Stop the Income Drain; Reform Taxes

Source: Green Bay Press-Gazette

Wisconsinites still remember the dark days of the Doyle administration, where billion dollar tax increases and budget deficits were the norm. Luckily, the state is headed in a different direction now.

Gov. Scott Walker has set a different course. Each of his budgets was balanced. Property taxes have practically been frozen at 2010 levels. The income tax code was simplified, reducing the amount of brackets from five to four and eliminating 17 special interest tax credits. And every taxpayer has seen their taxes cut — to the tune of $2 billion.

Wisconsin is headed in the right direction, but there is still a lot of work to do because too many of our fellow Wisconsinites are leaving the state for better tax climates and taking their money with them.

On average, Wisconsin loses $136 million a year in adjusted gross income (AGI) from residents moving to other states. That is equal to nearly $2.5 billion over the past two decades. Money leaving the state means less investment in local businesses, less revenue for state and local governments and less being spent on Wisconsin goods and services.

Wisconsin’s burdensome tax climate may be to blame for money leaving the state at such an alarming rate. A new report from the John K. MacIver Institute for Public Policy and the National Center for Policy Analysis compares state tax burdens across the country to see if it is advantageous to move from Wisconsin to a different state.

According to the report, Florida is the No. 1 destination for Wisconsinites leaving the state and for good reason. Florida’s taxpayers do not pay a state income tax, and the average property tax rate is almost half of Wisconsin’s. That means over the period of a lifetime, taxpayers could stand to gain hundreds of thousands of dollars in AGI just by heading to the Sunshine State.

According to the NCPA’s State Tax Calculator, the analysis tool used in the study, a 40-year-old married couple who owns a home and earns $75,000 a year would gain $223,735 over the rest of their lifetime if they moved to Florida from Wisconsin.

Multiple Midwest states can claim a similar advantage. The couple above would be better off in Iowa, Michigan and Minnesota. If this couple chose to move to one of these neighboring states, they would gain up to $50,497 over the rest of their lifetime. The only neighboring state that has a worse tax climate for this couple is Illinois.

The report does find that lower-income individuals fare better in Wisconsin than Illinois, Iowa and Minnesota, however. A single 25-year-old renter making $30,000 a year is better off in Wisconsin than each of these states. But, as this taxpayer earns more and purchases a home, it is actually advantageous to move to Iowa or Minnesota. There is always a tax advantage for a Wisconsin resident moving to Michigan.

Essentially, the state’s tax code is making it more difficult for Wisconsinites to achieve the American dream. Wisconsin has some of the highest property taxes in the country and an income tax system that takes more and more out of a taxpayer’s pocket as their wages increase.

Walker’s policies have us pointed in the right direction, but if Wisconsin intends on keeping residents here throughout their careers and into retirement, it must keep reforming its tax code and reducing the overall tax burden for everyone.

Brett Healy is president of the John K. MacIver Institute for Public Policy.