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WPRI study looks at state's tax mix

The Wisconsin Policy Research Institute has issued a study about the economic impact of changing the state's tax mix. Earlier this year, Lt. Gov. Rebecca Kleefisch and Revenue Secretary Rick Chandler led a series of meetings on the topic of tax reform, but so far no details of their findings have been released to the public.

Gov. Scott Walker and his Democratic challenger, Mary Burke, rejected broadening the state’s sales tax Tuesday, the same day a conservative think tank urged lawmakers to consider such a move to grow the economy.

“Anything that has a significant increase in the sales tax is not going to be on the table,” Walker told reporters after a ribbon-cutting ceremony at the World Dairy Expo in Madison.

Burke spokesman Joe Zepecki said she opposes “regressive tax proposals such as increasing the sales tax,” but is open to reducing taxes, particularly the property tax.

The candidates responded to a study from the Milwaukee-based Wisconsin Policy Research Institute that found Wisconsin could boost its economy without bankrupting state government by cutting income and property taxes, while broadening its sales tax on consumer goods and services — including groceries.

The study comes amid a hard-fought gubernatorial campaign in which neither candidate has laid out a specific proposal for overhauling the state’s tax system.

“My big frustration with the political realm is we have had no serious comprehensive tax reform discussion, which this is,” said Todd Berry, president of the Wisconsin Taxpayers Alliance, of the WPRI study.

The study says Wisconsin would “benefit long-term from lower taxes and a different tax mix. ... The path to prosperity, though, starts with lower income taxes and property taxes and recognition from legislators that the current sales tax structure can and should be broadened.”

The study treads on some volatile political turf, presenting the elimination of 24 sales tax exemptions — including grocery store food, gas, construction labor, legal services, bottled water, fitness clubs, newspapers, coffins and funeral services — as a way to cut taxes while balancing the state budget. Taxing such goods and services would generate $2.3 billion in state revenue.

It also raises the possibility of replacing the sales tax with a gross receipts tax or value-added tax, which are used in Canada and many European countries.

Citing Taxpayer Alliance data, the study said Wisconsin tax collections total 11.6 percent of personal income, or 11th-highest in the nation.

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The study looked at several tax mix scenarios, but highlighted one — cutting income tax rates by 10 percent, property taxes statewide by 11.5 percent and the sales tax rate by about a half-percentage point, while eliminating 24 sales tax exemptions — as being the most balanced, in terms of new jobs and new investment, and in improving the state’s tax ranking compared with other states.

That scenario would add 10,850 jobs, spur $948 million in investment, generate $892 million in disposable income and reduce state revenue by $21 million through 2018, according to economic models developed by the Beacon Hill Institute at Suffolk University in Boston, which identifies itself as a “free-market think tank.”

Jon Peacock, director of the liberal Wisconsin Budget Project, said he was “skeptical about the job growth they claim would be achieved by the revenue-neutral proposal.”

“Nevertheless, I think closing tax exemptions as part of a tax-neutral plan is worth considering, with the goal of making reforms that create a fairer and more stable tax system,” Peacock said.

Late last year, Walker floated the idea of eliminating the state income tax, and had Lt. Gov. Rebecca Kleefisch and Revenue Secretary Rick Chandler collect input from around the state on overhauling the tax code.

But so far Walker has only broadly pledged to lower income and property taxes by 2018. He has cut taxes by $2 billion in his first term, mostly by reducing income tax rates and buying down K-12 and technical college property taxes with state aid.

“The typical family of four will save $322 this year alone,” Walker spokeswoman Alleigh Marre said in response to questions about the study. “Governor Walker’s goal is to lower the overall tax burden every year he is in office.”

Burke, a Madison School Board member, has said major tax reform is not needed, though she has pledged to “hold the line” on taxes, while offering tax deductions for student loan payments and eliminating a new tax deduction for private K-12 tuition.

In a statement, Zepecki said: “As Governor, Mary Burke is committed to holding the line on taxes and, as our economy and tax base grows, lowering taxes on working and middle class families in a fiscally responsible way.”

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