State tax burden hits 50-year low
Report: Amount taken was shrinking before the pandemic
MADISON - Wisconsin’s tax burden continued its slide last year, hitting its lowest level in at least 50 years, according to a report being released today.
State and local taxes ate up 10.2% of Wisconsinites’ income in 2020, according to the report from the nonpartisan Wisconsin Policy Forum. That’s the lowest it’s been since at least 1970, the report says.
Wisconsin’s tax ranking compared to other states continues to fall as well. In 2018 — the latest year for which U.S. Census Bureau information is available — Wisconsin had the 23rd highest state and local taxes, down from 17th place a year earlier, according to the policy forum.
That put Wisconsin in better standing than three of its neighbors — Minnesota (ranked seventh highest), Illinois (12th highest) and Iowa (13th highest). Michigan ranked 30th for its tax burden.
Wisconsin’s tax burden has been shrinking for years. In 1994, state and local takes took up 13.1% of personal income. By 2019, they took up 10.3%. The dip last year was just a tenth of a percentage point, but that was enough to put it at the lowest level in at least half a century.
The coronavirus pandemic has affected the state’s finances and will continue to do so. Some tax collections are down because of the pandemic, though not by as much as some budget observers
had feared. Costs are up, but many of those have been covered by the federal government so far, and people’s incomes have been supplemented by stimulus payments and unemployment insurance benefits.
Wisconsin continues to have relatively high property taxes and relatively high income taxes for the middle class, the report noted. But the state’s overall tax burden is going down.
“In the near term, the pandemic will weaken tax collections and the economy,” the report noted. “It will also impact the income of state residents and with it their ability to pay the tax liabilities that remain. Meanwhile, looming state budget challenges may cause officials in the state Capitol to consider tax increases or perhaps cuts in aid to local governments, which could spur property tax increases instead.”
The shrinking tax burden gives both Democratic Gov. Tony Evers and Republican lawmakers a point to crow about.
Republicans have controlled the Legislature for almost all of the last decade and have made cutting taxes a priority. Evers has pushed unsuccessfully for more spending, but also championed an income tax cut targeted to working and middle-class Wisconsinites that was included in the state budget he signed in 2019.
Wisconsin continues to have relatively high property taxes and relatively high income taxes for the middle class, the report noted. But the state’s overall tax burden continues to go down, it found.
Local and state taxes went up last year, but not as fast as personal income increased. That meant the state’s tax burden went down.