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By Mary Lazich
Friday, Nov 28 2008, 08:30 AM
Wisconsin has a moving problem. Too many are voting with their feet.
Our state’s high level of taxation is forcing too many residents to pack up and leave. During November 2005, the Wisconsin Taxpayer Alliance issued a very troubling report entitled, "Moving In, Moving on: Migration in Wisconsin." During the five years prior to the 2000 census, almost 669,000 people either moved to or out of Wisconsin. However, the net in-migration into Wisconsin was a meager 7,282.
Individuals with college or advanced degrees were more likely to leave, while those with less education tended to come. Individuals with household incomes above $75,000 left Wisconsin. Those with incomes of $200,000 or more had the highest rates of leaving.
The huge exodus of wealthy Wisconsinites leaving the state caused a loss of an estimated $4.72 billion in net worth and a loss of $455 million in income over the five years of this study. That means far fewer in-state bank deposits, less stock in Wisconsin firms, less investment capital for in-state ventures, and less money given to local charities.
Arthur Laffer, president of Laffer Associates and Stephen Moore, senior economics writer for The Wall Street Journal editorial board confirmed that high taxing and spending have had a negative impact on Wisconsin’s ability to compete and cause many people to relocate elsewhere.
Laffer and Moore write in the Wall Street Journal, “Five of the states near the bottom of our competitiveness ratings -- Illinois, Maryland, Michigan, New Jersey and Wisconsin -- have enacted major tax increases.” Laffer and Moore say the record movement of citizens across America has little to do with the weather. They say the states with the most dynamic and desirable economies are generally the states with the lowest tax, spending and regulatory burdens. These states win the battle for the prized commodity of human capital. The big losers are high taxing and spending states in the Midwest and Northeast.
New evidence suggests the disturbing pattern continues.
The Woodrow Wilson School of Public and International Affairs at Princeton University released a study during September 2008 examining migration trends in New Jersey. The authors compared New Jersey to states that tend to attract low‐income individuals, while seeing a relative outflow (or much smaller inflow) of wealthy individuals. The study said Wisconsin is a good example, being one of the five states in the country with the most negative correlation between income and net migration. The list includes Wisconsin, Arizona, Delaware, North Dakota and Arkansas.
The study says the following about Wisconsin:
“At low income levels, there is strong net in-migration into Wisconsin; however, at higher income levels, in‐migration is small or negative. Hence, one can say that Wisconsin is more attractive to low‐income individuals than high‐income earners.”
Authors concluded that in New Jersey, “poor people leave, but rich people do not.” In Wisconsin, “on average, poor people move in, but rich people do not.”
Why is Wisconsin so enticing to so many poor? University of Wisconsin-Madison economics professor provided an answer in his presentation to a Federal Reserve Bank of Minneapolis conference on the Midwest economy during June 2008. Kennan displayed graphs showing Wisconsin dishes out the highest welfare benefits in the Midwest. You thought we ended welfare as we know it? Time limits have been placed on benefits and there are more stringent work provisions. But the size of benefits remains generous.
Factor in other benefits like child care, BadgerCare, the earned income tax credit, and low income housing, and the incentives for low-income residents to flock to Wisconsin are quite evident. The term, “welfare magnet” may have disappeared for some time in Wisconsin, but this new data seems to suggest there could be an entirely new welfare migration taking place.
This migration is clearly putting a strain on our finances. Just how much it is costing in taxes is unclear but my guess is that it is substantial and needs further study.
Meanwhile, our wealthiest leave Wisconsin, taking with them their tax revenues, spending, savings, investments, and charitable contributions. To stop people from voting with their feet in Wisconsin, we must stop the hemorrhaging of taxing and spending.
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By Mary Lazich
Wednesday, Nov 19 2008, 03:41 PM
Whenever a new economic report surfaces about Wisconsin, the news usually isn’t very good, whether it be about taxes, our business climate, per-capita income, or Tax Freedom Day. I have blogged extensively about these reports and the latest also shows some critical shortcomings.
The “2008 State New Economy Index” has been released by the nonpartisan groups, the Ewing Marion Kauffman Foundation and the Information Technology and Innovation Foundation.
According to stateline.org, “The groups used 29 indicators to rank each state on how well its economy is structured to compete regionally, as well as globally. States at the top of the list tend to have a high concentration of workers in ‘knowledge jobs’ that require at least a two-year college degree, are at the forefront of the information technology and Internet revolutions and have institutions and residents that embrace the digital economy.”
When it comes to the New Economy, Wisconsin ranks number 33 among the states. The report defines the New Economy as, “a global, entrepreneurial, and knowledge-based economy in which the keys to success lie in the extent to which knowledge, technology, and innovation are embedded in products and services.”
More specifically, the New Ecomony is:
Knowledge-dependent. Knowledge workers have become the largest occupational category.
Global. More goods and services are being traded and exported.
Entrepreneurial. Most, if not all of the job growth in America is derived from companies that are less than five years old.
Rooted in information technologies. IT’s are every where, the most important technology engineering our economy, a key component in almost every sector.
Driven by innovation. Competition is heavily based on the ability to create and adopt new products and business models. As the report states, “Innovative capacity (derived through universities, Research & Development investments, scientists and engineers, and entrepreneurial drive) is increasingly what drives competitive success in the New Economy.”
The Midwest has failed to catch on to the New Economy with the exception of some our neighbors: Illinois (rank number 16), Michigan (rank number 17), and Minnesota (rank number 14).
Why is the “2008 State New Economy Index” important? The report says, “How closely do high scores correlate with economic growth? States that score higher appear to create jobs at a slightly faster rate than lower-ranking states. Higher New Economy scores were positively correlated with higher growth in state per-capita incomes between 2002 and 2006….states that embrace the New Economy can expect to sustain greater per-capita income growth for the foreseeable future.”
Solutions? We must keep our best and brightest here in Wisconsin and we must dramatically improve our business climate.
Here is the complete “2008 State New Economy Index.”
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By Mary Lazich
Wednesday, Nov 19 2008, 02:20 PM
Reports indicate the state is headed for a disastrous $5 billion state budget deficit. The worst way to get out of a hole is to keep digging, i.e., increasing taxes and fees. And yet, it seems Wisconsin will continue its fiscally irresponsible practice of increasing taxes and fees at a time when they are least affordable.
Case in point: The Wisconsin Division of Emergency Management wants to increase the fees for businesses that are required to file emergency planning notifications or that store hazardous chemicals by a whopping 35 percent. Wisconsin hasn’t increased the fees since they were first implemented in 1990 and now is not a good time to start.
More than 7,000 facilities in Wisconsin would be affected by the fee increases. Currently, the emergency planning notification fee is $800 per facility and would increase to $1,080 under the proposed rule. The inventory form fee would increase across all levels of reporting requirements, ranging from $205 to $1540. The emergency planning notification fee is a one-time fee. The inventory form fee is an annual fee.
The additional fees are expected to increase revenues by $471,000; however, there is a larger issue to consider. If this is any indication how the state, in general, is going to address its fiscal crisis, as compared to other states that are cutting rather than increasing taxing and spending, Wisconsin’s economic problems will only become more severe.
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By Mary Lazich
Friday, Nov 14 2008, 01:52 PM
Now that Democrats control the governor’s mansion and both houses of the state Legislature, it is a pretty safe bet that there will be a serious effort to repeal the Qualified Economic Offer (QEO) when the Legislature reconvenes in January 2009. In the past, Governor Doyle has said the QEO (opposed by the state teacher’s union that strongly backs Governor Doyle) “isn’t working.” The governor needs a history lesson.
The QEO was instituted by the Legislature in 1993 after angry taxpayers statewide demanded action be taken to stop the tidal wave of huge property tax increases. Since its inception, the QEO has helped keep property taxes from being even higher than they already are.
Under the QEO, the compensation package for teachers including salaries and benefits is to be limited to a 3.8 percent increase. Prior to the implementation of the QEO, settlement packages with teachers were much larger, forcing a tremendous burden on taxpayers.
According to data from the Wisconsin Association of School Boards (WASB) that used figures from the Wisconsin Department of Public Instruction, the average total teacher salary and benefit package increase in the years before the QEO was 8 percent during 1984-85, 8.4 percent during 1985-86, 7.7 percent during 1986-87, 7.4 percent during 1987-88, 7.1 percent during 1988-89, 7.3 percent during 1989-90, 7.4 percent during 1990-91 and 6.9 percent during both 1991-92 and 1992-93.
Enough was enough. Taxpayers protested. The Legislature heard and listened, and the QEO was adopted.
In reality, most school districts do not stay within the QEO, agreeing to settlements that surpass the 3.8 percent limit. The WASB reports that the average total package of salaries and benefits was 4.29 percent during 2006-07, 4.25 percent during 2005-06, and 4.31 percent during 2004-05. The percentages are higher than the rate of inflation, and more than likely are greater than increases provided in the private sector.
Watch for state Democrats from the top on down to prioritize the repeal of the QEO at a time when property taxpayers are already overburdened. The nonpartisan Tax Foundation in Washington D.C. writes, “Wisconsin Property Taxes: Among the Nation's Highest: Wisconsin is one of the 37 states that collect property taxes at both the state and local levels. As in most states, local governments collect far more. Wisconsin's localities collected $7,324,843,000 in property taxes in fiscal year 2004, which is the latest year the Census Bureau published state-by-state property tax collections. At the state level, Wisconsin collected $104,158,000 in property taxes during FY 2004, making its combined state/local property taxes $7,429,001,000. That brings its per capita collection to $1,350, which ranks 11th highest nationally.” Here is the full report
The governor and Democrats in the Legislature will be bound and determined to increase your taxes even higher, and that is exactly what will happen with elimination of the QEO.
The QEO must stay intact. Without the QEO, spending and taxes will rise substantially, more people will leave their homes, more people will leave the state, and more jobs will be lost. We cannot afford to lose the QEO.
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By Mary Lazich
Friday, Nov 14 2008, 01:39 PM
There was some good news from last week’s elections for fiscal conservatives. Voters in Colorado, the architect of the Taxpayer’s Bill of Rights (TABOR), rejected another effort to weaken protection for taxpayers. The Colorado ballot included Amendment 59, considered by TABOR supporters to have been the most serious attack against the concept.
TABOR was approved as an amendment to the state constitution in Colorado during 1992. Government spending was capped at the previous year’s total multiplied by the rate of inflation plus annual population growth. The beauty of TABOR is that voters need to approve any hikes in tax rates or in state or local debt. Revenues that go beyond the spending caps must be returned to taxpayers through tax reductions.
TABOR was a godsend to taxpayers. Between 1997 and 2002, the state of Colorado issued tax rebates totaling more than $3.2 billion. Colorado was the envy of tax relief proponents and saw its economy take off. TABOR’s opponents have stubbornly tried numerous times to circumvent the measure by supporting tax and spending increases. Referendum C was adopted during 2005 that suspended revenue limits in Colorado for five years. Revenues that have exceeded the TABOR limits are now funding government in Colorado, not tax relief. Revenue limits return in 2010. The latest attempt to water down TABOR was Amendment 59 on the Colorado ballot November 4.
Amendment 59 would have eliminated rebates that taxpayers receive when Colorado collected more money than it is allowed, and spent the money on preschool through 12th (grade (P-12) public education. The amendment also would have eliminated a required inflationary increase for P-12 education spending and would have set aside money in a new savings account for P-12 education.
Opponents of Amendment 59 called it a permanent tax increase, arguing that a requirement to donate a tax rebate to government programs is a net tax increase.
Amendment 59, its opponents claimed, would have freed up general funds currently spent on education, allowing elected officials to spend more taxpayer money on their pet projects. They also emphasized that the amendment would gut the goal of TABOR: Shrinking the role of government in the state’s economy. The fear was that Colorado would return to the days of double-digit spending increases, making balancing the state budget more difficult. That sounds familiar, doesn’t it, Wisconsin?
Amendment 59 was rejected by 55% of Colorado voters and the consensus is that once the suspension on revenue limits is lifted during 2010, Colorado will once again enjoy economic growth.
Under the current political landscape, Wisconsin’s prospects for approving TABOR are next to impossible. I support TABOR, and voted for tough spending limits when the Legislature took up the measure during 2006.
Colorado’s defeat of Amendment 59 signals a return of TABOR to the state that successfully pioneered the idea. TABOR’s reputation and credibility will rebound, and hopefully serve as the stimulus for another proposal here in Wisconsin.
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By Mary Lazich
Saturday, Nov 8 2008, 06:12 AM
When the state Legislature reconvenes in January, I plan to re-introduce legislation to create a website that would show all state expenditures. The user-friendly searchable website would be maintained by the Wisconsin Department of Administration (DOA).
Anyone could go to the website and see how the state is spending your money. Legislation that I introduced last session would require that the DOA must ensure that all state agency expenditures are available for inspection. The DOA would categorize expenditure information on the Web site by state agency and expenditure category. Within each category, DOA must show the amount and purpose of each expenditure exceeding $100 and the entity or person receiving your money.
All of the following information relating to state agency grants and contracts would be made available to the general public: a copy of the contract and grant award; the state agency making the grant or entering into the contract; the name and address of the person receiving the grant or entering into the contract; the purpose of the grant or contract; the amount of the grant or the amount the state agency must expend under the contract; and the name of the state fund the grant is paid or moneys are expended under the contract.
There would be frequent updates so the public is aware as quickly as possible about how their tax money is being spent. State agencies would be required to make the information available to the DOA not later than 24 hours after an expenditure is made or an agency makes a grant or enters into a contract.
Several states have already adopted this transparency philosophy called the Google-government trend, a movement that has tremendous benefits for taxpayers. One of the states is the “Show me” state, Missouri that last year created a popular database called the Missouri Accountability Portal (MAP). During May of this year, MAP exceeded six million hits.
Googling state government works. The National Taxpayers Union (NTU) reviewed Missouri’s database and found more than $2.4 million of dubious expenditures during the past eight years. According to the NTU, “The state of Missouri spent $15,482.57 at Ann's Bra Shop from 2000 to 2008 for ‘professional services’ and ‘clothing supplies.’ Over the same period, government employees spent more than $1.6 million at coffee shops, $387,210.14 at framing stores, $278,053.46 at florists and nurseries, and $70,849.02 at donut bakeries.”
Other expenditures discovered by the NTU included $936.75 spent at The Corsage Shop, $232.00 at Doris' Beauty Shop, $1,651.27 at The Jean Shop, $348.70 at the Budget Rose Shop, $6,964.55 at Susie's Bake Shoppe, and $3,803.00 at the Westside Barber Shop. During 2000, $12.00 was spent at Ann's Hair & Nail Shop. Apparently, twelve dollars was the price at the time for a manicure.
If a state government is throwing money around for bras, hair appointments, manicures, flowers, frames, and donuts, I am certain taxpayers would want to know that information. Clearly, having this information readily available would assist legislators making important budget decisions.
A quick and easy Internet clearinghouse would throw a laser beam on government spending, the increased focus having great potential for significant savings. As I researched this legislation, I was told that the Wisconsin data is available and technology is in place that could keep the cost of a transparency website relatively low. Yes, it is definitely time to Google Wisconsin government.
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By Mary Lazich
Monday, Nov 3 2008, 01:36 PM
The nonpartisan Tax Foundation in Washington D.C. has announced the winners of its CompeteUSA YouTube Contest. Contestants produced videos about America's high business tax rates and their impact on our country’s wages and ability to compete.
The Tax Foundations reports that data shows, “America has the second-highest corporate income tax rate in the industrialized world, and the American worker shoulders a disproportionate amount of the corporate tax. As a result of America standing still while nine key trading partners cut their corporate tax rates last year, our corporate tax rate is now 50% higher than the OECD (Organisation for Economic Co-operation and Development) average.”
Third prize in the contest went to Lori Harfenist of Brooklyn, New York for her video, "Taxes, Schmaxes."
Second prize was awarded to Craig Kirchoff of Alexandria, Virginia for his video called, “Sally, the Corporate Income Tax and You."
First prize went to Andrew Patterson of Edmond, Oklahoma for his video, "Tax Attack."
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By Mary Lazich
Monday, Nov 3 2008, 07:13 AM
By Mary Lazich
Friday, Oct 31 2008, 09:11 AM
Wisconsin’s business tax climate continues to be one of the worst in the country. The nonpartisan Tax Foundation in Washington D.C. has released its 2009 State Business Tax Climate Index, ranking Wisconsin number 38 (Wisconsin was number 39 last year). The annual study is significant because it demonstrates how states compare to one another in competitiveness.
Here are the five specific areas the Tax Foundation reviewed in each state to come up with its Index and how Wisconsin scored on each: corporate taxes (29), individual income taxes (44), sales taxes (18), unemployment insurance taxes (25), and property taxes (31).
American companies confront a double-whammy. They pay one of the highest corporate tax rates of any of the industrialized nations. The top federal rate on corporate income is 35 percent. On top of that, some states institute harsh tax systems that make competition difficult. Companies will go where they have the best advantage. As the Tax Foundation correctly reports, “States with the best tax systems will be the most competitive in attracting new businesses and most effective at generating economic and employment growth.”
While booming job creation overseas can’t be overlooked, the U.S. Department of Labor reports most significant job relocations are from one state to another. A state like Wisconsin must be more concerned about jobs moving to Indiana (Business tax climate number 14), Michigan (number 20) or Illinois (number 23) than India or China.
The ten states with the best business tax climates are, in order, Wyoming, South Dakota, Nevada, Alaska, Florida, Montana, Texas, New Hampshire, Oregon, and Delaware. Wyoming, Nevada and South Dakota do not have corporate or individual income taxes. Alaska does not have individual income or state-level sales taxes. Florida and Texas do not have individual income taxes. New Hampshire, Delaware, Oregon and Montana do not have sales taxes. States that are able to draw adequate revenue without one of the major taxes will be more competitive than states that impose every possible tax.
Some factors contribute to Wisconsin’s poor ranking. The income level at which a state’s top rate kicks in determines what amount of income is subject to the top rate. Wisconsin scores badly here because it is one of the states that has arranged its multiple tax brackets so that the top rate takes effect in the middle range of income ($152,140).
Wisconsin has an Alternative Minimum Tax (AMT) that is modeled after the federal AMT. The Tax Foundation says the AMT is, “an inefficient way to prevent tax deductions and credits from totally eliminating tax liability,” that puts states like Wisconsin through, “needless tax complexity.”
Then there is our gas tax, the fourth highest in the country at 32.9 cents. Because gasoline constitutes a large expense, states with lower gas taxes are more competitive.
How can states like Wisconsin improve their business climates? What about tax incentives and subsidies? The Tax Foundation’s position and I concur, is that, “if a state needs to offer such packages, it is most likely covering for a woeful business tax climate. A far more effective approach is to systematically improve the business tax climate for the long term so as to improve the state's competitiveness.”
Surely, other factors play a role in a state’s business climate including how close it is to raw materials and transportation centers, the quality of schools, the skill of its workforce, and the state’s quality of life. Some of these areas lie beyond the scope of state lawmakers to directly control. However, legislators can make policy decisions that directly impact a sate’s tax system, and thus, the state’s business climate.
I agree with the Tax Foundation that writes:
“Taxes matter to business. Business taxes affect business decisions, job creation and retention, plant location, competitiveness, the transparency of the tax system, and the long-term health of a state's economy. Most importantly, taxes diminish profits. If taxes take a larger portion of profits, that cost is passed along to either consumers (through higher prices), workers (through lower wages or fewer jobs), or shareholders (through lower dividends or share value). Thus a state with lower tax costs will be more attractive to business investment, and more likely to experience economic growth.”
The best tax system is one that is simple and fair to all businesses that shuns excessive business taxes and keeps costs for adhering to the system down. Until Wisconsin adopts policies to enable a business climate that encourages growth, it will continue to have problems competing.
You can find the 2009 State Business Tax Climate Index here.
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By Mary Lazich
Tuesday, Oct 28 2008, 12:52 PM
Wisconsin incomes continue to lag behind the rest of the nation. The non-partisan Wisconsin Taxpayers Alliance (WISTAX) has broken down Wisconsin incomes by county, and found that most of the state’s 72 counties are experiencing problems with income growth.
The ten fastest growing counties were in Bayfield, Buffalo, Door, Florence, Green Lake, Kewaunee, Langlade, Ozaukee, Vilas, and Waukesha. But WISTAX points out these counties are small, with less than 11 percent of the state’ population.
Overall, the news is disappointing. WISTAX reports:
“During the 2003-2006 period, state income growth lagged the nation. While national incomes climbed 5.2% per year, Badger State incomes rose 3.9% annually. From 2003 through 2007, only metro Milwaukee (Milwaukee, Ozaukee, Washington, and Waukesha counties) and Sheboygan had income growth topping the state average. However, both areas were in the bottom half of 365 U.S. metro areas studied.”
You can read the WISTAX news release here.
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By Mary Lazich
Friday, Oct 24 2008, 12:28 PM
A report by the non-partisan Wisconsin Taxpayers Alliance says, “growth in tax dollars going to the UW has trailed overall state spending, state school aid, and inflation.”
At first blush, the WISTAX finding may sound as though the UW is getting a raw deal. However, it is clear why growth in tax dollars for UW has fallen behind. Given the numbers, keeping pace with the growth in overall state spending and state school aid would be extremely difficult.
Ready for some eye-popping statistics? WISTAX reports, “Between 1983 and 2007, state aids and tax credits for K-12 schools rose 320%, while overall state expenditures were up 222%. By comparison, inflation—as measured by the consumer price index (CPI)— rose 115%, and UW funding, 99%.”
Here is the WISTAX news release.
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By Mary Lazich
Monday, Oct 6 2008, 07:30 AM
Wisconsin’s dispute with the Ho-Chunk Nation might be over after a four year battle, and Wisconsin taxpayers got the short end of the stick in the gambling compact settlement.
The Ho-Chunk stopped making payments to the state in 2004 after signing a compact with Governor Doyle in 2003. The tribe argued that because a 2004 state Supreme Court ruling invalidated a similar compact agreement with the Forest County Potawatomi, it owed the state nothing.
Since 2004, Ho-Chunk halted payments with the exception of a one-time $30-million payment during 2006 it claimed demonstrated good faith bargaining. Here are the details of the recent settlement that should have taxpayers quizzically shaking their heads wondering, is that all there is?
The state contended the Ho-Chunk owed $72 million. Ho-Chunk has agreed to pay $60 million. That is a $12 million jolt to Wisconsin taxpayers.
Terms of the old compact had the Ho-Chunk paying the state a six percent tax of its take. Under the new compact, the Ho-Chunk will make payments of five percent if net earnings are below $350 million and 5.5 percent if earnings exceed $350 million. The reduced percentage means a loss of millions of dollars to the state. By contrast, the Potawatomi pay 6.5 percent of winnings.
The new compact also allows the Ho-Chunk to make reductions in their annual payments to the state:
- Beginning May 1, 2010, the tribe can deduct payments made to counties totaling $1,000 for every acre of land owned by the U.S. government in trust for the tribe located within each county’s jurisdiction in July, 2003. The LFB informs me that during July 2003 the Ho-Chunk had approximately 2,300 acres of trust land that could result in a reduction in their annual state payment of $2.3 million.
- During a 10-year period from May 1, 2009 to May 1, 2019, the tribe could deduct the amounts it paid for public works projects that benefit both the tribe and the state. Deductions would be limited to no more than $1.0 million in any one year and the total deductions for the period could not exceed $5.0 million. That means there could be an average annual deduction of $500,000.
- The tribe can also deduct any additional amounts paid by the tribe for projects that the state and the tribe agree provide a substantial public benefit in areas of economic development, infrastructure, health, safety, or welfare. These deductions would begin May 1, 2019, would be limited to a total of $4 million, with annual deductions limited to a maximum of $1 million.
The casinos are arguably some of the most lucrative, profitable businesses in Wisconsin, yet their payments to the state are questionable. I asked the non-partisan Legislative Fiscal Bureau (LFB) to prepare a memo that provides information that compares the imposition of the state corporate income and franchise tax, general sales tax, and local property taxes on private businesses to tribal casino operations in Wisconsin.
The LFB writes a “tax rate of 7.9 percent is applied to Wisconsin net taxable income to determine gross tax. The annual payment negotiated with the Ho-Chunk Nation is five percent of net win (5.5 percent if net win is greater than $350 million). Since net win generally does not include deductions used in determining net income, the net-win amount is likely larger than would be the case if the Ho-Chunk Nation casino was subject to the state corporate income and franchise tax. In addition, corporate income and franchise taxes can be offset by state tax credits. However, the corporate income and franchise tax rate is 7.9 percent which is higher than the 5.0 percent or 5.5 percent rate applied to net win.”
On the matter of the sales tax, the LFB writes, Due to restrictions in federal law, the state sales tax is not imposed on purchases or leases of otherwise taxable items by the tribes for use in the casinos. In addition tribal gaming proceeds generally are not subject to the sales tax. Sales of lodging, food and beverages, and admissions to the entertainment events at the casino are taxable if the purchaser is not a member of the tribe that is operating the casino, but exempt if the purchaser is a tribal member.”
Finally, on property taxes, the LFB writes, “Casinos owned by Native Americans are exempt from the property tax.”
To re-cap, Wisconsin businesses pay a higher tax rate than the rate Ho-Chunk and other tribes pay the state from their earnings. The tribes do not pay sales taxes or property taxes.
At first blush, the amount of the payments being made to the state through negotiated compacts may sound sizeable. However, there are significant societal costs due to gambling.
Serious problem gamblers lose or quit their jobs, steal money to support their gambling habit, think about and actually plan suicide, and some even make suicide attempts. Children of problem gamblers develop behavior and adjustment problems suffering from depression, anxiety, and cynicism.
The Wisconsin Council on Problem Gambling Helpline Executive Director Rose Gruber says the average debt of callers to her hotline during 2007 was $43,000, up from $37,000 during 2006. Wisconsin has over 332,000 serious problem gamblers reported during 2007, up from 265,000 the previous year.
A Wisconsin Policy Research Institute study in 1996 reported the average serious problem gambler imposed costs close to $10,000 upon Wisconsin each year with a total annual social cost impact of over $307 million. The same study reports the average serious problem casino gambler imposed costs of over $10,000 upon Wisconsin each year with a total annual social cost impact of over $138 million.
The Ho-Chunk’s deal with the state can be renegotiated after 25 years. Meanwhile, for the next two and half decades, the Ho-Chunk can offer Las Vegas-style games at its casinos in Baraboo, Black River Falls, Nekoosa and Tomah. It operates a bingo parlor in Madison and a new casino is scheduled to open in Wittenburg in October.
Governor Doyle negotiated a deal that brings in less money at a smaller percentage to the state and allows huge expansion of gambling in the state.
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By Mary Lazich
Wednesday, Aug 27 2008, 08:55 AM
One year ago, I blogged about the problems associated with feel-good fat taxes.
As far-fetched as a fat tax may sound (most of the revenue often fails to get to obesity-prevention programs or healthy food subsidies), Alabama has taken the extraordinary step of mandating that its state employees get into shape in two years or be forced to pay more for insurance.
Some states, according to the National Conference of State Legislatures, provide incentives for people to adopt healthier lifestyles. Workers in Ohio get $50 for having health assessments and another $50 if they follow medical instructions.
Arkansas and Missouri give monthly discounts on premiums for employees who take health risk assessments and enroll in programs to reduce obesity and stress. Those states differ from Alabama in that they offer incentives instead of punishments. Alabama has become the first state to charge workers who fail to try to lose weight.
Some medical experts oppose the Alabama plan, saying it's too punitive. Read more about Alabama’s plan here.
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By Mary Lazich
Friday, Aug 15 2008, 09:18 AM
Here is Exhibit A why Wisconsin is a tax hell and why I consistently vote against state budget and budget repair bills that increase taxes and spending.
The non-partisan Wisconsin Taxpayers Alliance (WISTAX) reports, “Net property taxes in Wisconsin rose 5.7 percent in 2008, the largest increase since 2005, the year before the recent levy limits on municipalities and counties were imposed. The new study notes that 2006 property taxes here were ninth highest nationally and higher than those in all surrounding states.”
School levies increased the most, at 7.4 percent. County and municipal levy increases were limited to the greater of 3.86% or the increase in property values due to new construction. Due to the slowing real estate market, new construction growth around the state was only 2.5 percent. Even so, municipal property taxes increased by 5.0 percent, and county levies were up 4.5 percent.
Using the most recent figures from the U.S. Census Bureau, WISTAX found that Wisconsin property taxes, at 4.4 percent of personal income, were ninth highest in the nation.
Here is Exhibit B. The Tax Foundation in Washington D.C. has completed its annual report estimating the combined state-local tax burden of residents in all 50 states. It concluded that state-local tax burdens have declined due to income growth surpassing tax growth.
That is not the case, however, in Wisconsin. Every year, the Tax Foundation determines the percentage of income residents in each state pay in state and local taxes. Wisconsin ranks number 9 in the country for state and local tax burdens. Wisconsin’s rank was number 10 in 2007.
According to the Tax Foundation, Wisconsinites pay 10.2 percent of their income in state and local taxes. Wisconsin’s burden isn’t far from New Jersey that ranks number 1 with a state-local tax burden of 11.8 percent.
Surrounding states have lower state-local tax burdens than Wisconsin:
Minnesota: 10.2 percent (#12)
Michigan: 9.4 percent (#27)
Illinois: 9.3 percent (#30)
Iowa: 9.3 percent (#31)
One of the interesting parts of the report is a segment on states where the tax burden rankings have dropped the most:
“From 1977 to the present, South Dakota’s tax burden ranking has dropped 25 places from 20th highest to 45th, primarily by maintaining a zero rate on individual and corporate income. The tax burden ranking in Arizona has dropped 24 places from 17th highest to 41st, and the residents there now pay the tenth lowest tax burden. Most of the change came in the wake of a property tax limitation in 1980, and their ranking has changed little since.
Montana has dropped 22 places, primarily by maintaining a zero rate on general sales.
Colorado has dropped 19 places in the ranking over the last 30 years. It levies every major tax, but the rate on each is among the lowest in the country. Spending discipline in the form of a so-called TABOR (Taxpayer Bill of Rights) has helped the state keep tax rates low.
Two politically liberal states have dropped sharply: Oregon and Massachusetts. Oregon has done so by never enacting a sales tax, dropping 16 ranks from 10th highest to 26th. Massachusetts has dropped 17 places by imposing a property tax limitation and keeping a lid on its personal income tax rate, living down its ‘Taxachusetts’ nickname.”
While other states have found the right formulas, Wisconsin continues down the disastrous path of excessive taxing and spending.
Two months ago, I was skeptical of a Wisconsin State Journal article with a bold headline that proclaimed, “Wisconsin falls from ranks of top 10 highest-taxed states for first time since 1980.” Researchers at WISTAX and the University of Wisconsin said this would be only the second time since 1969 Wisconsin has not been in the top ten in taxes nationwide.
How did this happen? As the newspaper reported, “Wisconsin's taxes actually rose slightly in the fiscal year ended in June 2006 but those of other states rose more quickly.” Translation: You’re still paying high taxes, Wisconsin, and they’re not going down.
Judging from the latest reports on our tax climate, it is time to put the corks back in the champagne.
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By Mary Lazich
Thursday, Aug 14 2008, 06:06 PM
WEAC (The Wisconsin Education Association Council), the state teacher’s union has released its 2009-10 Legislative Agenda. Topping WEAC’s list of priorities is repealing the QEO (Qualified Economic Offer).
This is another reason the November election is critical. If Democrats maintain control of the state Senate and take back control of the state Assembly, a legislature controlled by Democrats along with Governor Doyle will kill the QEO. The result will be a property tax explosion.
Some background is in order. The QEO was instituted by the Legislature after angry taxpayers statewide demanded action be taken to stop the tidal wave of huge property tax increases. Since its inception, the QEO has helped keep property taxes from being even higher than they already are.
Under the QEO, the compensation package for teachers including salaries and benefits is to be limited to a 3.8 percent increase. Prior to the implementation of the QEO, settlement packages with teachers were much larger, forcing a tremendous burden on taxpayers.
According to data from the Wisconsin Association of School Boards (WASB) that used figures from the Wisconsin Department of Public Instruction, the average total teacher salary and benefit package increase in the years before the QEO was 8 percent during 1984-85, 8.4 percent during 1985-86, 7.7 percent during 1986-87, 7.4 percent during 1987-88, 7.1 percent during 1988-89, 7.3 percent during 1989-90, 7.4 percent during 1990-91 and 6.9 percent during both 1991-92 and 1992-93.
Enough was enough. Taxpayers protested. The Legislature heard and listened, and the QEO was adopted.
In reality, most school districts do not stay within the QEO, agreeing to settlements that surpass the 3.8 percent limit. The WASB reports that the average total package of salaries and benefits was 4.29 percent during 2006-07, 4.25 percent during 2005-06, and 4.31 percent during 2004-05. The percentages are higher than the rate of inflation, and more than likely are greater than increases provided in the private sector.
The QEO must remain intact. Without the QEO, spending and taxes will rise substantially, more people will leave their homes, more people will leave the state, and more jobs will be lost. We cannot afford to lose the QEO.
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By Mary Lazich
Thursday, Aug 14 2008, 07:19 AM
Proponents of large cigarette tax increases like to point to the additional revenue the tax hikes will bring in to the state Treasury. There is one problem with that assumption. What happens if many of the revenue sources, the cigarette smokers, stop smoking?
Maryland politicians are now dealing with that very scenario. While they begrudgingly admit some satisfaction with fewer cigarettes being sold in Maryland, they are less than thrilled that the smokers have simply gone to nearby Virginia where the cigarette tax is much cheaper. Maryland has lost sales and much-needed revenue and has reacted by making it a crime to carry two packs of cigarettes that weren't purchased in Maryland.
The Maryland experience demonstrates the folly of government depending on cigarette tax increases. Read more in the Wall Street Journal.
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By Mary Lazich
Monday, Aug 4 2008, 02:13 PM
The Tax Foundation in Washington D.C. released a report, using Internal Revenue Service data, showing the amount residents of each income group in each state send to Washington each year. Here are some of the numbers for Wisconsin.
Federal Income Taxes paid by Wisconsin by Adjusted Gross Income Percentile 2006 in $millions:
TOTAL: $16, 278
TOP 1%: $5,753
TOP 2-5%: $2,997
TOP 5%: $8,750
TOP 6-10%: $1,697
TOP 10%: $10,447
TOP 11-25%: $2,765
TOP 25%: $13,212
TOP 26-50%: $2,294
TOP 50%: $15,506
BOTTOM 50%: $772
Percentile’s Share of Federal Income Taxes paid by Wisconsin, 2006
TOTAL: 100%
TOP 1%: 35.34%
TOP 2-5%: 18.41%
TOP 5%: 53.75%
TOP 6-10%: 10.43%
TOP 10%: 64.18%
TOP 11-25%: 16.99%
TOP 25%: 81.16%
TOP 26-50%: 14.09%
TOP 50%: 95.26%
BOTTOM 50%: 4.74%
Here are the numbers for the United States.
Federal Income Taxes paid by the United States by Adjusted Gross Income Percentile 2006 in $millions:
TOTAL: $999,506
TOP 1%: $394,066
TOP 2-5%: $203,797
TOP 5%: $597,863
TOP 6-10%: $106,327
TOP 10%: $704,190
TOP 11-25%: $156,205
TOP 25%: $860,395
TOP 26-50%: $108,066
TOP 50%: $968,461
BOTTOM 50%: $31,045
Percentile’s Share of Federal Income Taxes paid by the United States, 2006
TOTAL: 100%
TOP 1%: 39.43%
TOP 2-5%: 20.39%
TOP 5%: 59.82%
TOP 6-10%: 10.64%
TOP 10%: 70.45%
TOP 11-25%: 15.63%
TOP 25%: 86.08%
TOP 26-50%: 10.81%
TOP 50%: 96.89%
BOTTOM 50%: 3.11%
The data reveals higher income filers are paying their fair share in taxes. I advise a healthy dose of skepticism anytime you hear an argument that the wealthy should pay more taxes because they don’t pay enough. Here is the new Tax Foundation report.
Last November, I wrote a blog on taxes entitled, America’s wealthy paying more than their fair share. According to a report at the time by the Tax Foundation in Washington D.C., I wrote, “America’s richest 25 percent of taxpayers paid about 86 percent of all federal income taxes in 2005, despite earning only 67 percent of the nation’s income. The highest-earning 1 percent alone—those earning more than $364,657—paid a staggering 39.4 percent of all federal income taxes, despite earning just 21 percent of the nation’s income. That means the top 1 percent of tax returns paid about the same amount of federal income tax as the bottom 95 percent of tax returns combined.”
The Tax Foundation has released an updated report using Internal Revenue Service data on individual income taxes from calendar year 2006. The results are the same: the wealthy are carrying a very heavy tax load.
The Tax Foundation reports, “This year's numbers show that both the income share earned by the top 1 percent of tax returns and the tax share paid by that top 1 percent have once again reached all-time highs. In 2006, the top 1 percent of tax returns paid 39.9 percent of all federal individual income taxes and earned 22.1 percent of adjusted gross income, both are significantly higher than 2004 when the top 1 percent earned 19 percent of adjusted gross income (AGI) and paid 36.9 percent of federal individual income taxes.”
Here’s another interesting finding from the report: “The top-earning 25 percent of taxpayers (AGI over $64,702) earned 68.2 percent of the nation's income, but they paid more than four out of every five dollars collected by the federal income tax (86.3 percent). The top 1 percent of taxpayers (AGI over $388,806) earned approximately 22.1 percent of the nation's income (as defined by AGI), yet paid 39.9 percent of all federal income taxes. That means the top 1 percent of tax returns paid about the same amount of federal individual income taxes as the bottom 95 percent of tax returns.”
You can read the entire report here.
The Wall Street Journal also has an editorial.
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By Mary Lazich
Monday, Jul 21 2008, 01:05 PM
The non-partisan Wisconsin Taxpayers Alliance (WISTAX) says it is assessments.
In a nutshell, WISTAX says, “A rising (or falling) assessment does not necessarily mean higher (or lower) property taxes.”
WISTAX goes into more detail in this report.
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By Mary Lazich
Thursday, Jul 17 2008, 03:19 PM
The news media gives little attention to Tax Freedom Day, the day the average American has earned enough money to pay this year's tax obligations at the federal, state and local levels. It reports even less on the Cost of Government Day.
Cost of Government Day is the date of the calendar year on which the average American worker has earned enough gross income to pay off his or her share of spending and regulatory burdens imposed by all levels of government, federal, state and local. According to the Americans for Tax Reform, Cost of Government Day is far worse than Tax Freedom Day.
This year, the national Cost of Government Day fell on July 16. Wisconsin’s Cost of Government Day, the 37th latest in the country, is today. July 17.
Americans for Tax Reform in its 2008 report on Cost of Government Day (COGD) writes:
“Working people must toil on average 197 days out of the year just to meet all costs imposed by government. In other words, the cost of government consumes 53.9 percent of national income.
Cost of Government Day falls four days later in 2008 than last year’s revised date of July 12. In 2008, the average American will have to work an additional 17 days out of the year to pay off his or her cost of government compared to 2000, when the COGD was June 29.
In fact, since 1977, COGD has fallen later than July 16 in only four of those 32 years -in 1982 and 1983, and in 1992 and 1993. The driving factor for this development is the fact that all components of the cost of government – federal spending, state and local spending, and regulation – are now increasing faster than national income.
This increase in the cost of government stands in sharp contrast to at least two periods in the past thirty years: COGD fell sharply from a high of July 20 in 1992 to June 29 in 1999 and 2000. In addition, COGD declined from a record high of July 23 in 1982 to July 3 in 1989. Both of these declines resulted from a combination of restraining the growth of federal spending while the economy was booming and rapidly increasing national income.”
The key is taxing and spending. The burden on taxpayers is reduced when restraints are placed on spending. In Wisconsin, taxing and spending levels remain too high, meaning Wisconsin taxpayers have to work over half a year just to earn enough income to pay off their commitments to all levels of government.
You can read more about the Cost of Government and Cost of Government Day here.
I have signed a pledge issued by Americans for Tax Reform that I oppose tax increases.
Cost of Government Day is finally here. Its arrival is little reason to celebrate.
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By Mary Lazich
Monday, Jun 16 2008, 05:27 PM
Many Wisconsinites spend a great portion of each year living in Florida, attracted by good weather and a favorable tax climate.
These snowbirds need to be aware that they might be targeted for tax increases.
The Wall Street Journal reports:
“Florida voters in January amended the state's constitution to further limit property taxes. The state has long protected "homesteaders," or Floridians who live in their houses for more than six months of the year, by limiting the increase in the assessed value of their homes to 3% annually. In January, voters built on those limits. Over time, the difference between the assessed value and the market value of homesteaders' properties becomes substantial; the new measure ensures that homesteaders who move to a new home won't lose the tax benefits they've built up in their old home.
Such changes are already putting the squeeze on Florida school jurisdictions, which may tap "snowbirds" -- retirees who live in the state only part of the year -- to make up lost revenues. Those out-of-state property owners aren't eligible for most of Florida's property-tax protections.
Mr. Calabro (Dominic M. Calabro, president and CEO of Florida TaxWatch) is most critical of a Florida proposal on the ballot this November that would further roll back property taxes and increase state sales taxes to do so. With no state income tax, Florida relies on its 6% sales tax to a larger degree than any state save two -- Washington and Tennessee.”
The Wall Street Journal reports Florida is one of several states looking to curb property taxes.
Read the entire article.
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