Republican's proposed flat tax is bad for Wisconsin.
“A flat tax — no matter what form it takes — only contributes to what might be called a decades-long strategy of institutionalized piracy, in which the power of the state is used to prey on the wages, savings, and political leverage of ordinary citizens on behalf of cronies and economic elites,” wrote Phil Rocco and Sam Harshner, both affiliated with Marquette University.
Republicans are proposing a dramatic change to Wisconsin's tax system which will make things worse for working Americans, according to over two dozen economists who have looked at the plan.
Voters rejected Republican candidate for governor, Tim Michels, who ran on a platform which included a "flat tax" which would only favor Wisconsin's richest residents.
The evaluation of the plan was included in a letter signed by economics professors from universities in Wisconsin, Missouri, Illinois, New Jersey and Massachusetts.
The non-partisan Legislative Fiscal Bureau did their own analysis and agreed, Michels' flat tax would benefit the rich and hurting working Wisconsinites.
Under the flat tax Tim Michels had proposed, about 3% of Wisconsin residents would get an income tax cut, while people making $25,000 to $300,000 per year would actually see their taxes go up.
People making more than $500,000 per year would get an average tax cut of $22,800 per year.
And who would be one of the people who benefits most from this tax plan? Wealthy Wisconsinites.
Republican's current proposal is very similar to the plan touted by Michels and evaluated by the economics professors.
Republican Senate Majority Leader Devin LeMahieu said on Thursday he is working on a plan that would phase in a flat tax over two to four years, moving the state's income tax rates down to the state's bottom tax rate of 3.54%.
Wisconsin's Current Income Tax Rate
Wisconsin’s income tax rates currently start at 3.54% and rise to 7.65%.Wisconsin was the first state to impose a workable income tax in 1911. The federal government adopted its current income tax system two years later.
Thirty-two states have progressive income taxes like Wisconsin's, according to the Tax Foundation. Eleven states have flat income taxes and seven have no income taxes.
Minnesota’s income tax rates start at 5.35% and go up to 9.85%. Illinois has a flat income tax rate of 4.95% and Michigan has a flat income tax rate of 4.25%.
The Impact of the Flat Tax
According to the Department of Administration, lowering income tax rates to a flat 3.54% would reduce state revenues by about $4 billion each year without raising revenue through other means. DOA officials contend that lowering the individual income tax rate could lead to calls from the business community for lowering the state's corporate tax rate, leading to an impact of about $1 billion.
Gov. Evers' Tax Proposal
In his first term Gov. Evers has already delivered a 15% tax cut for most Wisconsinites and cut taxes by $500 million for small businesses. Gov. Evers’ work delivered historic tax cuts to Wisconsinites.
Gov. Evers has also attempted to send a portion of the state's $5 billion tax surplus back to Wisconsinites who are feeling the pain of inflation. Republicans in the state legislature have refused to return the money to Wisconsin taxpayers.
Republicans flat tax proposal is likely a non-starter with Democratic Gov. Tony Evers who has his own ideas for cutting taxes in the next budget.
Evers has promoted a separate tax plan of cutting income taxes by 10% for middle class taxpayers.
Under the Republicans's proposal, the rich would get richer on the back of working Wisconsinites.
Gov. Evers has already proven he wants to help working Wisconsinites by enacting a fairer tax system.
Sources:
Economists say Republican's flat tax idea would only benefit the rich
Analysis of Republican's flat tax by Wisconsin non-partisan Legislative Fiscal Bureau
A flat tax would create pain for most Wisconsinites and a windfall for the state’s wealthiest
Gov. Evers Delivers: Building on his record of cutting taxes to address rising costs