September
2006
Reform Income and Sales Taxes in Wisconsin
You often hear about people complaining about how Wisconsin taxes are too high but there is a fairly simple solution — stop subsidizing Illinois visitors.
Wisconsin's natural beauty helps us benefit from a large tourism industry and those tourists have to eat. If they rent a condo for a week or go up to their cabin in northern Wisconsin, they don't pay any income tax. Illinois gets the benefit of their taxes, yet when Wisconsinites cross the Illinois border, it is barely 5 minutes before we have paid an Illinois toll. In fact, Illinois recently doubled its cash tolls and its put its most expensive toll stations on the border. The first one into the home of the flatlanders costs $1.50. Yet, Illinois residents don't pay a dime to ride on Wisconsin's freeways and highways.
Illinois residents also benefit from not paying sales tax on food purchases since Wisconsin excludes groceries from its taxable items. Many Illinois residents who live near the border do their grocery shopping in Wisconsin because they can avoid those taxes.
Because the State of Wisconsin doesn't get additional revenues from the sales tax, we pay a higher income tax than other states in order to subsidize what out of state residents would otherwise chip in. There is no free ride in Illinois. When a Wisconsinite visits Illinois, there's no sign up that says, 'Wisconsinites don't have to pay tax'.
It's time to stop giving Illinois residents a free ride while Wisconsinites pay a disproportionately higher percentage of their income to subsidize out of state visitors. It's time for reform.
If the sales tax exemption were lifted for all items, state revenues would rise and Wisconsin would be able to afford to lower the income tax. It's a valid argument to say that a sales tax would disproportionately impact the poor because everyone has to eat and a sales tax would take that much more away from those living on the edge. This could be solved by offering a tax credit to the working poor.
But reform has it's challenges in an environment as politically acrid as it is in Madison these days. Republicans would charge that democrats don't want to lower the income tax and Democrats would charge that republicans only want to give tax breaks to their rich campaign donors. Then there's the issue of when a tough budget year comes, the republicans would want to cut the tax credit for the poor crying that we can't afford it anymore.
The reality is that it is possible to make this happen but not without the work on some honest players in the state house. True diplomats who have the ability to reach across the aisle to craft a workable compromise would be needed; people who have the ability, if even temporarily, to set aside their own personal agenda.
This is not to say we need to find ways to soak Illinois residents but it is time for them to start to pay for services the enjoy here.
Jim McGuigan
Jim McGuigan
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