Government Spending

Question for Scott Walker Recall Fans: How Much Higher Should Wisconsin's Taxes Be?


Wisconsin voters go to the polls on June 5 to see if incumbent Republican Gov. Scott Walker gets to stay in office after pushing to rid collective bargaining for teachers when it comes to retirement and health-care benefits and other controversial moves. Walker says all manner of cost-cutting and efficiency-improving measures are necessary to save the state's finances. Opponents say he's a union-busting zealot who is against the working man.

Both sides look energized:

The turnout offered a hint of what might come June 5 with two energized parties clashing in only the third recall of a governor in U.S. history, said Charles Franklin, who directs the Marquette Law School poll. In 2010, 2.1 million people voted in the governor's race.

"There's every reason to believe we'll hit 2.5 million or higher, easily," Franklin said.

More here.

Supporters of the recall say that Walker is followed a failed European-style austerity plan by cutting spending. That's wrong on at least two counts.

First, Europe's much- and mistakenly reviled "austerity" doesn't exist in the sense most people think. Most of the countries in the euro-zone have either not cut spending at all or just barely, and most have raised taxes. To the extent that austerity plans simply cut spending to reduce publicly held debt, there's a long line of research showing that works. There's no reason to believe that simply jacking spending (stimulus!) works, especially if it's coupled with tax hikes, as many latter-day Keynesians want.

Second, the two-year budget signed by Walker neither cuts spending nor increases (or cuts) taxes. It increases overall spending by around 2 percent.

Which raises a question for those aghast at Scott Walker's budget: How much higher should taxes be in Wisconsin?

According to the Tax Foundation, in 2009, Wisconsin had the fourth-highest combined state and local tax burden in the country, with only New Jersey, New York, and Connecticut residents paying more. 2009 is the latest year available for this figure, but there's little reason to believe much if anything has changed. In 2009, the Tax Foundation found that Wisconsin residents paid 11 percent of their income in state and local taxes. The compared to 12.3 for New Jersey residents (the highest rate) and 6.3 percent for Alaskans (the lowest rate).

Wisconsin has historically been a high-tax state—in 1985 for instance, it had the second-highest combined state and local tax rate in the nation, at 12 percent—but it seems unlikely that increasing taxes to spend more money (or borrowing more money to be paid back later via tax revenues) is a smart way to boost a flagging economy. 

When governments want to spend more money, they can either raise it via taxes or borrowing (the feds, of course, can also print it). Like all states in the industrial Midwest, Wisconsin is facing a long slide in terms of economic and demographic shifts. Old-style industries have been leaving for years, and the general area is depopulating relative to other parts of the country. Going into the last budgeting process, Wisconsin faced a deficit of $3.6 billion on what became a $66 billion budget. Wisconsin already has one of the worst debt-loads per capita in the country and its economy is on life support. Borrowing and taxing more aren't an option.

Despite a lower-than-average state unemployment rate, Walker's job-creation plans have flopped so far (he came in promising to create a quarter-million new jobs as governor but the state has suffered a net loss over the past year) but his opponent, Milwaukee Mayor Tom Barrett, certainly doesn't inspire confidence on that score. In this interview, he complains about cuts in state aid to Milwaukee but doesn't suggest how he'd keep from reducing spending in a time of flat or declining revenues and grants that he used Walker's changes in collective bargaining to save money. In this one, he spends more time fretting over the danger of school choice than about how to create a sustainable budget.

If spending is going to exceed current levels of revenue, taxes (now or in the future, to pay for borrowing) have to go up. Relying on future economic growth to pay for ongoing increases in spending is a  mug's game at the state level, as Reason has shown. Whenever states get a few cents in their pocket, they don't simply spend that amount, they commit to massive new plans to keep spending more and more.

So if you're not for cutting spending, then how much should taxes be raised? That seems to be the question in Wisconsin, and elsewhere, that few people really want to answer.

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  1. No amount of money is ever enough.

  2. We know the rich don’t pay their fair share because they’re rich!
    If they paid their fair share they wouldn’t be rich!

    1. If every “rich” person were stripped of all their wealth, the New Rich would be the next targets of liberal griefers everywhere… and the cycle would continue downward until the bag-lady with the most-overfilled shopping cart would be the richest person around.

      1. The logical conclusion of taxing in the name of fairness is universal poverty among all but the political class, which incidentally is what happens in socialist states.

      2. Not true, because the new rich would be politicians themselves or very close associates. And pols rarely eat their own.

        1. Actually, politicians would be the last rich, and everyone else would be dirt-assed poor.

          Works for the Castros, for instance.

  3. Building on the first two comments… I don’t think they give a rat’s ass about balancing the budget. Taxes are not about raising revenue, they are about socking it to someone who has more than they do.

  4. Revenue will be higher because all the teachers and bureaucrats will be paying taxes, right?

  5. Once on Stossel they were debating public school funding. The union stooge said his district was underfunded. Stossel asked him how much would be enough. The union stooge sputtered and stuttered and couldn’t answer the question.

    Just for fun, whenever a liberal tells you that something is underfunded, ask them how much would be enough. With any luck, their heads will explode.

  6. Nick, Nick, Nick. You are asking a reasonable question of unreasonable people. Come on; you have debated folks on the left. When did an honest, logical question ever result in an honest, logical answer?

  7. Things inevitably get ugly when politics amounts to people voting themselves a paycheck.

    I’m a little surprised that Wisconsin has a higher tax burden than Illinois.

    1. “Government is the great fiction through which everybody endeavors to live at the expense of everybody else.”

    2. Perhaps Illinois can catch up during the next legislative session.

    3. As a resident of Illinois, I too am surprised that Wisconsin has a higher tax burden than Illinois.

      But the Illinois state government is trying, though.

  8. The smart move for Walker would be to run a campaign that asked Barrett, in every ad, at every speech, at every interview, how much he was going to raise taxes, and on who, in order to pay for his promises.

    Dog him relentlessly on the numbers. Make him show how he will balance a bigger budget with more taxes, and no funny business with ridiculous growth assumptions.

    Pair that with ads showing that, on his watch, previously planned pubsec layoffs didn’t happen (I know, I know, they should have cut the workforce anyway, but this guts union credibility and talking points), and he wins in a walk.

  9. We know there is truly no hope for a libertarian future when the media reports a 2% increase in spending as “austerity” and enough people believe it to determine election outcomes. I seriously hope Walker wins.

    1. If you’re expecting a 5% raise and your check only increases by 2%, that’s a 3% cut in pay!

  10. Old-style industries have been leaving for years

    I wonder why…

    I’d bet “the weather” has absolutely nothing to do with it.

  11. 2009 is the latest year available for this figure

    Why? It takes more than 3 years to update that shit?

  12. Dude is not making any sense at all man. Wow.

  13. I so hope he gets recalled. Lets see the liberals/unions fall on their own face. I’ll bring the popcorn.

    1. Umm…

      If Walker gets recalled, doesn’t that mean the liberals + unions win?

    2. Even if the Unionistias get Gov. Scott recalled and if Wisconsin turns into the Midwest’s Greece (with cheese) as a result, the state’s fiscal situation will be characterized as either a market failure or blamed on those nasty rich people and their greed.

  14. Taxes should be 200% of income. States want it to be 100%; federal wants it to be 100%. So why not make it 200%.

    Hey hey
    Ho ho
    The union has
    Gotta go!

  15. We DO need higher taxes……SIGNIFICANTLY HIGHER… Wisconsin, and in America, but only from our wealthiest citizens, who are doing better than ever fiscally, and have seen drastic income increases over the last 20 years, in stark contrast to everyone else. The government needs revenue to run necessary programs, period, and the rich have been under-taxed for far too long.

    1. Bob984,

      We already have a progressive tax system in the U.S. I pay more income tax, both in total, and as a percentage of my income, than someone in a lower bracket.

      Until the obscene waste and mismanagement of the tax revenue that is already collected is corrected, I think everyone pays too much….except maybe for those 47% that don’t pay any federal income tax at all.

    2. Bob984, here’s a chart showing the effective income tax rate paid by the population of federal income taxpayers. This charts comes DIRECTLY out of the statistical data provided by the Internal Revenue Service.

      CHART: Average Effective Federal Income Tax Rate by Taxpayer Population, Sorted by Adjusted Gross Income (AGI)

      Those at the top ALREADY pay the highest rates and, because of their higher incomes, also pay more in absolute dollars. As President Obama likes to say, “It’s simple math.”

      If an even more income-progressive tax system were the solution, then California should be the most successful state in the nation. Instead, our system is designed to insulate a 2/3rd majority of taxpayers from the true cost of operating the government? Why 2/3rds? It takes a 2/3rds majority to raise taxes in the Legislature and it used to require a 2/3rds majority to raise spending. The top 2% of California taxpayers pay a higher effective rate and paid over 50% of ALL income taxes in 2009.

      CHART: Comparing the 2/3rd Majority of California Taxpayers vs. the Top 2%

    3. Not a good parody. Improve your game.

  16. I cannot tell you EXACTLY how much higher Wisconsin taxes should be. However, by extension, I can give you an idea. You see, many of the same groups that oppose Wisconsin Governor Scott Walker also control California politics.

    Out here in California, two public-sector unions are the biggest spenders in California politics, according to the California Fair Political Practices Commission (FPPC).

    CHART: The 15 Biggest Spenders in California Politics

    Due to decreased personal incomes, California’s tax revenues have dropped. The solution? Raise taxes, of course. These same unions are backing a plan to increase California’s ALREADY-HIGH state sales tax and income tax rates.

    Who are these organizations that are bankrolling the Governor’s tax hike plan?

    CHART: The Big Government and Union Interests Bankrolling Governor Brown’s Tax Hike

    1. Despite ALREADY having the 2nd and 4th highest income tax rates in the nation, California’s Governor and his union cronies want us to be 1st, 2nd, 3rd, 5th, and 7th. Wisconsin’s top rate is much lower–so much more room for growth.

      CHART: California Governor Jerry Brown’s Tax Hike Proposal and California Income Tax Rates Compared to the Top Marginal Rates in 49 Other States

      Despite ALREADY having the nation’s top state sales tax rate, California Governor Brown and his cronies want to increase this tax, too. Again, Wisconsin’s top rate is much lower than California’s.

      CHART: California Governor Jerry Brown’s State Sales Tax Hike Proposal Compared to States Sales Tax Rates in 49 Other States

      So, how much higher should Wisconsin’s taxes be? If you ask the public sector unions, they should be among the highest in the nation so that you too can destroy your once-vibrant private-sector economy.

  17. How is it that Wisconsin got to a $66 Billion budget for such a small state? In the state of PA with double the population, the state budget is about $27 Billion. For all the Recall fan’s why don’t you move to Calif and help pay for all of Gov Moonbeam’s out of control spending.

    1. The $66 billion is for two years. But you’re still absolutely correct; $33 billion a year is a huge amount of spending for a medium-sized state like Wisconsin.

      It’s not that surprising though when you consider that in many ways, Wisconsin was the birthplace of the communist movement in America.

      1. Wisconsin was the birthplace of the communist movement in America.

        So that’s why it’s shaped like a clinched fist!

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