August 11, 2014
For Immediate Release
Contact: Nick Novak, 608-237-7290
[Madison, Wisc...] Wisconsin's high tax rates could encourage many people to leave the state, particularly high-income residents who pay the greatest share of taxes, says a new study from the John K. MacIver Institute for Public Policy and the National Center for Policy Analysis (NCPA).
Calculations show that people moving from Wisconsin to neighboring states - Iowa, Minnesota and Michigan - can keep more money in their pockets thanks to better tax climates. Illinois is the only state that shares a border with Wisconsin where taxpayers are always worse off.
Wisconsin has improved its tax climate with income and property tax cuts in recent years. In fact, state lawmakers have cut taxes by $2 billion since 2011. However, this study shows the Badger State has a long way to go.
The report finds that Wisconsin loses $136 million a year in adjusted gross income to other states, totaling nearly $2.5 billion over the past two decades. Wisconsinites are leaving for states with lower taxes, like Florida, which does not have a state income tax and the property tax rate is nearly half of the rate in Wisconsin.
"Even with Governor Walker's recent tax cuts, this report shows that we have more to do to make the tax climate better for our hard-working taxpayers," MacIver President Brett Healy said. "We simply cannot afford to lose this $136 million to other states. We need a simple, comprehensive tax system that does not push Wisconsinites to move away."
The study uses the NCPA's State Tax Calculator to help people determine their tax burden by moving from one state to another. The State Tax Calculator (www.whynotmove.com), developed by NCPA senior fellow Laurence Kotlikoff, produces results based on the economic theory that households manage their finances so as to smooth out their discretionary spending over their lifetime.
Wisconsin's moderate to low-income residents would benefit by staying in Wisconsin, except if they choose to move to Michigan (see table below bullets).
- A 25-year-old renter earning $30,000 a year would fare worse in Minnesota, Illinois and Iowa, losing lifetime wealth of $12,657 to $34,759.
- A 30-year-old renter earning $50,000 a year would also fare worse in Minnesota, Illinois and Iowa, losing lifetime wealth of $24,040 to $50,221.
- In Michigan, both renters would gain in annual discretionary income and lifetime wealth, compared to Wisconsin.
However, Wisconsin's higher-income homeowners would be better off in a neighboring state, except for Illinois, where they would lose up to $55,612 in lifetime wealth:
- 40-year-old married homeowners earning $75,000 a year would do better in neighboring states - gaining up to $50,497 in lifetime wealth.
- A 50-year-old married, home-owning couple earning $100,000 a year would also do better in neighboring states - gaining up to $38,914 in lifetime wealth.
- As with their younger counterparts, the 70-year-old retirees would do better in neighboring states - gaining up to $11,417 in lifetime wealth.
"Wisconsin stands to lose millions of dollars a year to other states as people move to reduce their tax burden. The current tax rate is going to create a greater burden on those left behind," says NCPA Senior Fellow Pamela Villarreal, who authored the study.
The most popular destination states for Wisconsinites who move are Florida, Arizona, Texas, Colorado and North Carolina. All have more favorable tax rates, says Villarreal.
The full report is available by clicking here.
The John K. MacIver Institute for Public Policy is a Wisconsin-based think tank that promotes free markets, individual freedom, personal responsibility and limited government. Visit our website today for more information.
The National Center for Policy Analysis (NCPA) is a nonprofit, nonpartisan public policy research organization, established in 1983. We bring together the best and brightest minds to tackle the country's most difficult public policy problems -- in health care, taxes, retirement, education, energy and the environment. Visit our website today for more information.