State Views: To stop income drain, keep reforming and reducing taxes, report suggests
Wisconsinites still remember the dark days of Gov. Doyle's administration, where billion-dollar tax increases and budget deficits were the norm. Luckily, the state is headed in a different direction.
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 number 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 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 so much money leaving the state. A new report from the MacIver Institute and National Center for Policy Analysis (NCPA) compares state tax burdens across the country to see if it is advantageous to move out of Wisconsin.
According to the report, Florida is the No. 1 destination for Wisconsinites. Florida's taxpayers do not pay a state income tax, and the average property tax rate is almost half of Wisconsin's. 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 own a home and earn $75,000 a year would gain $223,735 over the rest of their lives by moving to Florida.
Multiple Midwest states claim a similar advantage. The couple above would be better off in Iowa, Michigan and Minnesota. They would gain up to $50,497 over the rest of their lives by moving to one of these states. Only Illinois has a worse tax climate.
However, a single 25-year-old renter making $30,000 annually is better off in Wisconsin than in Illinois, Iowa and Minnesota. But as this taxpayer earns more and purchases a home, it is actually advantageous to move to Iowa or Minnesota. Michigan always has a tax advantage.
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 taxpayers' pockets 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, 44 E. Mifflin Street, Suite 201, Madison, WI 53703. Contact him by email at email@example.com.