By M.D. Kittle | Wisconsin Reporter
MADISON, Wis. — Congratulations, Wisconsin taxpayers. You have arrived.
It’s Tax Freedom Day for all you tax-burdened Badger Staters, the day when Wisconsin taxpayers have earned enough money to pay their total local, state and federal tax bill for the year.
You’re a day behind national Tax Freedom Day, Wisconsin, and trail last year’s mark — April 20 — by two days, according to the Tax Foundation, the Washington, D.C. think tank that holds the trademark on Tax Freedom Day.
But there is good news for those feeling taxing fatigue, according to tax experts. Policy reforms and hundreds of millions of dollars in tax cuts are beginning to change Wisconsin’s bad reputation as a high-tax state.
“Wisconsin has had some beneficial tax reform over the last two years to its overall tax burden and to its tax structure,” said Scott Drenkard, an economist at the Tax Foundation’s Center for State Tax Policy. “The reforms are stepping in the right direction. I don’t know what the future holds in terms of future tax reform, but I’m interested to learn what they will look at in the next (legislative) session.”
The Tax Foundation’s annual analysis comparing the states’ tax burden is based on U.S. Census Bureau figures, which means much of the data lag a few years behind. So, the vast majority of the tax cuts and reforms passed by the Republican-led Legislature and signed by Republican Gov. Scott Walker during the past few of years have yet to register on the annual measurement of tax burden.
As of 2011, Wisconsin’s tax burden of 10.99 percent ranked as the fifth highest of the 50 states, and well above the national average of 9.8 percent, according to the Tax Foundation. Wisconsin taxpayers paid $4,477 per capita in state and local taxes.
“Wisconsin ranks among the highest states for tax burden; 11 percent of the economy is taxes,” Drenkard said.
But much has changed since June 30, 2011, the end of Wisconsin’s 2011 fiscal year.
A month ago, Gov. Scott Walker signed into law a $541-million tax cut bill, payback to taxpayers in improving economic times that promise state revenue will exceed projections by about $1 billion in June 2015.
The tax cut, the third reduction in a year, offers a mix of property tax and income tax relief. Average income tax filers are projected to see a tax break of about $46 in April 2015, and the savings would amount to $131 for the average homeowner on this December’s property tax bills.
More impressive is the governor’s call to change income tax withholding rates, meaning the state will take less money out of workers’ paycheck. A married couple earning a combined $80,000 annually will see about $520 in tax savings. The alterations were expected to start this month.
Wisconsin doesn’t fare so well in more real-time rankings, however. The Badger State ranks 43rd in the Tax Foundation’s 2014 State Business Tax Climate Index. The index compares the states in five areas of taxation that impact business: corporate taxes, individual income taxes, sales taxes, unemployment insurance taxes, and taxes on property, including residential and commercial property.
Wisconsin placed ahead of only one neighboring state, Minnesota, which ranks 47th on the index. Iowa finished 40th, Michigan, 14th, and Illinois, 31st.
Drenkard said the Tax Foundation expects Wisconsin’s ranking to improve this year, although he wouldn’t offer any predictions.
“You’ll have to tune in this October to see,” he said.
As far as freedom from the tax man goes, it could be worse.
Connecticut and New Jersey residents won’t earn enough to pay all of their tax obligations until May 9. New York’s Tax Freedom Day arrives on May 4.
Of course it could be much better. Residents of Louisiana bear the lowest average tax burden in 2014. Their “freedom” arrived on March 30. Next best was Mississippi, celebrating Tax Freedom Day on April 2, and South Dakota, on April 4.
Freedom has its price. Taxes feed the services that citizens often expect or demand. Valid point, said Drenkard, but taxpayers ought to know what they are paying and how they compare to other states and the nation.
“Citizens need to ask themselves, are they getting what they paid for,” the economist said. “Everyone has an opinion on that.”
111 days ’til freedom
National Tax Freedom Day arrived on Monday, three days later than last year, according to the Washington, D.C. –based Tax Foundation. The reason? Continued slow economic recovery, which is expected to boost tax revenue especially from the corporate, payroll, and individual income tax.
The latest ever Tax Freedom Day was May 1, 2000, meaning Americans paid 33.0 percent of their total income in taxes. A century earlier, in 1900, Americans paid only 5.9 percent of their income in taxes, meaning Tax Freedom Day came on Jan. 22.
In 2014, Americans will pay $3 trillion in federal taxes and $1.5 trillion in state taxes, for a total tax bill of $4.5 trillion, or 30.2 percent of income, according to the Tax Foundation.
Contact M.D. Kittle at [email protected]