January 23, 2015[Washington, D.C.] Think the personal income tax only matters for individuals? Think again. As the Tax Foundation lays out, most of Wisconsin’s workforce is employed by “pass-through” entities who pay the individual income tax. In these types of businesses, profits are “passed through” to the owners or shareholders and taxed by the federal and state income tax code.
The growth of pass-through businesses in America has made state income taxes even more important in attracting and retaining businesses. Unfortunately, Wisconsin’s high top personal income rate of 7.65 percent is uncompetitive compared to neighboring flat tax states with lower rates. Income taxes are currently lower in Michigan (4.25 percent), Illinois (3.75 percent) and Indiana (3.3 percent), making it harder for Wisconsin to compete in the region.
Read the full Tax Foundation article here