Another tax season has wrapped up, and Wisconsin researchers found it is a reminder the state’s overall tax structure leaves low- and middle-income families behind.
A policy group said data show it is becoming harder for these households to survive. The organization Kids Forward used state Revenue Department information and census data for its new policy brief. It showed when considering all state and local taxes, wealthy residents pay a much lower effective tax rate than the poorest taxpayers.
Kristin Schumacher, research director for Kids Forward, said it comes as income remains stagnant for those who are not wealthy, worsening economic inequalities.
“In the last two years, one in three Wisconsin households with children have really struggled to pay for basic expenses,” Schumacher observed. “It is also really important to note some households of color with children were far more likely to face hardship.”
Wisconsin has a tiered income tax, but the report said the state’s flat sales-tax rate has a greater impact on low-income households. Democratic Gov. Tony Evers has floated expanding the Earned Income Tax Credit while pushing for higher taxes on the wealthy. Republicans, who control the Legislature, prefer a flat income tax, arguing it would spur more business activity. The proposed flat tax rate is not likely to survive the current budget debate, but could eventually resurface.
Schumacher argued aggressively cutting taxes, including for the wealthy, makes it harder to maintain services and would cost the state in the long run. She pointed out there are examples of the approach not working to boost a regional economy.
“I think that we can point to Kansas and their disastrous tax cuts that they made about a decade ago that really constricted their state budget and was actually repealed a few years later,” Schumacher recounted. “Because what they were forced to do was to cut critical programs and services, things like schools and funding for health care.”
Schumacher added it creates more pressure to raise local taxes, which hit working families.
She stressed expanding the Earned Income Tax Credit has proven to help cut poverty.
Wisconsin has a large budget surplus right now. The report warned strong footing could erode if policymakers opt for a budget relying on an unfair tax structure.
This story was written by Mike Moen, a producer at Public News Service, where this story first appeared.