Tuesday, April 11, 2006

Wis Income Taxes Are Shifting Sands

From the Business Journal:

A national policy analyst says that the state of Wisconsin's tax system relies too heavily on personal income tax to raise taxpayer funds, placing the state at risk in the event of an economic recession.

Nicholas Jenny, senior policy analyst for the Fiscal Studies Program at the Nelson A. Rockefeller Institute of Government, announced his conclusions at a membership meeting Monday of the Greater Milwaukee Committee. Jenny is the author of the quarterly "State Revenue Report," which tracks and analyzes trends in state tax collections and economic factors underlying the trends.

In an interview, Jenny noted that the state of Wisconsin gets up to 45 percent of its annual state taxpayer funds through personal income taxes, more than 22 percent higher than other Midwest states' reliance on the personal income tax, on average.

In the fourth quarter of 2005, personal income taxes accounted for 48 percent of Wisconsin's total state tax revenue, according to the most recent State Revenue Report released last month. Sales taxes accounted for 32 percent and corporate income taxes accounted for just 4 percent. Remaining funds come from other revenue sources.

Jenny said a third of state revenue should come from personal income tax. Across the five-state Great Lakes region plus Minnesota and Iowa, personal income tax accounts for 40 percent of state tax revenue, while sales taxes make up 37 percent and corporate income tax comprises 6 percent.

Wisconsin's reliance on the personal income tax could place the state at risk during a recession, which would hurt personal income levels more than other sources of tax revenue because it is a volatile source of revenue, Jenny said. There is also evidence that high personal income taxes tends to retard development, he said.

Jenny said the state's heavy reliance on the personal income tax comes from the state's progressive nature that places more of a tax burden on high-income wage earners.

"The tax system is essentially set up to tax higher income people at a higher rate," Jenny said.

Well, it's also true that Wisconsin's State tax burden is 13th in the country (local taxes bring us up further in the ranks--4th or 5th--). So the solution is to simply reduce personal income taxes by 15%



Billiam said...

As I'm sure we both know, that WON'T happen in this State. Spend less? Oh, the Heresy!!

Neo-Con Tastic said...

And why am I coming back?