Taxes in Wisconsin as a share of income dropped over the last two decades more than in almost any other state, according to a new report from the nonpartisan Wisconsin Policy Forum.
In 1999, state and local governments in Wisconsin took in $17.4 billion from taxpayers, or about 12.2% of total personal income — the fourth-highest percentage in the country. As of 2019, the state’s $30.6 billion in total taxes accounted for 10.3% of personal income, which ranked 23rd in the nation.
That 1.87 percentage point drop was the biggest decrease in the nation over the 20-year span, according to the forum.
Taxes on each resident ranked sixth-highest in the country in 1999, at $3,288 or about $5,045 in 2019 dollars after adjusting for inflation. In 2019, the state’s $5,275 in per capita taxes ranked 24th in the country.
Taxes as a share of personal income dropped 15.4% over those 20 years, falling behind only Florida (-18.5%) and Michigan (-15.5%).
“The overall drop of less than two percentage points in Wisconsin’s tax burden may seem modest but represents a substantial shift,” the report states. “If the state’s tax burden as a share of income had been the same in 2019 as it was in 1999, then state taxpayers could have paid $5.57 billion more in taxes to state and local governments.”
The forum notes that the calculation is imperfect, as it assumes that the hypothetical higher level in taxes would not have affected personal income in the state, but still illustrates the growing significance of those changes over a 20-year period.
Like most states, Wisconsin’s tax revenue on the state and local level comes primarily from property, sales and income taxes, with local entities particularly reliant on property taxes.
The report notes that Wisconsin’s declining taxes as a share of income is due in part to reduced state spending as it relates to personal income. State and local governments spent a combined $28 billion, or about 19.6% of personal income in 1999 (that’s $43 billion in inflation-adjusted 2019 dollars), compared with $56 billion, or 18.8% of personal income, in 2019.
Wisconsin’s tax share decline is due in part to economic and personal income growth after the Great Recession, according to the report. The state also has generally restricted the percentage increase in municipal and county property taxes and has limited school district revenues through property taxes. The passage of 2011 Act 10 also reduced the amount state and local governments spent on health care and pension benefits for public employees.
Some of those changes at the state level have also led to a rise in both school referenda to exceed property tax limits and a growing use of levies for debt payments, the report notes.
This summer, Gov. Tony Evers signed the GOP-authored 2021-23 biennial budget, which includes more than $2 billion in state income tax cuts, as well as hundreds of millions in direct aid to districts. The budget also capped the amount districts can raise from the combination of state aid and property taxes, meaning the $408 million in direct aid to schools will effectively cut property taxes.
“As always, changes to the state’s tax ranking are difficult to predict since they depend on personal income growth in Wisconsin and the nation as well as the tax changes made by other states,” the report states. “Still, this latest round of tax cuts will certainly lead to slower growth in state and local tax collections here and may even affect Wisconsin’s ranking in the years to come.”