Chris Reader: With a big surplus, Wisconsin should eliminate its income tax | Column


Chris Reader

The state has once again overtaxed Wisconsin families and employers, this time to the tune of $3.8 billion.

That’s $3.8 billion that could help small employers (those who survived the pandemic) hire and raise wages. And it could help families facing raging inflation at levels never seen by anyone under 40.

But instead of being in your checkbook or paycheck, it’s in Madison.

In response, Governor Tony Evers offered to send a fraction of the surplus to residents through one-time $150 checks. Apparently, he recently converted to the idea that the government taxes too much. (He proposed a billion dollar tax hike last year only.)

Evers wants to funnel the rest of the surplus into government spending. It’s a misguided approach that doesn’t solve the real problem – the state is simply taking too much money from families and employers.

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The magnitude of the latest state budget surplus presents Wisconsin with a generational opportunity to significantly reduce taxes and provide immediate and long-term relief to businesses and the middle class. This would not only save money on your paycheck. It would also tackle Wisconsin’s demographic crisis by making our state the envy of the Midwest and a magnet for workers, families, entrepreneurs and employers looking to escape the high taxes of neighboring states.

The biggest game changer for Wisconsin would be to eliminate income tax.

The Wisconsin Center for Economic Research (CROWE) at UW-Madison released a study last year analyzing the impact of Wisconsin’s income tax elimination and tax clawback. a portion of the revenue with a slight increase in sales tax. The results are stunning.

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According to Professor Noah Williams, director of CROWE and author of the study, “Fundamental State Tax Reform: Income Tax Elimination in Wisconsinthe average household would see a net tax saving of $1,700 per year if income tax were repealed and sales tax increased by a modest 3%. (It is important to note that everyday items such as groceries, rent, childcare, insurance, prescription drugs and medical expenses would remain tax exempt).

It’s real money helping your family, compared to the one-time $150 check offered by Governor Evers.

The study also found it would be a massive win for small businesses in the state, many of which are still struggling to recover from the pandemic. Most people don’t realize that over 90% of Wisconsin employers pay personal, not corporate, income tax.

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Small businesses also account for about half of all jobs in the state, averaging fewer than 13 employees each. Nearly 75% of these companies pay the highest tax rate possible. Imagine if they instead had that money to reinvest in their workers through higher wages, greater benefits, and additional hiring.

Professor Williams further found that the impact would be dramatic for the economy as a whole. He found that such reform would lead to a $28 billion increase in economic output and 175,000 additional jobs filled. These are game-changing numbers, especially in a state like ours where the working population is shrinking.

Eliminating the income tax is a bold reform that Wisconsin needs. We would be the only state in the Midwest with no income tax, making Wisconsin a magnet for those looking to relocate, especially with so many people now able to work remotely. There’s a reason several states are striving to join the exclusive club of nine income-tax-free states, and Wisconsin would be well-advised to join the bandwagon.

Reader, of Beaver Dam, is executive vice president of the Institute for Reforming Government, a Madison-based think tank:


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