Source: NCPA
Wisconsin’s high tax rates could encourage many to leave the state, particularly high-income residents who pay the greatest share of taxes, says a new study from the National Center for Policy Analysis and the John K. MacIver Institute for Public Policy.
Calculations in the report show the tax advantages for Wisconsinites who move to the neighboring states of Minnesota, Michigan and Iowa. Illinois is the exception.
“Wisconsin stands to lose millions of dollars a year to other states as people move to reduce their tax burden. The current tax rate is going to create a greater burden on those left behind,” says NCPA Senior Fellow Pamela Villarreal, who authored the study.
There have been a number of changes to Wisconsin’s tax code since 2011, which will save taxpayers nearly $2 billion by 2015. But compared to its neighboring states — Minnesota, Michigan and Iowa — Wisconsin still has a long way to go.
The study uses the NCPA’s State Tax Calculator to help people determine their tax burden by moving from one state to another. The State Tax Calculator (www.whynotmove.com), developed by NCPA senior fellow Laurence Kotlikoff, produces results based on the economic theory that households manage their finances so as to smooth out their discretionary spending over their lifetime.
Wisconsin’s moderate to low-income residents would benefit by staying in Wisconsin, except if they choose to move to Michigan (see table below bullets).
- A 25-year-old renter earning $30,000 a year would fare worse in Minnesota, Illinois and Iowa, losing lifetime wealth of $12,657 to $34,759.
- A 30-year-old renter earning $50,000 a year would also fare worse in Minnesota, Illinois and Iowa, losing lifetime wealth of $24,040 to $50,221.
- In Michigan, both renters would gain in annual discretionary income and lifetime wealth, compared to Wisconsin.
However, Wisconsin’s higher-income homeowners would be better off in a neighboring state, except for Illinois:
- 40-year-old married homeowners earning $75,000 a year would do better in neighboring states — except for Illinois, where their loss in lifetime wealth would be $56,612.
- A 50-year-old married, home-owning couple earning $100,000 a year would also do better in neighboring states, with the exception of Illinois, where they would lose $36,586 in lifetime wealth.
- As with their younger counterparts, the 70-year old retirees would do better in neighboring states except for Illinois, where they would lose $21,216 in lifetime wealth.
“With Governor Walker’s recent tax cuts, Wisconsin is heading down the right path. But, this report shows that we have more to do to make the tax climate better for our hard-working taxpayers,” MacIver President Brett Healy said. “We simply cannot afford to lose this $2.5 billion to other states. We need a simple, comprehensive tax system that does not push Wisconsinites to move away.”
Wisconsin has made some strides in reducing and simplifying its tax burden. Although lower- and middle-income residents, particularly non-homeowners do quite well in Wisconsin compared to its neighbors, higher-income earners have a tax advantage by moving to another state. This should be of concern to the state’s policymakers who have the potential to lose the residents who pay the most taxes.
Lifetime Gain (Loss) to Taxpayers Moving from Wisconsin to Neighboring States
|
State |
25-year old single renter: $30K annual income |
30-yr-old single renter; $50K annual income |
40-yr-old married homeowners; $75K annual income |
50-yr-old married homeowners; $100K annual income |
70-yr-old married homeowners; retired |
|
Minnesota |
($12,657) |
($31,114) |
$50,497 |
$38,914 |
$2,672 |
|
Illinois |
($34,759) |
($24,040) |
($55,612) |
($36,586) |
($21,216) |
|
Iowa |
($33,850) |
($50,221) |
$8,720 |
$19,587 |
$35 |
|
Michigan |
$714 |
$29,874 |
$18,095 |
$19,948 |
$11,417 |
The most popular destination states for Wisconsinites who move are Florida, Arizona, Texas, Colorado and North Carolina. All have more favorable tax rates, says Villarreal.
Is the Tax Code Driving Taxpayers from Wisconsin?: http://www.ncpathinktank.org/pub/is-the-tax-code-driving-taxpayers-from-wisconsin