Early in the postwar era, Wisconsin was not among the nation’s highest-taxed states, as measured by state and local taxes.1 Relative to personal income, Wisconsin’s tax burden flirted with the “top ten” during those years, but did not reach it. That changed in 1963 when the full effect of sales and income tax increases enacted by the 1961 state legislature were felt. Wisconsin’s tax rank jumped from twelfth to fifth in a single year.
Since then, Wisconsin has dropped below the ranks of the top-ten “tax elite” only twice — in 1968 and 1980, when a combination of tax cuts and surging personal incomes pushed Wisconsin to eleventh place. And the Badger State has been among the top five most-taxed states in 24 years since 1962, including every year since 1991.
Many reasons are given for Wisconsin’s high taxes. “State and local governments spend too much” is one. “The state does not get its share of federal money” is another. Both factors contribute to Wisconsin’s high-tax status, but they tell only part of the story. Surprisingly, despite Wisconsin’s long history of high taxes, there has been no comprehensive attempt to explain why the state has held fast to its high-tax status.
This study aims to fill that need by taking a broad look at Wisconsin’s tax burden.
- We begin with a short review of some salient aspects of state political and cultural history during the formative years between the Civil War and the First World War. Decisions made then helped to shape the present political and policy-making environment.
- Turning from the qualitative to the quantitative, we examine, through two different methodological lenses, the roles that revenue mix and expenditures play in fostering Wisconsin’s high-tax status. Within the spending discussion, we pay particular attention to several crucial areas that appear to play particularly important roles in pushing up both expenditures and taxes.
- Next we note that spending varies not only by program area, e.g., education or roads, but also by level of government, i.e., state and local. In this section we explore the Badger State’s approach to funding local budgets with state tax dollars, to see what impact, if any, this unusual approach to state-local finance might have.
- Putting culture, revenue mix, and expenditure patterns aside, we close by recognizing an inescapable reality of twenty-first century Badger-State politics: Public preferences for tax and spending priorities are ultimately articulated in a partisan arena. Our ethnic and religious roots manifest themselves, to some degree, in current political preferences. The last section explores the relationship between Wisconsin’s current political preferences and its tax and spending decisions.
It is also important to clarify what this study does not do. While we find that higher spending in some areas goes a long way toward explaining the state’s high tax burden, we make no assessment as to whether the associated spending levels are appropriate. Further, our work shows how Wisconsin’s unique state-local relationship translates into higher taxes, but we do not attempt to find the ideal relationship. These issues are best left for others to discuss. Our sole purpose in this study is to isolate the factors that are most important in explaining Wisconsin’s above-average tax burden.
