Progressives object because proposed Wisconsin relief goes to people they envy
Rain is proverbially indiscriminate. It falls over whole swaths of thirsty land, not caring nor asking whether the cornfield belongs to a well-fed farmer or a guy just hanging on. One suspects Wisconsin progressives would sue the clouds about that, if only they could.
Consider their complaints about a $1.3 billion tax cut that Republicans passed this month through the Legislature’s budget committee. Progressives complained it was too big. They complained it was too small. They complained that the money wasn’t funneled into government programs they like.
And some complained because some of the relief rained down upon Wisconsinites they imagine deserve none of it — those with the temerity to earn more than $100,000.
Wisconsin has four tax brackets. The measure approved by the Joint Finance Committee on June 12 would raise the upper limit of the personal income tax’s second-lowest bracket, meaning the marginal tax rate would fall by 17 percent for people mostly under the state’s median household income.
For single people, the point at which the state income tax rate on the next dollar earned rises from 4.4 percent to 5.3 percent would increase from $29,370 of taxable income to $50,480. Married couples, instead of seeing their rate rise at $39,150, could earn up to $67,300 before the state takes the higher percentage.
The income range is notable, the Tax Foundation’s Katherine Loughead told the Badger Institute last week, because a “large number of lower-income Wisconsinites are currently exposed to Wisconsin’s second-highest rate” and would now get to move to the second-lowest.
For a single person earning $30,000, Wisconsin takes a bigger share of the next buck than 30 of the 41 states that levy income taxes. The tax cut will dramatically help those $30,000-per-year earners — and a whole bunch of others not making a lot of money.
Yet progressives complained.
“Over 65% of these tax cuts would go to filers making over $100,000 per year,” fumed Chris Larson, the Milwaukeean who chairs the Democrats’ caucus in the state Senate. Left-wing outlets repeated the point.
The point is not untrue. That’s how a graduated income tax works.
Wisconsin’s second-lowest rate, 4.4 percent, doesn’t apply only to single taxpayers who now make $29,370 or less. Rather, every single filer in Wisconsin pays 4.4 percent on every taxable dollar she earns between $14,680 and $29,370. Same goes for married couples at their higher break points.
So everyone earning even more will see relief on some of their income when the rate of tax on every dollar earned up to the 67,299th one is cut. In fact, since everyone earning $68,000 or more will have earned a 67,299th dollar, while people earning $60,000 will not, it’s people with higher earnings who would see the biggest break, according to the Legislative Fiscal Bureau: They have the most income that falls in the range where relief rains down.
The LFB’s estimate indeed says Larson’s almost right, that 62 percent of the relief goes to taxpayers whose total earnings are more than $100,000.
The bureau also notes that, for the latest year of data, 2023, taxpayers making more than $100,000 earned about 65 percent of all income in Wisconsin — and paid about 75 percent of all Wisconsin income taxes.
People earning $30,000 to $70,000, meanwhile, will get about 17 percent of the benefits of the proposed cut while paying 12 percent of Wisconsin’s income taxes.
Except for the ones earning over 68,000, this group includes the ones who will see a drop in the tax levied on whatever they make from working overtime or earning a promotion. They’d get to keep more of the reward from working harder.
If that encourages more Wisconsinites toward self-improvement, that’s worth an extra sprinkle of relief.
What’s really illustrative here, however, is the reaction from progressives.
If the proposed cut helps working-class taxpayers but also helps those who pay most of the freight, why wouldn’t anyone call it a success with a nice side effect?
Progressives don’t because, it appears, the side effect went to people they don’t think are nice. It smacks of a view that earning more than $100,000 should disqualify a taxpayer from relief, as if relief were a government favor. It’s tax policy not as a means of raising revenue but as economic spite.
It all may be moot if Gov. Tony Evers vetoes the Legislature’s proposed tax cuts. Still, one hopes it passes: Our divisions would be less intractable if our politics were less fertilized by envy.
Patrick McIlheran is the Director of Policy at the Badger Institute.
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