Wisconsin Exits Big Ten for Taxes

Good riddance to 2021, a year when the bad news far exceeded the good. A saving positive, however, to end the year came unexpectedly in the form of a sharply lower tax picture for Wisconsin taxpayers.

For several decades before the turn of the century, state strategists decried the state’s perennial status as one of the higher taxed of the 50 states — often in the top ten. In 1995, for instance, the state was the third highest at 13.5% as a percentage of personal income. Wisconsin had topped 14% several times in the 1980s.

In a recent report on the Wisconsin Policy Forum took a hard look at the state’s tax profile from 1999 to 2019. Lo and behold, the state dropped sharply in 2019 to 10.3% of personal income – 23rd in the nation.

Few observers ever expected Wisconsin to drop out of the top ten for taxation.

But led by Republicans fiscal restraint, caused it to happen during those 20 years. State income tax cuts in the 2021-23 state budget promise an even further reduction going forward.

That will mean as much as $1000 or more per household in the wallets of Wisconsinites.

The tax rankings, which used to be tracked by the Wisconsin Taxpayers Alliance before it merged into the Forum, has a great deal to do with the state’s competitiveness in terms of business climate and people moving to and from the state.

It is no accident that Wisconsin added 3585 residents in the 12 months ending July 1 after years of brain drain.

Illinois, by comparison, lost more than 113,000 residents as its tax rates rose, some of them moving to Wisconsin. Actually, Wisconsin had a net in-migration of 5575 people. That offset the decline of 2581 as the number of deaths outstripped the number of births.

In the Midwest, only Indiana and Iowa added more new residents with 20,341 and 4410 respectively, new residents. Michigan lost 17,000.

Wisconsin has three roughly equal pillars for tax revenues, and all three decreased as a percentage of personal income. The property tax led the way at 9.7 billion at 3.3% of personal income. Personal income tax and sales tax were close behind at 2.9% and 3.0%.

Taxes aren’t everything when a business or a person decides where to locate, but they are certainly a major factor.

Wisconsin’s attractiveness also benefits from its excellent quality of life. Its water resources in lakes and rivers are a big draw. Its forests and parks are a big plus. Its robust arts and cultural assets add to the mix. Its education resources are far above average among the states.

Despite the covid disaster, Wisconsin’s unemployment rate dropped to an all-time low of 3%. Jobs at ever-higher pay are going begging.

It is hard, however, to get too optimistic about the future because the covid pandemic and the resulting labor shortages are a major danger to a healthy economy.

If everyone would just get vaccinated, the damage to the economy would mostly disappear, but as long as the anti-vaxxers scare the populace with ungrounded misinformation, herd immunity will be unlikely. Every company and every household will share the economic pain caused by an unwillingness to take full advantage of the miraculous covid vaccines.

Ironically, the development of the vaccines was accelerated under Republican former President Trump, but his party, led by the likes of Sen. Ron Johnson, has obfuscated and slowed the acceptance of the vaccines. The GOP that has long stood for lower taxes, smaller government and economic growth is undercutting its own success by stonewalling the broad adoption of the proven effectiveness of vaccinations.

Even Trump has changed his posture by getting his third shot.

We welcome the good news of lower taxes and a surplus of jobs in the new year, but we all have every right to be worried about the negative impact of the unvaccinated on the economy of 2022 and beyond.

(Note: Torinus is a former chairman of the Wisconsin Taxpayers Alliance.)

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