Wisconsin is No 'Tax Hell,' Report Says

The image of Wisconsin as a "tax hell" is a hoax cultivated by conservatives to generate support for placing strict limits on government resources, a new report says.

The report by the Institute for Wisconsin's Future – "Exposing the Wisconsin 'Tax Hell' Hoax: Why spending caps on state and local government are wrong for Wisconsin" – says supporters of spending freezes have exaggerated the level of government spending in Wisconsin. Among other things, the report points out that:

• Wisconsin spending and taxes are actually closer to the middle than the top, ranking only 18th highest in the nation.
• Wisconsin is at the median level of spending among its neighboring states.
• Wisconsin spending has moved steadily downward in relation to the
  national average.
• Taxes now take a smaller bite of total income than in the 1980s or 1990s.
• Wisconsin’s top income tax rate is the lowest it has been since 1931.

The report noted that much of the increase in homeowners' property taxes are not the result of government spending increases but of laws that have shifted the property tax burden away from businesses and onto homeowners.

A series of tax exemptions over the last 30 years has significantly cut business property taxes, which in turn has increased the taxes paid by homeowners. Homeowners accounted for less than 50% of total property taxes paid in 1970, compared to nearly 70% today.

"The business community is well aware that corporate taxes are low," the report states. It offers this quote from the Web site of Forward Wisconsin, the state’s business-to-business recruitment agency:

"Wisconsin ranks fourth-lowest in the nation in business taxes as a percent of all state and local taxes. The state's business-friendly attitude is reflected in positive business tax changes that have been made in every biennial legislative session since the early 1970s.”

The IWF says the obvious result is that the tax burden "is shifted increasingly onto individuals," while the business community ironically claims that high taxes on individuals are anti-business.

The report also details problems that have afflicted Colorado since it passed the so-called Taxpayer Bill of Rights (TABOR) a decade ago, placing severe restrictions on the ability of state and local governments to raise resources. It said:

• Colorado’s general fund revenues fell 17% from 2001 to 2003, compared to the national average of about 4%, due to the manner in which TABOR restricts revenue increases.
• By 2003, Colorado reported the nation's second largest budget shortfall relative to its budget.
• By 2000, Colorado had fallen to 50th in K-12 spending per pupil in relation to state income.
• Colorado ranks 47th in state tax support for higher education.
• Since June 2002, state funding for libraries has been cut by 79%, resulting in decreased access to information.
• TABOR has complicated Colorado’s fiscal life so much that some of its original supporters have soured on it. “In hindsight, I wouldn’t vote for it again,” said Republican State Senator Ron Teck.

Conservatives are pushing for passage of a TABOR amendment to Wisconsin's Constitution, a move that some predict would result in massive cutbacks in the quantity and quality of government services, including education.

The IWF report says a recent study by the Wisconsin Policy Research Institute exaggerates the level of spending and taxes in Wisconsin, minimizes the potentially destructive effects of revenue and spending limits, and ignores a number of alternatives for strengthening the Wisconsin economy.

The Institute for Wisconsin's Future is a Milwaukee-based non-profit organization. Its focus is research, education, and advocacy in areas of state public policy.

The entire report (this link opens a pdf file)
Institute for Wisconsin's Future Web site
OnWEAC Resource Page on School Funding

Posted December 9, 2004