"The best off...should pay at a rate at least equal to what low- and middle-income families pay." - Institute on Taxation & Economic PolicyScott Walker wants to change how Wisconsin collects taxes. He wants Wisconsin to join the cast of states that have no income tax. That doesn't sound so bad at first hearing, but, like all things Walker, this needs further unpacking.
Let's look again at the chart shown previously:
It should be pointed out that simply because a state may not have an income tax in no way should be interpreted that no taxes are paid. They just aren't call income taxes.
You see how the line showing the current tax structure for Wisconsin has a sort-of hump in the middle? And, how that is in contrast to the other lines, which represent who pays what percentage in taxes of personal income for non-elderly taxpayers?
The reason for the hump is to give those on the bottom of the earnings scale a break. It's no secret that lower-income people have less to work with in the first place.
As you can easily see, people in the lowest 20% , pay from 5.7% to a whopping 16.9% of their income in taxes in one form or another, be it sales, property, or excise tax. That 16.9% figure? That's from Washington, where there is no state income tax. It's also the highest percentage paid by anyone in any category.
Generally as one moves from lowest to higher income brackets, the percentages of taxes paid goes down, but not the dollar amounts. This is as it should be.
Take a look at the chart below:
The upper and lower lines represent the range I believe distribution of tax burden will be within.
The line in the middle, labeled Walker's Wisconsin, is what I think the state's tax structure will look like after Walker obeys his overseers and does their bidding. The structure will favor the better off, and the least well off will carry an unfair burden. No surprises there.
Yet, I still wouldn't be surprised if Walker tries to take it a step further, if not right off the bat, then at the next budget cycle, by removing features such as exemptions for children, sales tax deductions for groceries, rent, heating,etc.
Walker's not stupid and he's sure to incorporate at least a few progressive features into the scheme, such as:
I hope I'm wrong - and there's a chance I am, since Walker is running for president. Maybe the strategy is to do this one thing right to show the people he really cares. Because he does - about his ambition.
- Property tax Homestead exemptions - at least for the elderly.
- Provide a tax credit to offset impact of sales tax - at least for lower-income taxpayers.
- A tax credit linked to Federal poverty level and/or to inflation.
- Standard deductions and child-care exemptions.
- Refundable Earned Income Tax Credit.
- Limits itemized deductions for upper-income taxpayers.
- Use of Combined Reporting for corporations.
- Providing total exclusion of Capital Gains taxes (that's how rich people make their money make their money).
- Eroding the Combined Reporting requirement.
- Higher reliance on property taxes.
- Decoupling exemptions from inflation indexes.
- Removal of Federal Income Tax deduction.
- Institute only non-refundable EITC.
- Higher reliance on sales and excise taxes.
I hope I'm wrong - and there's a chance I am, since Walker is running for president. Maybe the strategy is to do this one thing right to show the people he really cares. Because he does - about his ambition.
