Gov. Walker Wants To Eliminate Wisconsin's State Income Tax

Walker recently floated out the idea of eliminating Wisconsin's state income tax. he hasn't come up with a plan yet as he claims he wants input from 'the people'.

That's something we in Wisconsin haven't heard from him before, but he is running for President, so he has to at minimum appear to care what voters think.

He says he has no definite scheme in mind, but we know that can't be the case. This guy's middle name is subterfuge. That's mainly because he knows his policies are unpopular and can't just come out say what he wants to do. Geez, if he did that, he probably wouldn't get elected.

Let's look at Wisconsin's current state income tax, compare it to other state's that have no state income tax and see if it can't be discerned where Walker is really going with this.

Currently, there are seven states with no state income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming.

Right off the bat, you can see that the line representing Wisconsin doesn't follow the contour for the states with no income tax. The reason for this is that Wisconsin's current tax structure has a graduated design and is far more progressive than those states that have no income tax.

Wisconsin's state motto is "Forward" and used to be lauded for it's progressiveness. In fact, it was Wisconsin's Republicans that gave the state this reputation.

Now, with Walker running the state, this is no longer the case as his main interest is serving his overseers. And, the one thing his overseers lust after more than possibly anything else, is the elimination of capital gains taxes. Considering that Walker is a man of little or no real substance and will bend to whatever political wind is blowing (Tea Party, anyone? Anyone? Bueller?), watch for it to be forced down the throats of the people.

If we're lucky, we'll end up with a tax structure that resembles the 'overall average' of data sets reflected in the chart above and those least able to fight back will end up bearing the heaviest load. That last part is sure to be a feature of whatever plan Walker comes up with because we now live in an echo of days past where the only ones that mattered were those with money.

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Barba Tenus Sapientes

"The best off...should pay at a rate at least equal to what low- and middle-income families pay." - Institute on Taxation & Economic Policy

Scott 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:

• 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.

But I'm certain that once he sells the state on discarding the graduated income tax, he (if he's still Governor and not..and not..I can't say it...) then train his efforts to punish and reward freely:

• 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.

Neither of the above lists are exhaustive. Think of it as a game: remove two from column A and add three from column B.

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.