Yes, it’s time to bring up that ‘T’ word
By Karen Royster and Jack Norman May 7, 2011 MJS
It’s time to talk about taxes.
The proposed 2011-2013 state budget cuts more than $2 billion from education, community services and infrastructure, medical assistance and other programs. This assumes that Wisconsin cannot afford to maintain good schools and safe neighborhoods. The public knows this is not true.
Across Wisconsin and the nation, people are telling pollsters that higher taxes must be a part of the solution to budget problems.
About 70% of Wisconsinites favor higher income taxes on the wealthiest, according to recent surveys by the Wisconsin Policy Research Institute and WisconsinReporter.com. New national polls by McClatchy-Marist and Washington Post/ABC News found the same result.
It’s time for legislators to openly discuss a balanced approach to the budget.
A balanced approach uses both program efficiencies and revenue expansion to sustain quality services and infrastructure during rough economic times.
Our grandparents built strong communities with extensive transportation networks, beautiful parks, health programs and excellent education. The state is allowing these treasures to fall into disrepair by cutting our investment in them. But there are constructive alternatives.
A recent report – “A Catalog of Tax Reform Options for Wisconsin” – offers 30 ways to generate state revenue to prevent drastic cuts. Not every option should be adopted, but enacting some would help balance the state budget while protecting vital programs.
Basing estimates on the latest state reports, options include:
Taxes on the wealthiest
• Increasing the top income tax rate (which applies to income above $300,000 for married couples) from 7.75% to 9.0%: $125 million a year.
• A tax on inheritances of more than $1 million dollars (exempting family farms): $107 million.
• Fully taxing investment profits/capital gains on investments outside Wisconsin: $50 million.
Taxes on large corporations
• A tax on oil company receipts: $171 million.
• Blocking proposals to reopen corporate income tax loopholes: $40 million.
• Increasing state sales tax from 5% to 6% (one penny per dollar): $870 million. (A portion of the funds would go for tax credits, such as the Homestead Credit, to offset the impact on low-income people.)
• A sales tax on personal, business and professional services: $731 million.
• Raising tax on beer, wine and liquor to national averages: $42 million.
• Staffing the Department of Revenue to increase collection of delinquent taxes: Over $40 million.
• A 2% assessment on health care providers parallel to the fee on hospitals: $475 million (which would generate $712 million more in federal funds, to reimburse providers).
Spending is not the problem. Wisconsin is frugal with government. Census Bureau data show that per-person spending on state and local government is below the national average and the number of public workers relative to population is among the 10 lowest in the nation.
Revenue is the problem. One reason Wisconsin has a deficit is the many tax cuts in recent decades. Income tax cuts alone since the late 1990s depress revenue by well over $1 billion annually. Middle-class homeowners pay an increasing portion of state taxes, compared with high-income households and very large corporations.
A balanced budget strategy is crucial for economic recovery. What discourages business growth isn’t slightly higher taxes but deteriorating roads and bridges, unskilled job applicants, a lack of public security and dirty parks.
A balanced approach to budgets means everyone is a part of the solution. It means those who are most capable contribute a greater amount to the common good. This is as much a part of Wisconsin’s tradition as hard work, good beer and shared prosperity.
Karen Royster is executive director of the Institute for Wisconsin’s Future; Jack Norman is research director.