EDITORIAL: Share the state’s wealth

Are income taxes too high in Wisconsin?

Based on the state’s balance sheet, the answer is yes.

The State of Wisconsin has a surplus of around $7 billion, largely due to one-time pandemic relief funds from the federal government. For good measure, the nonpartisan Legislative Fiscal Bureau projects that revenue from taxes and other sources will surpass spending by about $5.3 billion over the next two years. Some of this largesse should be distributed to state residents in the form of tax relief.

Legislators in both parties and the governor seem to understand that the state cannot fail to share this windfall with its taxpayers, but tax cutting is proving to be as difficult as any other form of political progress issuing from this bitterly divided state government. Deciding whose taxes will be cut and by how much has so far trapped tax relief in a loggerhead zone between the Republican Legislature and the Democratic governor.

The process got off to a bad start when the Legislature passed a tax relief measure so top heavy with benefit to the state’s wealthiest residents that it might as well have been delivered to the governor’s desk with “please veto me” sticky note attached. Gov. Tony Evers did just that.

Evers sent his version of tax relief to the Legislature, where it was promptly killed by vote of the Republican majority. The governor’s plan proposed an equal-percentage reduction for all tax brackets, but at a stingy 10%.

Last week, Assembly Speaker Robin Vos unveiled a proposal offering somewhat more fairly distributed tax relief along with the sweetener of removing taxes on retirement income of up $100,000 for individuals and $150,000 for couples. The plan appears to be reasonable enough to be a good start for negotiation, but the governor says he won’t talk about it until the Legislature approves his proposals for increased state aid to families for child care.

If and when tax cuts come, they should be of equal percentage for all tax brackets. The new GOP tax plan, though an improvement, is still skewed in favor of wealthier taxpayers. Speaker Vos seems stuck on the idea that the prime reason to cut taxes is to dissuade Wisconsinites from establishing residency in Florida and other low-tax, warm-weather states to escape the Wisconsin income tax.

Vos said the goal of the tax cuts he proposes “is to keep people in Wisconsin for six months and a day.”

The justification for tax reduction should simply be to let Wisconsin families keep a bit more of their income to spend as they see fit. It should not be to reward taxpayers who are well enough off to have two homes.

In any case, competing with Florida and other retirement-mecca states is a losing game. Florida has no state income tax and harvests much of the revenue it needs from mega-tourism that generates billions in sales and hotel taxes. A recent analysis found that the total tax burden for Florida residents amounts to an average of 6.33% of residents’ income, compared to a tax burden of 8.62% of income in Wisconsin.

Incremental cuts in Wisconsin income taxes are not going to stop retiree flight, but other factors are likely to slow it. As Florida and other southern destinations heat up and are increasingly vulnerable to the consequences of climate change, especially the destruction of property by tropical storms and hurricanes, Wisconsin’s climate will look more attractive.

The mass migration to Florida may in itself diminish the state’s popularity. The population density of the most appealing areas of the state is already making life stressful. Residents have to compete with tourists for space at restaurants, parks and beaches—and on roads. A trip to the supermarket can be an ordeal undergone in unrelenting traffic. Surveys consistently rank Florida commuting among the worst in the nation.

Florida boosters boast of their state’s high-speed population growth, but the time may be near when states where growth is more gradual and plenty of space is left for residents’ enjoyment, including vast natural areas as in Wisconsin, will be more appealing.

Portrayals of Wisconsin as a sort of tax hell are misleading. The Tax Foundation rates Wisconsin 27th in the nation in taxes. Taxes are lower in Wisconsin than in all of the states that border it.

Now is the time to make them even lower, not to compete with Florida, but to be fair to Wisconsinites of all income levels.