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Wednesday, July 23, 2014 |  Madison, WI: 63.0° F  Fair
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OPINION

Republicans' tax plan will help Wisconsin win the race to the bottom
Robin Hood in reverse


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Republican Assembly Speaker Robin Vos lives in the tiny village of Rochester, population 3,682, whose website boasts of a "unique small town charm that mixes urban, farming and country life styles." It's located just 23 miles from downtown Racine, but might as well be on the other side of the Earth when it comes to the tax policies Vos wants to pursue.

Vos proposes to reduce taxes on what he calls the "middle class," but his definition leaves out nearly two-fifths of tax filers in the state - the 39% of households that earn less than $20,000 annually. Few of those folks live in Rochester, I suspect, but they make up many of the people in Racine and Milwaukee and Madison and all the major cities of Wisconsin, and they won't get a dollar of tax relief.

At first glance, Vos seemed ready to assess the cold, hard facts before deciding the proper policy for Wisconsin. He created a bipartisan Legislative Steering Committee on Taxation, which crunched a lot of numbers, leaving Vos to conclude that "Wisconsin is a really good place to be poor" but "not a good place to be middle income."

There is some truth to that observation if you consider only the state income tax, which is the only tax Vos wants to adjust, and which falls lightest on the poor. But Wisconsin has two other major taxes, the sales tax and property tax, and both fall harder on the poor.

Figures from the national Institute for Tax and Economic Policy analyzed the total tax burden by state and found that the bottom 20% of Wisconsinites pay 9.4% of their income in taxes. By contrast, the top 1% of Wisconsinites pay just 6.7% of their income in taxes; the top 4% below that pay 7.9%; and the 15% of taxpayers below that pay 9.2%. Meanwhile, the broad range of Wisconsinites in between these extremes pay anywhere from 10.3% to 10.6% in taxes.

In short, Wisconsin's tax system is Robin Hood in reverse: It rewards the rich at the expense of the middle class and poor. Yes, Wisconsin's system is less regressive than that of most states, but the difference is not huge. In essence, you have a situation where state taxes are increasing the wealth inequity in America, and Vos wants to make sure Wisconsin's poor people don't fall behind other states in this race to the bottom.

Consider what the Republicans and Gov. Scott Walker did to taxes in their first legislative term. They passed $36 million in capital gains tax breaks, and 46% of those breaks will go to the top 2% of earners in Wisconsin, according to the Legislative Fiscal Bureau. They also passed $49 million in tax breaks for those with Health Savings Accounts, again benefiting the well-to-do. The average income of someone with such an account is more than $100,000, according to the Government Accountability Office.

As for poor people, Walker and Republicans slashed the earned income tax credit. This provision was created under Republican Gov. Tommy Thompson and won bipartisan support as a way to reward work and help those whose wages were inadequate to support a family.

A recent study by the UW-Milwaukee Employment and Training Institute looked at the earned income tax credit cuts and found they had "a dramatic and devastating impact on some of the lowest wage, single working parents," as ETI director John Pawasarat noted. The average single-parent family saw its tax credit drop by 23%, the study found.

Vos' new proposal does nothing to restore this money to poor families. It will make some reduction in income taxes for the middle class, but its definition of the "middle" reaches well into the upper class, cutting income taxes for those earning between $20,000 and $200,000. This includes the many taxpayers who earn $150,000 to $200,000, which is three to four times the average taxpayer in Wisconsin, and who already pay less of their income in taxes than the poor and middle class.

Indeed, the idea of redefining the once-broad middle class in Wisconsin as including only the 58% of tax filers who earn $20,000 to $200,000 essentially accepts the idea that America's growing wealth inequity is shrinking the middle class. So why not shrink them more, Vos seems to be saying.

When Vos was 14, he worked as a grocery-store bagger in small-town Burlington, where he surely served many of the working-poor families he now wants to exclude from his tax plan. The Republicans' 2010 legislative redistricting packed the cities and poor people into heavily Democratic districts that can now be ignored by the legislative majority, even though Democrats actually garnered the majority of votes for legislators in 2012. In the new Wisconsin, just 58% of the people deserve a tax cut.


Bruce Murphy is the editor of UrbanMilwaukee.com.

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