Christian Schneider

Author, Columnist

Rethinking Wisconsin’s Tax Mix

Questions abound regarding Monday’s Refocus Wisconsin meeting held here in Madison – is former Wisconsin Revenue Secretary Rick Chandler calling for an increase in the sales tax?  Is he doing so in his capacity as a budget adviser to Governor-elect Scott Walker?  And why is orange juice served to large groups of people always so pulpy?  Who likes that much stuff floating in their beverage?

I might be able to answer at least the first two questions.  No and no.

Earlier this year, Chandler wrote an extensive article for the Refocus Wisconsin project that looked at the sustainability of Wisconsin’s long-term budget structure.  He utilized the extensive polling data our project provided him, which detailed the public’s level of comfort with various taxes.  Not surprisingly, respondents saw the sales tax as the fairest tax, while they loathed the property tax the most.

When Chandler looked at the viability of lowering some of the most hated taxes in exchange for raising what the public thought were the “fairest” taxes (the sales tax), he found some interesting economic modeling that predicted even more of a benefit from such a shift:

But here is the kicker: Economic modeling shows that rebalancing the Wisconsin tax system in a revenue-neutral way to reduce personal income and property taxes could generate about 10,000 more jobs, increase per capita income up to $400 per person, and increase investment. These are very substantial positive effects.

Chandler’s long and well-researched article goes on to describe the economic benefit from such a restructuring of our tax framework, including a look at other states that have made similar structural changes:

At whatever level of tax collections Wisconsin chooses, a tax mix that would collect less from personal income and property taxes and more from sales taxes would simply be better. It makes sound policy sense because it reduces taxes on earnings and savings. It would help in marketing the state to workers and businesses, who strongly dislike high personal income and property taxes, and would help combat Wisconsin’s “tax hell” reputation.

Economic analysis tells us that a tax mix change would boost employment, incomes and investment. Survey information tells us that the public would support a change. A tax mix change would help Wisconsin’s economy and make the tax system more acceptable to Wisconsin citizens. And in an era where there is great public distrust of government along with strong negative feelings towards incumbents both here and in Washington, this is a change that would have broad public support.

That’s something worth noting for our future lawmakers.

So Chandler was not making an immediate proposal – merely re-stating a long-term plan he had researched early in the year.  He is not advocating a sales tax increase – although the public told our pollsters they are open to discussing the tax mix in future legislative sessions.

And of course, Chandler was not acting as an agent of the Scott Walker administration, which is made clear in the Cap Times article about the event.  He was acting solely as an independent contractor to the Refocus Wisconsin project.  Chandler’s statements have no connection to his capacity as an adviser to Walker.

As for the orange juice question, it remains unanswered.  Much like why hotels put so many damn pillows on their beds.  Seriously – I’m going to walk out and go to another hotel if my bed isn’t drowned with 50 pillows?

2 Comments

  1. you never lower taxes by raising taxes.

  2. Dohnal — “You never lower taxes by raising taxes.” Is that economic principle from Econ 101? I doubt it. So if a given tax mix was truly imbalanced (as our is here in WI) it would be automatically anathema to raise and lower various taxes in the mix in order to achieve a better balance. A mix,then, once passed by politicians, becomes sacrosanct by virtue of — uhh, the fact that politicians passed it.

    Sounds like a counter-productive principle that works against the people. Possibly you could share some support for the idea.

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  1. richard

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