTorinus

      And what mountaintop do you sit on to say the point is irrelevant? The blog was about the progressivity of Wisconsin tax rates. That the top .1% pays 11.5% of the taxes is entirely relevant in that context.

      My sense of your comment is that you would like to see them pay an even higher rate, which won’t happen. They’ll be in Texas or Florida.

      • Mark

        John, I agree with the other two that the percentage of the state’s taxes they pay should be judged against the percentage of the income to make a fair comparison. I also noticed that according to your research half of the taxpayers made $30,000 or less. I would be interested in knowing how much of that half makes under $15,000 because to me that is the real tragedy.

        Of those 3900 fat cats, how many are retired and have the ability to move away? Now, without doing the research, I’m betting that most of those 3900 are still working, still driving in to work and a bump in their taxes would just be something for them to complain about vocally, not with their feet (or fleet of moving trucks). They have ties here that require their presence, how else could you explain why they haven’t already moved to a place like Texas? A few may even carry a certain amount of pride for the state they have made so much money in and are more than willing to pay the taxes necessary to create/maintain the same type of environment that allowed them to ‘strike it rich’ as it were. Richard Linehart made a very good point that you completely glossed over. The top tax rate, at both the national and state level, has been cut by more than 50% over the last 50 years (the top national rate in 1960 was a whopping 92%!!). It is NOT a coincidence that debt and deficits have been on the rise at the same time as the rates have gone down. Taxes are meant to pay for things like Infrastructure which covers everything from our roads (which are crumbling and always being repaired) to our water and sewer supply lines which also have a limited life span we’re reaching the end of and to education. Where does Wisconsin fall among the other states in education again?

        Instead of investing in the long term everyone seems concerned only with the Now. How else can you explain turning away free money from the federal government to upgrade our 100+ yr old rail lines to something resembling modern?
        The bottom line is, the lower the top tax rate has gone, the louder the complaints about how high taxes are. The more money spent on lobbyists or campaign donations to have it lowered is just as backwards. Why not spend that same amount (or less) on your actual taxes?? Considering that by your own research you show that this topic affects at most 0.4% of the population then the only way to get the majority of people behind a lower rate is to make them believe that one day they too could make a half a million per year and wouldn’t they also want to pay that lower rate? But that would be worse than a lie to the 50% who make under thirty thousand and will be lucky to make half a million in their entire lifetime.

        • JohnTorinus

          Agreed that the top rates, the marginal rates, have come down sharply at the federal level. Not true in Wisconsin, where Gov. Doyle took the top rate up a point to 7.75%. What do you think the marginal rate in Wisconsin should be?

          • Mark

            Fortunately, for me, I don’t have to decide what the numbers need to be in order to be classified as a fair percentage. I not only do not have enough information about the finer details in the budget or statewide economy to make an informed opinion on a specific rate, I’m just not that interested which is why we elect others in the first place. What I do know is that when an individual (or even a company) faces a financial crunch they don’t attempt to voluntarily lower their income which is what your article espouses the virtues of doing at the state level.

  • I always find statements like this interesting: “The 3940 fat cats with more than $1 million in income in 2011 (.1% of the total taxpayers) paid 11.5% of the state incomes taxes that year. That’s 115 times their population weight.” 115 times their population weight is a meaningless thing to say. They paid 11.5% of the taxes, compared to what percentage of income? If they made 4% of the income then they should scream. If they made 20% of the income then they’re getting a hell of a deal. And how about we throw ALL sources of income and ALL taxes(or fees) paid if we want to be really accurate.
    The super wealthy get breaks on any fee (as a percentage), all use taxes like fuel (as a percentage), and any FICA taxes just to name a few. They pay infinitely lower taxes than they did years ago and the trend is continually lower. Yes with blips, but look at the long term trend. There is no disputing the fact that the income gap has grown considerably. That’s a problem and continuing to cut taxes for those with the most is not going to fix it. Neither is cutting government spending. And look at any nation that continued to let that gap grow and show me a successful one.

    • JohnTorinus

      I’m good to go with a no-loopholes minimum tax on the real fat cats like Buffet, rock stars, ball players and public company CEOs. Say 30% at the federal level and 5% at the state level. But then get the corporate rate more competitive, including the rates on pass-through companies.

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  • Steve

    I agree, Johns attempt to win sympathy for the “3940 fat cats with more than $1 million in income” by claiming they paid “11.5” of the states income taxes” is disingenuous. The fact is, 95% of taxpayers who earn less than $1 million in Wisconsin pay MORE of their income in taxes than do the top 5%. When the wealthiest 5% pay a larger percentage of their income in taxes than do the working poor, they may finally have a legitimate reason to complain.
    If the wealthy only used income tax rates to chose where they live Alabama and Mississippi would be awash in “fat cats”.
    Johns prediction that Minnesotans would flock to Wisconsin certainly has not panned out. Actually the opposite may be true. Those in Wisconsin are experiencing cuts to benefits, services, higher fees and anemic economic growth, meanwhile Minnesotans are enjoying strong economic growth and a budget surplus which benefits all taxpayers.