By Rep. Dale Kooyenga and Sen. Howard MarkleinWisconsin’s budget recently signed into law by Governor Walker continues to move Wisconsin into better territory on the tax front. The most significant attention has been directed towards the continued reduction in property taxes following decades in which Wisconsin homeowners and businesses could reliably count on tax increases greater than the rate of inflation. The Wisconsin Taxpayers Alliance reported property taxes decreased by 2.3 percent in 2014-2015 and the most recent budget continues to cut Wisconsin property taxes. Right Wisconsin’s Collin Roth did a masterful job of articulating the success in these pages last week.
Less attention has been granted to income tax reforms in this budget, which although modest in nature, are another indication of Wisconsin’s priorities and direction. It has been our objective since being sworn into office in 2011 to make Wisconsin’s tax code fairer, flatter and to overall lower the rates. Wisconsin is one of six states with an Alternative Minimum Tax (AMT) and although we did not have the political support to eliminate the tax, we were able to federalize the AMT which lowers the number of Wisconsin residents hit by this tax from 30,000 to 2,000.
Wisconsin’s unfair tax code also extends to married couples that are penalized in a number of different ways. The budget made a good faith twenty million dollar down payment on eliminating Wisconsin’s marriage penalty by increasing the standard deduction for joint filers. This change moves Wisconsin closer to the goal of having the joint filer standard deduction be twice that of the single filer standard deduction. Wisconsin’s tax code should not penalize people who choose to marry.
The budget simplifies the tax code by eliminating another tax credit, bringing the total number of tax credits eliminated over the past three years to eighteen. The revenue picked up from the simplification is being redirected to overall tax relief. The state tax code continues to be federalized which lowers compliance costs for businesses and individuals that hire professionals to prepare their taxes. This federalization also reduces frustration and the propensity of making errors by do-it-yourself tax filers. The number of tax brackets has been reduced in the last two budgets from five to four.
The 2015 budget will lead to an additional half a billion dollars in tax relief over the next decade and when coupled with our income tax reform in the last budget over $7 billion will be retained in the private sector over the next decade instead of being sent to Madison. Despite this progress there is still significant work to do. We have not arrived at a destination. Wisconsin has the dubious honor of being consistently ranked among the top in corporate, property and income tax burdens. In fact, Illinois’ flat income tax rate is on average lower than Wisconsin’s income tax rate. The tax code is also littered with complications. Yet there are still elected officials, individuals and advocacy groups which advocate daily for continued carve outs and exemptions instead of taking the approach of lowering the overall tax burden.
Republicans in Madison have to move away from spending money through Wisconsin’s tax code. The tax cuts to date have been 100 percent funded through growth in revenues. Pro-growth policies (including additional tax cuts) will create more revenue that should at least partially go towards lowering Wisconsin’s overall tax burden in addition to our other priorities. Wisconsin is a high tax state because we are a high spending state. Significantly more work needs to be done to achieve greater efficiency in government to ensure that Wisconsin spends less and therefore taxes less.
Wisconsin Republicans need to remember that we cannot message our way to prosperity. Prosperity is the result of conservative policies. After another session filled with bold conservative reforms we need to continue to work responsibly to deal with Wisconsin’s high tax burden.