Democratic Governors Association got it wrong
The Democratic Governors Association is falsely insinuating that the Badger Institute panned a “scheme” by gubernatorial candidate Tom Tiffany to eliminate Wisconsin’s income tax.
“Congressman Tiffany’s plan is so extreme that it’s been panned by experts across the political spectrum. Even the conservative Badger Institute warned that Tiffany’s scheme” could increase sales taxes to as high as 12.9 percent, the governor’s association contended in a press release.
The Badger Institute has not issued any analysis of comments that the Milwaukee Journal Sentinel reported were made by Tiffany in September. In fact, the institute has not written in any substantive way about efforts to eliminate the income tax since 2024, more than two years before Tiffany’s comments.
According to the Milwaukee newspaper’s story on Monday, Tiffany was asked during a Sept. 23 campaign event whether he would eliminate income taxes.
“I will not be able to do it in the first budget, but after that, we sure hope to be able to get it done,” Tiffany was quoted by the newspaper as saying.
The Badger Institute last wrote in detail about efforts to eliminate the income tax in a policy brief in September 2024 titled “Could Wisconsin eliminate its income tax?”
That brief did not argue for or against eliminating the income tax. Instead, it provided a data-based analysis of what other policies would be required to get there. Specifically, it showed that a combination of spending reductions and increases to other taxes (such as the sales tax) would be needed to make it possible.
The 2024 brief did not offer an explicit verdict on whether the state should make the tradeoffs necessary to eliminate the income tax. However, the institute has consistently argued for reducing the state’s reliance on a harmful, complicated and uncompetitive personal income tax by moving to a single-rate structure and pushing it as low as practically possible over time — a realistic path to a better tax structure.
The urgency of this work has grown in recent years as policy changes in other states have made Wisconsin less competitive. A growing number of states are replacing graduated individual income taxes with lower, single-rate systems, while others are pursuing further reductions in their existing single-rate structures.
Meanwhile, Wisconsin is getting left behind, maintaining one of the highest top income tax rates in the region. Wisconsin’s top individual income tax rate is 7.65 percent, compared to 2.75 percent in Ohio and 2.95 percent in Indiana. This puts the Badger State at a competitive disadvantage for attracting high-skill workers and investment, given that many businesses in the state are organized as pass-through entities, whose owners pay taxes on business income through the individual tax system.
Our recent study presents the path forward. Wisconsin should replace its graduated individual income tax with a single-rate structure and “set that rate as low as fiscal conditions responsibly allow.” Moving to a competitively low single rate would reduce the state’s high top marginal rate, simplify its tax structure and improve its prospects for economic growth.
Exactly how low that rate can eventually be set depends on the fiscal choices policymakers are prepared to make. Deeper reductions will require greater spending restraint, additional revenue from other sources, or some combination. These choices involve tradeoffs, but the potential economic benefits provide a strong reason for pursuing ambitious reform.
One possible long-term target would be to achieve the lowest top individual income tax rate among the Midwestern states examined in our study, currently Ohio’s 2.75 percent. That would represent a major improvement in Wisconsin’s competitive position, even if achieving it would require substantial fiscal changes over time.
Tiffany’s comments represent a different, still more ambitious target, eliminating Wisconsin’s individual income tax altogether. That would certainly require difficult fiscal choices. Those challenges are real. But there is no fundamental conflict between recognizing them and pursuing ambitious income tax reform.
Whether Wisconsin ultimately reaches a rate of zero, and how long that might take, is not the immediate question facing policymakers. The immediate question is whether we want to get serious about competitiveness by embracing a moderate single rate on personal income with the intention of pushing it down further as fiscal circumstances permit.
This approach would strengthen incentives for work, investment and entrepreneurship and improve Wisconsin’s prospects for long-term growth. That is the direction policymakers should embrace, whatever ultimate rate they hope to achieve.
Ben Eisen is vice president of research and policy for the Badger Institute. Mike Nichols is the institute’s president.
Any use or reproduction of Badger Institute articles or photographs requires prior written permission. To request permission to post articles on a website or print copies for distribution, contact Badger Institute Marketing Director Matt Erdman at matt@badgerinstitute.org.
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