Wisconsin Republicans’ flat tax would mostly benefit the highest earners | 3D illustration rendering by Getty Images Creative
Wisconsin Republicans have a plan for what to do with the record-breaking $6.6 billion state budget surplus, and it basically involves putting all the money in a pile and chucking it out the windows of the Capitol. State residents can gather below and snatch the cash as it scatters to the winds.
People who aren’t already rich won’t get much. Those in the lowest of Wisconsin’s four tax brackets will save a whopping $37 per year under the GOP flat tax plan. In exchange, as Jason Stein of the Wisconsin Policy Forum explained to Wisconsin Examiner reporter Baylor Spears, after the first few years, when the surplus is burned up, it could become very hard to pay for basic services including public schools, health care for low income kids, the UW System, public safety and a variety of local government services.
That doesn’t sound like a great trade for $37.
Of course, Wisconsin’s highest earners would make out much better than low-income people under the Republicans’ flat tax plan. People in the highest tax bracket — single filers with incomes over $280,950 and joint filers with incomes over $374,600 would pay less than half what they now pay at the 3.25% flat tax (the highest tax rate is 7.65% under our current, progressive tax system.)
On the other hand, some of those high earners also might consider it worthwhile for the state to maintain good schools, safe streets, and cities that can afford to continue paying for road repairs and garbage collection.
Republicans in the Wisconsin Legislature argue that “hardworking Wisconsinites” deserve to keep more of their hard-earned money. The existence of the state surplus is proof, they say, that Wisconsinites are already paying too much. Why else would all this money be piling up in government coffers? They’re in a big hurry to give it all back.
But the idea that overtaxation is our most pressing state problem doesn’t match the numbers. Nor are high taxes the reason for the state’s budget surplus.
According to a recent report from the Wisconsin Policy Forum, Wisconsin’s state and local tax burden fell in 2022 to its lowest level in history.
Republicans, who take credit for creating the surplus through their budget cuts are right, in a way: By withholding money from local governments and especially local public school districts — which received an unprecedented zero increase in the current, two-year budget — the Republicans have let billions of dollars pile up in state coffers, unspent, while continuing to enforce completely unnecessary austerity measures.
Over the last couple of decades, meanwhile, Wisconsin has slipped from a state with a well funded education system and well functioning local services to one where school districts and municipalities are increasingly strapped for funds, and confronting a fiscal cliff as federal pandemic relief money dries up.
All of that is part of a broader Republican plan to starve public schools and local governments, even when the state is in the best financial position in history.
It was striking to watch the bitter reaction of Republicans in the Legislature to the huge influx of federal emergency relief funds during the pandemic. They fought to take away Gov. Tony Evers’ authority to allocate the money to child care centers, schools, and small businesses; they cut education funding to the bone and told school officials to use one-time federal funds to cover ongoing costs. Now, at the start of a new session, they’re talking about forcing Medicaid patients to work for their health care and trying to find a way to disappear the surplus through a flat tax that will leave the state strapped in a few short years.
This, despite fiscal bureau projections that show the surplus growing even larger under the current progressive tax system, to an estimated $8.4 billion in 2023-24 and $9.7 billion at the end of the 2024-25 fiscal year.
It’s getting harder and harder for Wisconsin Republicans to get government down to the size where they can drown it in the bathtub. Their whole philosophy of helping the already wealthy hoard more wealth while imposing scarcity on the rest of us is at risk. It’s a political problem they’re confronting, not a financial emergency.
What if, instead of letting each individual taxpayer try to pay her own way, we got together and pooled our resources to build the kind of society we’d all like to live in? This is the vision the Republicans abhor. But it’s the essence of a functional democracy. Working together we can make a decent society, instead of going it alone and fighting each other for scraps.
Furthermore, as Evers has pointed out, despite Republicans’ best efforts, we are not actually faced with a tough choice. We can maintain the lowest state income tax rates in history under our current, progressive tax system, and still have billions left over to fund great public schools, good roads, and the kind of society where people aren’t desperate for housing and health care.
One of the biggest Republican talking points for the flat tax is that it will draw both employers and workers to Wisconsin. Other states have lower tax rates, according to this argument, and therefore people want to live there.
But one of the biggest draws for workers looking for a place to live is the quality of the local schools. Realtors are keenly aware of this. By slashing state school funding and refusing to allow local districts to increase property taxes, Republicans are undermining one of the biggest selling points for Wisconsin employers who are trying to attract a workforce.
People also like parks, well-maintained streets, excellent public transportation, and a clean, healthy environment.
As for Wisconsinites’ employment prospects, consider this tidbit from a Wisconsin Policy Forum report titled “Falling Behind? The State of Wisconsin’s Public Universities and Colleges”: Between 2000 and 2019, the amount of state and local funding for each full-time-equivalent student at the state’s universities and technical colleges fell from 6.4% above the national average to 16.5% below it. This is concerning, the Policy Forum notes, because “Higher education has been critical to the state’s success and that may be true now more than ever.” The report points to research showing that “the state is adding the most jobs in higher paying fields requiring a college education.” Yet Wisconsin suffers from a brain drain. Congressional research ranks us among the top 10 states suffering from a large proportion of highly educated people moving out of the state while struggling to induce 3 educated workers to move here.
The whole idea that the most desirable places to live in the U.S. are those with the most “competitive” business environment — meaning the lowest taxes and public investment, lowest minimum wages, the most disempowered workforce, the fewest public employees (including public school teachers) and the sparsest worker protections — has long been championed by the American Legislative Exchange Council, memorably described by Wisconsin Rep. Mark Pocan as a speed-dating service for corporations and Republican state legislators. ALEC, in addition to writing model legislation that promotes tax cuts and deregulation in the states, publishes an annual “Rich States/Poor States” report ranking the states for their “economic competitiveness.” This is where Wisconsin Republicans get a lot of their ideas, legislative languages and arguments.
Not coincidentally, high ALEC rankings often correlate with low rankings on US News & World Report and EdWeek lists of states with the best schools and outcomes for kids. New Jersey, for example, which makes the top six in US News’ ranking of states with the best high schools and earns an A- from EdWeek for K-12 kids’ “chance for success,” ranks 49th among the 50 states on ALEC’s list.
Wisconsin, which was 11th among the 50 states for per-pupil spending on elementary and secondary school kids back in 2002, ranked low on ALEC’s measures of competitiveness until Republican Gov. Scott Walker took office. We’ve climbed the ALEC “competitiveness” rankings from 33rd in 2008 to 14th in 2022, thanks to union-busting and budget cuts. Meanwhile our per-pupil spending on kids has dropped below the national average. A flat tax is one of the factors that would propel us even higher on ALEC’s list.
The problem is, the same cuts that are driving up our “competitiveness” ranking are also causing economic and social deterioration. For most Wisconsinites who don’t relish a future living in a low-wage, high-poverty corporate paradise, it’s worth thinking twice about what the Republican vision really looks like.
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