Wisconsin Senate Majority Leader Senator Devin LeMahieu (R-District 9) proposed legislation Jan. 20 that would change Wisconsin income tax to a flat rate instead of the current progressive taxing system.
If implemented, every taxpayer in Wisconsin would pay 3.25% of their income in taxes by 2026 in comparison to the current lowest rate of 3.5%, according to the bill.
The percentage of personal income tax owed for each bracket would decrease marginally between 2023 and 2025, the bill said.
Three stranger sexual assaults in Greenbush neighborhood under investigation
The plan aims to reduce the tax burden on Wisconsin residents and make use of a projected budget surplus of over six billion dollars for the 2022-2023 fiscal year, according to a press release from Senator LeMahieu.
“Since 2011, Legislative Republicans have reduced the tax burden on Wisconsinites by a cumulative $22 billion,” LeMahieu said in the press release. “Despite these bold reforms, our state government is still taxing its citizens too much.”
Last fiscal year, Wisconsin recorded a record-breaking 4.3 billion dollar surplus due to increased tax revenue, according to The Badger Herald.
But some do not approve of the bill as a durable solution. Assembly District 76 Representative Francesca Hong said moving to a flat income tax rate would increase the gap between the wealthiest Wisconsin residents and lower to middle-income households.
“In the long run, if we don’t make better investments in people and folks in the working class, our economic outcomes are going to be actually less competitive,” Hong said.
Wisconsin currently uses a progressive tax system consisting of four brackets, with income tax rates ranging from 3.5% to 7.65%, according to the press release.
Though all Wisconsin residents would see a decrease in their income tax, the wealthiest Wisconsinites would feel the most benefit, since they would be receiving a far greater decrease than the state’s lowest tax bracket, University of Wisconsin professor emeritus of public affairs and applied economics Andrew Reschovsky said.
By switching to a regressive tax system like the one proposed by LeMahieu, the most tax burden would fall on the lowest income earners and the least on Wisconsin’s highest earners, Reschovsky said.
Further, last year’s surplus is one-time money, Reschovsky said. Unless house Republicans would be willing to raise sales tax, the state will see a significant decrease in tax revenue after the surplus is depleted.
K-12 education and public universities — like the University of Wisconsin — are likely to feel the effects of decreased government funding, Reschovsky said.
But, according to an interview with LeMahieu by CBS58, other states that have implemented a flat personal income tax system have seen increases in sales tax revenue and other kinds of revenue due to shifting spending habits.
Currently, nine states have a flat personal income tax system and five others plan to switch to the flat tax within the next several years, according to the Tax Foundation, a nonprofit organization focusing on federal and state tax policy.
According to the Tax Foundation, flat tax proponents cite ease of filing as one benefit of the system. But, Reschovsky said most taxpayers file online or with an accountant, so a flat system is not any less confusing than a graduated system.
Another popular argument in favor of the flat tax system is the potential to draw in small businesses and families — but according to Reschovsky, there is little evidence showing Americans consider personal income tax when choosing where to live or operate a business.
Thirty-one states currently have a top personal income tax bracket lower than Wisconsin’s third bracket and only nine have a top bracket higher than Wisconsin’s fourth, LeMahieu’s press release said.
“There’s been a lot of research that suggests that tax-motivated moves are quite rare,” Reschovsky said. “…It is true that a lot of elderly Wisconsin residents moved to Florida, but particularly in January, there are some other reasons, like weather.”
In order for the bill to become law, it would need to pass with a majority in both the State Senate and Assembly. Currently, Wisconsin Republicans hold the majority in both houses, according to the Wisconsin State Legislature website. But Tony Evers, who has the final say on the bill, said he disagrees with LaMehieu’s proposal.
Hong said the proposal is fiscally irresponsible and serves merely as a distraction ahead of the spring election.
“[Republicans are] putting profits over people,” Hong said. “What we should be focusing on are delivering real solutions to help improve the lives of Wisconsinites by reinvesting in our communities.”
