A 3.25% flat income tax is unlikely to be included in the upcoming budget.
That’s according to the co-chairs of the Republican-led budget-writing committee in the state legislature. Representative Born and Senator Marklein told reporters during a WisPolitics forum today that while their long-term goal is to get to a flat tax, it’s quote “not going to happen overnight.”
That’s as Governor Evers has repeatedly said he opposes a flat tax and would not sign a budget that included one.
Instead, the Gov has proposed a 10% income tax cut for middle-class filers, reports the Milwaukee Journal Sentinel.
Moving to a flat tax in Wisconsin would be a dramatic switch from the state’s progressive tax rate. That means the amount of taxes someone pays depends on their income. According to a report from Intuit – the company that makes TurboTax – Wisconsin had the tenth highest income tax in 2021.
The lowest tax rate now is 3.54% for a single person with less than $12,000 for their yearly income.
So what is a flat tax? That means that Wisconsinites, regardless of income, pay the exact same tax rate. But there are still a number of variables that can affect your bottom-line tax.
Jason Stein is the Vice President and Research Director at the Wisconsin Policy Forum, a nonpartisan thinktank. Stein says that creating a flat tax rate would allow the state’s highest earners to keep more of their money, because they’d have the most significant decrease under a flat tax.
“So there’s just gonna be more benefit derived by people who have income in that upper bracket.” (Jason 2)
Today’s news comes as a UW-Center economics think tank is touting the potential benefits under a flat tax. The Center for Research on the Wisconsin Economy, or CROWE just released a report last week that changing the tax rate to a flat rate of 3.25% would increase revenue and labor.
CROWE, the think tank, was founded by leading economist Noah Williams, who served as an advisor to Scott Walker’s campaign. Founded in 2018, CROWE is funded by the National Science Foundation, and receives funding from the Bradley Foundation and the Charles Koch Foundation, according to the Center for Media and Democracy’s SourceWatch tool.
Kim Ruhl is Co-Director for CROWE. She says that the report is not trying to provide recommendations for politicians, but to inform voters and lawmakers about what a lower tax rate would bring to the state.
Ruhl says that the report concludes that lowering the tax rate is an automatic positive, supporting Republican claims for the policy.
“So there’s this tension, that when you lower taxes you make the economy more efficient. Firms invest more, build more businesses, make bigger investments in the state. Workers like you and me are incentivized to increase our skills, to go to school, to do on the job training, to do things that will help us be more productive because the returns for those are higher.” (Kim 1)
Stein says that it is possible that lower taxes could encourage laborers. But he says this needs to be balanced against the negative effects a tax cut would have on government services.
Implementing a flat tax would also cause a significant reduction in revenue and affect services in the state. Stein says that Wisconsin is reliant on the individual income tax for most of its revenue.
“Even with the large surplus we have, long term it’s gonna make it difficult to sustain current funding levels, or current service levels in programs like education, aid to local governments, the UW healthcare programs for low income individuals.” (Jason 1)
Legislators are expected to continue to debate the state budget in the coming months before sending their own spending plan back to the Governor later this year.
Reporting for W-O-R-T News, I’m Abigail Leavins
Photo credit of WORT Flickr
