What started out as a lackluster campaign for governor heated up in the last month, driven by the closeness in the polls between Scott Walker and Tony Evers.
Evers has campaigned as Democrats are wont to do: promise lots of goodies without being very specific about where the funds will come from. (They only sound like freebies.) That prompted Republican Gov. Walker to respond in kind.
In the end, with only weeks to go before the Nov. 6 showdown, the biggest promise made by both candidates was to fund K-12 education at two-thirds of expenses across the state’s school districts. That would require new state money of $130 million per year.
Evers would accomplish this major funding challenge by raising business taxes and raising taxes on the rich. Walker has not specified where he would get the money.
Both also promised to come up with more money for state roads, again without specifics on the ways and means. In the past, Walker has relied on general revenues and borrowing and has opposed a gas tax increase. Evers opened the door to the latter.
Beneath the rhetoric, there are some realities that will bear on those taxing decisions, such as:
• Medicaid, along with health costs for state employees and prisoners, are chewing up most of the new monies coming into the state treasury. That budget-busting crunch has not been raised by either candidate. Both parties are clueless in general about ways to get health costs under control.
• Evers would eliminate the income tax exemption for the manufacturing and agriculture sectors as a way of raising revenues. Note that a study by the Center for Research on the Wisconsin Economy found a positive impact of some 20,000 jobs from that tax relief. Our business taxes rank 32nd highest.
• Arguably, all corporate taxes should be zero, because they get just get passed on to consumers.
• Evers proposed a 10% income tax cut for the middle class to the tune of $340 million. He proposed a higher tax on the rich to offset. Wisconsin is relatively high on the high end with a 7.65% tax on the top bracket, 11th highest in the country. Walker proposed a few smaller cuts.
• Evers’ position tips his hand on his political philosophy about business. He is far less pro-business than Walker. Note: private companies are the ultimate source of all tax revenue.
• Property taxes have stabilized under Walker, thanks in great part to his Act 10 that allows management of health costs an benefits at the local level. Evers wants to roll back parts of Act 10.
• Unlike some other states, including our neighbor to the south, Wisconsin has a well-managed and fully funded pension system for state and local government employees. Absence of an under-funded albatross is a big deal.
There has been no mention of changing the state’s tax mix toward a heavier reliance on the sales tax, now 5% at the state level. Many economists advocate for lower income tax rates and a higher consumption (sales) tax. The former discourages investment; the latter discourages spending and encourages savings.
There has been no attention in the shallow debate over taxes of more stimulus for the startup economy. Rust belt states need reinvention, and that comes mostly from entrepreneurs. Wisconsin is improving, but still lags on venture investing. Why don’t they get it and do more in that sector?
This time around, there has been almost no debate on the state’s safety net for poor people, such as welfare reform. That means the net in pretty good shape, though it could be tuned to make work more rewarding.
Long and short, the gubernatorial debate over the Wisconsin tax structure has not involved deep thought or bold departure.
And we don’t really know what either candidate would actually propose once in office.
We do know that Evers would be more likely to raise taxes and increase government spending and that Walker would hold both down. There’s a clear difference there, with different appeal to different segments of voters.
•
