Who would Michels’ flat tax plan benefit?

November 3, 2022 6:00 am

The Tax-the-Rich Bus waits across the street from the State Capitol Wednesday morning. (Erik Gunn | Wisconsin Examiner)

Republican candidate for governor, Tim Michels has proposed a “flat tax” for Wisconsin if he’s elected. When pressed for details, his only answer has been that after the election he’s “going to sit down with all the smart tax people,” and “figure out how low we can get the tax…” 

Fortunately the smart people at the nonpartisan Legislative Fiscal Bureau (LFB) have already run the numbers. Here’s what they found: a flat tax would give a huge tax break to wealthy people, and either bankrupt Wisconsin or pay for rich people’s tax cut by jacking up taxes on the middle class and working poor.

The LFB analyzed the impact of a flat tax in two different ways. The first was to figure how a flat tax could bring in the same amount of revenue that the state currently does, what those smart tax people call “revenue neutral.” This would necessitate a flat tax of 5.22%

In this scenario, the LFB concludes that the middle class and working poor, the 96.6% of Wisconsin taxpayers making between $20,000 and $300,000 a year, would get hit with a tax increase.

But people pulling in $500,000 a year and above – 3.3% of Wisconsin tax filers — would receive an average tax cut of $22,280.

Another way to look at the flat tax is to test the rate at which no taxpayer would have an increase in taxes. The LFB concluded this would necessitate a flat tax of 3.54%, resulting in an even bigger windfall for the state’s richest taxpayers while slashing state revenue by $5.59 billion in the first year, and $3.86 billion per year thereafter.

The impact of such a cut would result in one of two things: either compensating for the lost revenue by drastically increasing sales and property taxes, which both hit the poor and middle class harder than the rich, or strangulating government services. Can you imagine living in Wisconsin after state funding for roads, bridges, public education, technical college, healthcare, the university system and environmental protections have been slashed?  

Promoting the flat tax is part of a national movement.  Last year four states controlled by Republicans – Mississippi, Iowa, Georgia and Arizona –  voted to abandon progressive income taxes as a source of state revenue and replace them with regressive flat taxes.  Illinois has had a flat tax since 1970. So we don’t need to look too far to see how flat taxes work in real life rather than just on paper.

Illinois has  a flat income tax of  4.95%, but it also has a state sales tax of 6.25%. At first this doesn’t seem to be all that much greater than Wisconsin’s 5% rate; that is, until one considers that groceries are taxed in Illinois but not here, and its gas tax is 55.9 cents compared to Wisconsin’s 30.9 cents per gallon. In fact, the poorest 20% of Illinois households pay nearly twice as much in state and local taxes as the richest 1%.

To the west, Iowa just passed a huge tax cut for the rich: a 3.9% flat tax that will cost nearly $1.7 billion annually when fully phased in. True to Republican priorities, 76% of the tax cuts will go to the top 20% of earners.

Republican State Sen. Dale Kooyenga, another advocate of the flat tax, claims it will encourage rich senior citizens to remain in the state.

Of course, this ignores the fact that seniors relocate for a variety of reasons, including to escape Wisconsin winters and to be closer to their children and grandchildren. Raise your hand if you want to raise taxes on the middle and working classes in an attempt to keep rich folks from relocating to Florida and Arizona.

Or consider how attractive Wisconsin will be to seniors or anybody else after our state has lacerated its investments in roads, clean water and air, education and public safety.


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Michael Rosen
Michael Rosen

Michael Rosen is a retired Milwaukee Area Technical College economics instructor. He was president of MATC's faculty union, AFT Local 212, for seventeen years and has published extensively on labor and economics.

Charlie Dee
Charlie Dee

Charlie Dee taught American Studies at Milwaukee Area Technical College for 33 years. He served on the Executive Board of AFT Local 212 for 32 years and has written in a variety of publications on politics and sports.