Wisconsin is one of many states across the nation which taxes the lower and middle classes more than the wealthy, according to a study released Wednesday by the Institute on Taxation and Economic Policy.
ITEP is a nonpartisan, nonprofit research group in Washington that monitors taxation and state spending issues, according to the ITEP website.
“In the coming months, lawmakers across the nation will be forced to make difficult decisions about budget-balancing tax changes — which makes it vital to understand who is hit hardest by state and local taxes right now,” Matthew Gardner, the lead author of the study, said in a statement.
After observing the state and local taxes paid by income groups in 2007, the study showed that most states take a higher percentage of income from families in middle- and low-income groups than from families in the highest income groups.
The study revealed after subtracting tax savings — also referred to as “federal offset” — Wisconsin families in the lowest and middle 20 percent have a tax rate of 9.2 percent and 10.6 percent, respectively, while families in the top 1 percent have a tax rate of only 6.7 percent.
Nationwide, the average state and local tax rate for families in the top 1 percent of the income scale is 5.2 percent. However, the average tax rate for families in the middle 20 percent of the income scale is 9.4 percent.
At 10.9 percent, the national average tax rate for families in the lowest 20 percent is more than double the tax rate for wealthy families.
Wisconsin is not one of the top 10 states with the most regressive tax systems highlighted in the study. These states include Illinois, Michigan and South Dakota, and all 10 states give families in the lowest 20 percent of the income scale a tax rate six times larger than the tax rate of wealthy families.
The states with the least regressive tax systems include Delaware, New York and Vermont, as well as the District of Columbia.
Andrew Reschovsky, a public affairs and applied economics professor at the University of Wisconsin, said this study is the third report ITEP has conducted on nationwide tax distribution. He said he believes ITEP to be a reputable source of information.
Many states have regressive tax systems, but it is a matter of just how regressive their tax systems are, Reschovsky said. He added there are a lot of states that are much more regressive than Wisconsin.
“Some may say the tax system [in Wisconsin] is unfair, and if so, they need to push for policies to change it,” Reschovsky said.
John Witte, a UW political science and public affairs professor, said Wisconsin was formerly one of the top five states with a progressive tax system. This is no longer the case, he said, because the state government has lowered taxes on the wealthy — including the retired — so they will continue to live in Wisconsin, Witte said.
