Here’s my column from the Sunday, March 12 edition of the La Crosse Tribune.
The nightly news and the morning paper are great ways to keep informed. Unfortunately, they’re also great avenues for politicians to peddle their schemes for foisting new taxes on unsuspecting taxpayers.
When I heard La Crosse County wants to become a “premiere resort area,” and that this designation would generate millions to fix roads, at first I felt like I was in Oprah’s audience that day she gave everyone a new car.
In reality, the proposal for a new “Premiere Resort Area Tax,” or PRAT, is more like when you overbid on the showcase showdown on The Price Is Right and the infamous fail horn blares just before you’re escorted from the stage.
The PRAT tax, the latest tax scheme cooked up by La Crosse County officials, is really just another half-percent sales tax that could be imposed on nearly all retail businesses in the county. As with any other sales tax, this $6.6 million new tax will inevitably be paid for by consumers like you.
“But without more money we can’t fill the potholes!” the tax-and-spend crowd keeps shouting in your ear every time you turn on the TV. What they conveniently omit are their own failures to properly prioritize county spending.
La Crosse County budgeted for $136,764,518 in revenue for 2016. It planned nearly $33 million in property tax collections and $11.6 million from the county’s 0.5 percent sales tax. Yes, the county already has a sales tax onto which the proposed PRAT tax would be stacked.
According to the state Department of Revenue, 44 categories of business are subject to this tax in any jurisdiction that enacts it — bars, restaurants, gas stations, clothing retailers, hotels — even a category called “miscellaneous retail stores,” lest any devious boutique business falls through the cracks. In short, pretty much every business that a tourist could theoretically walk into would be subject to the PRAT tax.
The PRAT was conceived for the most innocent of reasons. When the summer residents of certain areas, like the Wisconsin Dells, fled for the winter, the Dells and similar tourist reliant areas needed a consistent revenue source.
Thus the Legislature invented the PRAT, but it required at least 40 percent of assessed property values in the taxed region to be composed of tourism-related businesses in order to be enacted. Thus, only six municipalities in Wisconsin currently have a PRAT tax, according to the Department of Revenue. At 5.3 percent, La Crosse County doesn’t come close to qualifying.
While our home is a beautiful region with plenty of tourist attractions, it’s hardly a “premiere resort area” according to state law. Nobody’s going to be winning a trip to La Crosse on the Wheel of Fortune.
Fortunately for the pro-PRAT crowd, there’s an exemption. After an advisory referendum, the Legislature can pass a special measure allowing the county to proceed with the final steps required to enact the tax.
Taxpayers should keep an eye on the big picture, and I don’t mean the size of their property tax bills.
The county should make better decisions with what it does with taxpayer money, and roads should clearly be a priority. However, when the county board voted to nearly double its debt in 2015 from $59 million to $110 million in one fell swoop, filling potholes or fixing cracks was hardly a priority. Instead, the county embarked on a series of expansions of its office complex downtown.
Thankfully, we have a vast network of paved, pristine bike trails around here–nary a pothole in sight. Or I suppose these days we’re supposed to call them multi-use trails.
The county is clearly taking in significant revenue, it’s just not choosing to spend it on roads. Now, county officials want to hit up hard-working taxpayers for even more. If your neighbor said they desperately needed to borrow money from you, all the while installing an in-ground pool and building a breakfast nook off their foyer, any rational person would raise an eyebrow.
A tax by any other name is still a tax. Taxpayers beware.
Read the original column here.
The Republican grassroots expects Washington politicians to deliver on their campaign promises of a major tax code overhaul, a sentiment that’s backed up by a new poll by the American Action Network, a center-right advocacy group based in Washington – as well as Republican leaders in an area of Wisconsin where Trump emerged the surprising victor.
The poll, which surveyed Republicans, found that 77 percent of Republicans think tax reform is extremely or very important. It also found that Republican rank-and-file voters are most concerned that the current tax code is too complicated and tax rates are too high.
“As President Trump and conservatives in Congress work on tax reform, this constituency is strongly behind them and overwhelmingly supports center-right tax reform. It’s clear, now is the right time to deliver on a simple tax code with lower rates for all Americans,” said AAN Executive Director Corry Bliss in a statement.
Brian Westrate, chairman of the 3rd District Republican Party – a historically blue district Trump won handily – framed the imperative to reform the tax code as a moral one.
“Those in power in our nation’s capital have a moral duty to the people they represent to tackle the over 75,000 pages that comprise the current tax code, to deconstruct it line by line, and reform it as a simple, effective, efficient, and fair new law,” Westrate said.
Bill Feehan, chairman of the La Crosse County Republican Party, said rank-and-file Republicans are very much in tune with the conversation in Washington and expect bold tax reform, especially after Trump – who made tax reform a centerpiece of his campaign – won the presidency in November.
“Tax cuts are the fastest way to stimulate our economy. Income tax cuts put more money in people’s pockets and most of the money gets spent right away,” Feehan said.
“This gets the economy going from the bottom up. Allowing businesses to keep more of the money they earn results in pay raises for employees, new equipment purchases and investment in business expansion,” Feehan added.
AAN’s poll also went into specifics about Trump and Congressional Republicans’ job performance and asked respondents about their tax reform plan. Respondents overwhelmingly support the broad outlines of the GOP’s plan, with 85 percent approving. Respondents also said tax reform should make it easier to create jobs, raise wages, and expand opportunity. A new tax code should grow the economy and encourage job creation.
Respondents also viewed President Trump favorably – 89 percent registered their approval. As for Congressional leadership, 77 percent approve of the job GOP leaders are doing.
The high support for Trump and Congressional leaders should be a boost for fence-sitting Republicans who might be afraid of the electoral ramifications of major tax reform. “This will take courage, and fortitude, but now that the conservatives in Washington control all levers of power in Washington they must use this opportunity to serve the people,” Westrate said.
“They must kill the tax beast built by progressive socialists over the course of the last 100 years.”
Both Trump and Congressional leaders in the majority party can maintain those relatively high numbers, it seems, by advancing a bold, pro-growth tax reform plan and doing it sooner rather than later. “Republicans should move quickly on tax cuts,” Feehan said.
“With great power comes great responsibility, the American people have given conservatives the power, now it’s time to accept the responsibility,” said Westrate.
This column also appeared at the MacIver Institute.
Photo credit: The Motley Fool
This hilarious fake ad targets the proposed Border Adjustment Tax, or BAT tax. It’s a parody of the typical infomercial-type ads that feature goofy shots of people struggling to perform everyday activities. And then, of course, enter the charismatic spokesman with the solution!
Except in this ad, people are struggling to close their overstuffed wallets or haul handbags loaded with cash up the stairs. It’s really brilliant.
The tax is opposed by the National Retail Federation, which produced the ad and will run it during Saturday Night Live this weekend.
I had the pleasure of joining Joy Cardin on Wisconsin Public Radio this morning to discuss Gov. Walker’s transportation budget.
Over at the MacIver Institute, we’ve published a series of resources for Wisconsinites who just can’t scrape up the time to read Governor Walker’s entire 691-page budget proposal.
Yesterday afternoon, Walker delivered his budget address before a joint session of the legislature. Here is a video summarizing the governor’s speech.
The actual budget proposes significant new spending on K-12 education and the UW System, as well as major tax cuts. Here’s a summary of the budget overall.
Possibly the most significant element of Walker’s budget is the $649 million increase in funding for the K-12 system. However, it’s not a simple across-the-board increase. Get the details here.
Finally, the governor is going up against legislative leaders by holding the line on a gas tax or registration fee increase. Instead of lavishing DOT with more money, Walker re-prioritizes how money is spent and delays several southeast Wisconsin mega-projects. Get the rundown here.
The MacIver Institute is out with the next generation of bold reform in Wisconsin – a plan for a glide path to a 3 percent flat income tax in Wisconsin:
Since the beginning of his tenure, Governor Scott Walker has made tax reform a priority for Wisconsin. Walker has said he hopes to lower the tax burden every year of his term. Thus far, he has stuck to his pledge, having lowered taxes by $4.76 billion in under six years.
Both the amount of taxes and the different types of taxes that Governor Walker has cut since he took office is impressive.
It should not be simply glossed over how much progress Wisconsin has made reducing taxes in recent years. In 1994, less than 25 years ago, Wisconsin ranked 3rd nationally in overall tax burden and our taxes were 16 percent above the national average.
Today, property taxes are at the smallest percentage of personal income since 1945, 3.6 percent. The average homeowner in Wisconsin, in 2016, paid $116 less in property taxes than he or she paid in 2010.3 According to the Department of Revenue, the typical family in Wisconsin has seen their income taxes cut by $1,159. Wisconsin’s state and local tax burden, as reported in December 2016 Census Bureau data, fell to 10.8 percent of personal income, the 16th highest among the states. By comparison, the year prior, Wisconsin’s tax burden ranked the 15th highest at 10.9 percent of personal income.
While Walker and the Republican Legislature should be lauded for all the taxes they have cut, these tax cuts have done little to improve Wisconsin’s overall tax ranking. Similar to the Census Bureau data mentioned above, the nonpartisan Tax Foundation’s most recent ranking of state and local tax burdens puts Wisconsin at the fourth highest in the nation and highest in the Midwest. In the same study, the Tax Foundation found that state and local taxes take up 11 percent of all personal income in Wisconsin every year. These tax cuts have also done little to stop or even contain the never-ending and seemingly inevitable growth of the state budget. The 2011-2013 state budget spent over $66 billion from all funding sources. The 2015-17 state budget spent nearly $74 billion.
Clearly, it is time to think about the next big and bold reform that will transform our state and make Wisconsin an economic powerhouse for generations to come. It is time for a flat tax in Wisconsin.
Wisconsin’s reputation as a high-tax state has a significant impact on the state’s ability not only to attract newcomers, but also to retain those who are already residents. Annually, Wisconsin loses an estimated $136 million in adjusted gross income to tax migration. The high tax burden drives individuals to leave for those states with lower tax burdens or no income tax at all, such as Florida and Texas. One study, which examined Internal Revenue Service data from 1992 through 2015, showed that Wisconsin lost $3.40 billion in wealth to Florida, $1.08 billion to Arizona, and $769 million to Texas during the 23-year period. In that time, almost 93,000 people migrated from Wisconsin – that’s more than the entire population of Racine, the state’s 5th largest city. The loss of so many individuals, their businesses, and their economic activity does not bode well for the economic future of the state. Lower, flatter income taxes are one way to help stem the tide of emigration from Wisconsin.
Low, flat state income tax rates are actually common throughout the country. Seven states levy no individual income tax at all. New Hampshire and Tennessee currently tax dividend and interest income, though recent reforms in Tennessee have set a glide path to total elimination of the income tax in 2022. Eight states have flat individual income tax structures, and 33 states, including Wisconsin, levy progressive tax rates based on income level.
In today’s mobile economy, every state must compete for new residents and new businesses or risk losing them to other states. While climate and the local job market are big factors in a person’s decision to move, a state’s tax burden plays an important role in keeping recent graduates, people looking for a better life, and retirees from moving to a state with a lower tax burden.
The personal income tax, not just the corporate tax, is also becoming a bigger factor in the financial health and growth of businesses. The number of pass-through entities has nearly tripled since 1980, making pass-through businesses the most common business form in the country. Pass-through entities are not subject to typical corporate taxation, but are instead taxed under the individual income tax. Profits are passed through to the shareholders or partners of these companies and become part of their income. More than half of Wisconsin’s workforce is now employed by pass-through businesses, giving the individual income tax even greater importance to the livelihoods of Wisconsinites and the success of their businesses. In Wisconsin, pass-through businesses pay a top marginal income tax rate of over 48 percent – the 8th highest rate in the country.
Taking nearly half of a company’s income is detrimental to success and economic growth. Many states are wising up to the fact that high income taxes hurt competitiveness by punishing success and hard work. Despite the rhetoric that progressive taxation results in a fairer outcome, evidence shows that progressive income taxes are actually associated with higher income inequality.
THE SOLUTION: A 3 PERCENT FLAT TAX
This report sets out to explain why Wisconsin should continue to ratchet down its relatively high individual income tax system and many different rates to one flat rate. Evidence from a variety of sources – economic, social, and fiscal health metrics, as well as academic studies – demonstrates the benefit of a lower and flatter income tax structure. After examining Wisconsin’s position within the Midwest and considering recent reforms around the country, this report will recommend that Wisconsin transform its progressive income tax to a flat 3 percent tax rate for all taxpayers over an eight year period. In subsequent papers, we will continue to build our case through a comparison with Indiana, a state similar in size and demographics to Wisconsin, and will recommend specific steps that Wisconsin can take to make a flat tax a reality.
A systematic glide path to a 3 percent income tax rate would give Wisconsin the most competitive income tax among Midwestern states while greatly improving the state’s attractiveness on a national level. Such a move would have a significant impact on the incomes of all Wisconsinites and most importantly, would allow working class people to keep more of their income. A 3 percent flat tax would be a tax cut for everyone in Wisconsin. Under the current “progressive” tax code, our lowest tax rate of 4 percent for those who make just $11,120 per year is the 4th highest tax rate among the 33 states with a progressive income tax system.
Spacing out the rate reductions over a number of years protects the state budget from sudden and steep revenue drops, giving sufficient time to make gradual adjustments so the transition to the new tax system is smooth.
If Wisconsin is serious about becoming a high-performing state in a 21st Century economy, it must continue its recent tax-cutting momentum to fundamentally change the fiscal trajectory of our state and to lighten the tax burden for its hard-working residents.
Our economic future depends on it.
Read the original post at the MacIver Institute here.
As Wisconsin gears up for another monumental and contentious budget debate, the MacIver Institute posted a preview of the upcoming excitement – including summarizing the budget requests of the major state agencies, new “201” budget items, and the major battles that lie ahead:
Wisconsin state agencies are requesting more than $69 billion in total funding for the 2017-2019 biennial budget, a debate that is quickly taking shape as Governor Scott Walker prepares for his State of the State address Tuesday.
While most Madison insiders and the phalanx of lobbyists hovering about believe that the transportation debate will dominate and may even hold up the passage of the 2017-2019 state budget, the Governor has signaled that he is, once again, looking to make significant long-term changes to state government and the way it operates. Might we see the next big Act 10-like reform that will fundamentally change our state for generations to come? We will soon find out.
As we begin the ’17-’19 budget debate, we take stock of where Wisconsin stands and highlight for you, the taxpayer, all the important upcoming debates – from important policy discussions to petty back-biting and everything in between. While we are not sure where Gov. Walker and the Legislature will end up on the gas tax, tax reform, welfare reform or a whole host of other important issues, we are sure that the budget debate itself and legislative deliberations as the budget moves through the process will prove to be highly entertaining and completely mesmerizing.
This year, agencies have also been required for the first time to submit budget scenarios for a zero percent increase and a 5 percent decrease – named the “201” requirement after the 2015 Act 201 law that forced agencies to submit the different scenarios. Some agencies took the requirement seriously, while some listed shock-value cuts and others barely made an effort at all.
It’s a thorough analysis. Read the whole thing here.