Income Tax Realities

2017 | Week of April 17 | #1199

The March 31 edition of Wisconsin Taxpayers’ Alliance’s publication, “Focus,” had some pretty eye-opening information regarding income tax in Wisconsin.  For instance, did you know that Wisconsin’s income tax is the nation’s oldest?  It’s true. Our income tax was enacted in 1911 and even predated the U.S. income tax.  From the start, Wisconsin income tax has been what is known as a “progressive tax.”  That means as income increases, so does the share of taxes.

Did you know that originally our state income tax was intended to help reduce property taxes, but within a decade, income tax money was a major source of funding for state programs? Today, Wisconsin’s income tax is the state’s largest tax, underwriting over half of general fund expenditures.

Here are some statistics to consider.  This time last year, 3 million tax returns were filed in Wisconsin for the 2015 tax year.  The adjusted gross income or AGI was $163.1 billion and resulted in $7.1 billion in state individual income taxes. 58.6 percent of those returns were from people making under $40,000. These filers accounted for 16.3 per cent of income and paid 7.2 per cent of taxes. The majority of the income came from filers making between $40,000 and $150,000 a year. These filers paid 51.3 per cent of the taxes. Overall about 70% of all filers paid taxes, with the average tax rate paid relative to adjusted gross income being 4.35%.

To put all this in perspective, on a nationwide scale, Wisconsin ranks pretty well on how we tax people in the income levels between $20,000 and $40,000. However on income between $50,000 and $150,000 our taxes rise quickly and put us in the top 10 worst states.  At income levels above $150,000, we still rank well above the national average, coming in somewhere between 13th and 18th, which is not good.

According to the Census ACS 1-year survey, Wisconsin’s median household income in 2015 was $55, 638. That means the very heart and soul of Wisconsin carries quite a tax burden.

Middle-income households, those making between $40,000 and $150,000, make up the majority of income tax paid. These households are typically married men and women with children.  This is where The Family Prosperity Index comes into play. High taxes or heavy tax burdens, at a minimum, rob families of opportunities. And when our married dad and mom families are robbed of opportunities, our entire state is impacted negatively.

By robbed of opportunities, I mean such things as educational choices being restricted, children denied time with mom or dad because they have to work an extra job, travel to see extended family might be curtailed, keeping a family cabin up north may become too much of a luxury, and staying in Wisconsin just might be too costly.

In fact, The Family Prosperity Index shows Wisconsin has a major problem with that last lost opportunity.  Since 2006, Wisconsin has annually had more people leave the state than move here. Those moving out are married with children and making over $100,000. The top 2 states where these folks are moving are Florida and Texas, where not only is winter milder, but so is the tax burden, with both of these states having no income tax. That’s right…none.  In contrast, Wisconsin relies heavily on income tax to run state government and its myriad programs.

We’re just months away from passing a new two-year state budget. Lawmakers need to heed this information or face a continuing and possibly even growing problem of losing even more married dad-and-mom families to states that aren’t crushing their best natural resource under the burden of onerous income taxes.

For Wisconsin Family Council, I’m Julaine Appling, reminding you the prophet Hosea said, “My people are destroyed for lack of knowledge.”

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