Our Views: Wisconsin wise to explore tax reform, but do so in public

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Saturday, December 28, 2013

Gov. Scott Walker would like to lower or eliminate the state’s income tax.

The latter might be easier said than done. The state can’t eliminate a tax without making up for the needed revenue, and the personal/individual income tax rakes in about $7.5 billion a year, or half of the state’s general fund spending.

Walker is envious of the seven states that don’t have income taxes. He sees their robust job growth and thinks that might be tied to the lack of income tax.

Tax reform was the topic of a meeting that Walker directed Lt. Gov. Rebecca Kleefisch and Department of Revenue Secretary Rick Chandler to hold in Beloit this month. It was a private, invitation-only session attended by about 25 people. It fell under deserving criticism for barring reporters and the public. It was designed as the first of a series around the state, and it will be disappointing if the rest are closed, as well.

Walker spokesman Tom Evenson told the Wisconsin State Journal that the public eventually would get a chance to comment. That’s good, but these talks would be best done in the public eye.

Evenson also said that Walker’s goal is to lower the overall tax burden every year and that eliminating the income tax is one idea. Another might be to reduce property taxes.

Todd Berry, Wisconsin Taxpayers Alliance president, put eliminating the income tax in perspective. Making up for that revenue, he told the State Journal, would require the state to boost its sales tax to 12 or 13 percent—an unconscionable level—or add the tax to exempted items such as food, fuel or professional services.

Reducing the income tax and adding to the sales tax could harm the middle class, Democrats argue. Given that Walker admitted to Wisconsin Public Television that any formal proposal to eliminate the income tax wouldn’t come until the 2015-17 budget almost a year from now, critics see political motivations heading into an election year. They might have a point.

“A trial balloon for individual income tax elimination is sure to attract political attention,” Berry told the State Journal. “The devil is in some thorny details with big price tags.”

This year, Louisiana Gov. Bobby Jindal dumped his plan to erase his state’s income tax and boost the sales tax after holding exploratory meetings and running into stiff opposition.

Still, Walker’s administration is wise to explore reducing the state’s income tax because it remains high compared to other states. It puts Wisconsin at a competitive disadvantage for attracting business and industry. The nonpartisan Tax Foundation, based in Washington, D.C., put Wisconsin’s tax climate for businesses at 43rd nationally, but that didn’t factor in the $650 million income tax cut in the 2013-15 state budget that lowered rates and reduced the number of brackets from five to four.

On the other hand, Wisconsin’s 5 percent sales tax is lower than that of 30 other states. Tennessee is highest at 9.44 percent. A large boost in the sales tax would hurt lower income people, particularly if the tax was added to food and fuel purchases.

Wisconsin also must consider the sales taxes in surrounding states. If Wisconsin’s leaps ahead of its neighbors, residents in border communities such as Beloit, Janesville and Marinette might cross the state line to make major purchases.

Talk of tax reform is welcome, and reducing the income tax would be, too. However, let’s keep the public involved in the discussions at all times.

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