Fiscal Responsibility / Taxes
Could there be a more “hot-button” topic than
taxes? We need to remove the emotion and make rational decisions about how we spend our money.
We need a responsible long-term financial plan for
Wisconsin.
The budget process in Wisconsin is based, not
on a long-range sustainable plan, but on short-term revenue forecasts
that are by their very nature inherently inaccurate.
The undependable nature of the state budget jeopardizes Wisconsin cities, schools, businesses, services to the
most vulnerable citizens, and future economic growth.
If the state legislature fails to address long-range budget
issues, the result will be more fiscal uncertainty in the future, and
maybe even that big tax increase nobody wants.
Wisconsin’s budget deficit is the result of
three events: the softening of
the economy which began in 2000, the reduction of personal income tax
rates that went into effect in 2000, and the elevated spending level
left over from the 1990s. It
is of little comfort to know that many other states also have
significant budget problems. These
states all share a common flaw in budgeting in that fiscal planning
rarely extends beyond the term of the upcoming budget.
When there is a downturn in the
economy, all the states face the same crisis.
Although the Wisconsin Constitution requires the
government to balance the state budget, the use of creative accounting
techniques provides only the illusion of fiscal discipline.
There is no shortage of comment on
Wisconsin’s problem:
editorial writers, elected
officials, and citizens alike all note how the state spent too much and
used gimmicks to balance previous budgets.
All say it is time to operate
state government in the way prudent adults handle family finances.
The most common theme is that
state government must live within its means.
Deficit reduction cannot all come on the spending side
of the budget; changes to tax policy are necessary to bring budget
deficits under control. Many
of the reports and studies I’ve read indicate that the state has been
lax (or worse) in collecting corporate taxes.
Whether this has been a deliberate — albeit ill-advised and
ineffectual — attempt to lure businesses into the state is uncertain.
What is certain is that corporations must pay their share.
Wisconsin’s growth and prosperity are not
being equally shared. The rewards
of prosperity have been concentrated on the richest 20 percent of
families. As a state, this should
be of substantial concern, not only because of the slow growth in
incomes for the remaining 80 percent of families, but also because
increasing disparity comes with substantial social costs.
With regard to the effect of Wisconsin’s tax policies on income disparity, a report
from the Center on Wisconsin Strategy says:
“Perversely, state and local taxes in
Wisconsin
increase income inequality rather than reduce it.
Analysis of the burden of the combined package of Wisconsin taxes
(property, sales / excise, income) shows Wisconsin’s tax structure
to be almost regressive…. In
Wisconsin
in 2002, the richest one percent of taxpayers paid 8.1 percent of their
income in state and local taxes, the least by far of any income group,
and only 5.9 percent after deducting from their federal taxes.
By contrast, the poorest 20
percent of taxpayers paid 10.2 percent in state and local taxes in 2002,
and middle-income taxpayers paid the most, 11.9 percent.”
A 2006 report by the Economic Policy Institute and the
Center on Budget and Policy Priorities (Pulling
Apart: a State-by-State Analysis of Income Trends) shows that over
the two decades from the early 1980s (1980–82) to the early 2000s
(2001–03), the average real income of the lowest-income families in
Wisconsin grew by just 14 percent, while the average real income of the
highest-income families grew nearly four times as fast, up 48%.
The Republicans in the State Assembly seem to believe
that the only course of action is to cut taxes and slash services.
This is not the solution.
Let’s do a little tax myth-busting, shall we.
One myth is “Wisconsin is a
tax-and-spend hell.” The
fact is:
Wisconsin
is only slightly above the national average but we receive significantly
better services than other states.
Another myth is “taxes are skyrocketing.”
The fact is:
as a percentage of income, taxes in Wisconsin are actually
falling. And a third myth is
“taxes are killing business in
Wisconsin.”
The fact is:
Wisconsin’s business taxes are far below the
national average; moreover, taxes are not the primary factor in business
relocation decisions.
You get what you pay for!
Do you want your children to have the best possible education?
Do you like having the streets and roads plowed in the winter?
Do you like fishing in clean lakes and rivers?
Do you like having safe, pothole-free roads?
(Have you driven in Illinois lately?
It can be a kidney-jarring experience.)
Do you like living in Wisconsin?
Then, let’s agree to adequately fund the services and programs
that make this a great place to live.
We must develop a
long-term tax strategy that strengthens the middle class and a long-term
spending strategy that is responsible, while still providing the
services that makes Wisconsin the best place
to live. It is simply the
right thing to do.
