Earlier this month during the Wisconsin Counties Association’s annual meeting, Department of Administration Secretary Mike Huebsch said the governor was looking into eliminating the state income tax and increasing the state sales tax.
“This is getting much more discussion across the nation. And I think it’s being led by governors like Bobby Jindal in Louisiana who are trying to figure out ways that they can eliminate their income tax,” Huebsch is reported saying.
On the surface, it appears there could be some perks to it. You could eliminate a ton of administrative work dealing with the state taxes. Plus, since it’s consumption-based, everyone pays based on how much they spend. The rich spend more and pay more. The poor spend less and pay less.
But let’s start with that misnomer. Sure the rich would pay more than the poor; however, inevitably the poor would end up paying a lot more than they are now and more than they can afford.
Even more importantly, we need to think about seniors. Retired seniors have served their time working for 40-plus years of their life. They paid their toll to government through their income taxes all of those years. To all of a sudden make them pay extra for every good they buy is not fair. They already have to struggle to pay things like their property taxes that governments, particularly the City of Racine, keep raising. Plus, while they don’t pay Wisconsin income tax on their Social Security checks, they do have to pay those taxes to the federal government.
Before we go any further, luckily for Wisconsin Gov. Scott Walker has said it’s not something that is going to go into the budget he is proposing this week. But he reportedly said he’s open to having a broader discussion about tax policy later.
Hopefully, this idea of eliminating the income tax for a higher sales tax isn’t the kind of idea that is given any amount of serious consideration. On the other hand, a broader discussion about tax policy certainly is welcome.
As Rep. Robin Vos, R-Rochester, has readily pointed out, Wisconsin ranks in the top five nationally for highest-paying middle-class taxpayers. At the same time, our state gives a plethora of exemptions for businesses that are able to afford good accountants. Our system is screaming for a fix.
If by some slight chance the state did eliminate the income tax for a higher sales tax, it’s not as if corporate loopholes would go away. In a world full of lobbyists, an increased state sales tax would not be void from loopholes that exempted “special” businesses able to convince legislators of their dire need.
It’s probably largely for that reason that Huebsch estimated the state would need to raise its sales tax to 13 percent in order to make up for the lost income tax. Plus, everyone close enough to a state border would simply drive across to shop, skirting the tax.
We look forward to seeing what tax policy changes are proposed as part of the governor’s budget this week and in upcoming legislation and, hopefully, we have heard the end of this foolish talk of skyrocketing sales taxes.