A report that Wisconsin has one of the lowest state and local tax burdens in the country set off a wave of fanfare and press releases from Wisconsin’s political class in late November, which offered little comfort to most Wisconsin residents, who are increasingly struggling to make ends meet.
The Wisconsin Policy Forum (WPF) conducted the study that concluded 9.9% of personal income in Wisconsin went to state and local taxes in 2022, which dropped the state’s tax ranking to 35th in the country. In 2000, it was 12.5%, 3rd highest in the country. That does seem like good news, especially for small-government conservatives. Unfortunately, the Wisconsin Policy Forum’s report is riddled with errors and misrepresentations, making it practically worthless for serious policy discussions.
The MacIver Institute, skeptical at the claims in the four-page report, sought to independently verify them. The Wisconsin Policy Forum did not include its methodology, but it did provide sources and clues to how it made its calculations. It relied mostly on tax data from the US Census Bureau and income data from the US Bureau of Economic Analysis (BAE).
Claim 1: Wisconsin’s tax burden is 9.9%, the 35th highest in the country
The study’s main claim concerned “taxes as a share of personal income.” To test this, we used the “US Summary & State Estimates Tables” from the US Census Bureau’s “Annual Survey of State and Local Government Finances” for tax data, and we used “Annual Personal Income and Employment by State” from BEA’s “Regional Data: GDP and Personal Income” for income data.
MacIver could not replicate the Wisconsin Policy Forum’s result of 9.9%. You would think that a lower tax burden would result in a lower tax ranking, but it appears the study miscalculated everyone else’s tax burden too. We calculated Wisconsin’s ranking at 33rd, not 35th.
What government doesn’t take through taxes, it gets through fees.
The problem with WPF's claim is not the whether the tax burden is 9.6% or 9.9%. The problem is that it is deceptive to only consider “taxes” when calculating the cost of government for the average person. You have to consider government fees for services, too, because government often shifts costs that way. Those fees include things like parking meters, trash pickup, sewer, and hunting licenses. They also include fees that impact taxpayers indirectly, like those collected from hospitals, airports, harbors, and colleges. When you consider all that, Wisconsin’s 9.6% tax burden grows to 13.6%.
You also need to consider revenue from government-owned utilities, which is collected from taxpayers. That includes water, electric, gas, and even bus tickets. That pushed up the state’s tax burden to 14.2%. If you find comfort that people in other states are paying even more than that, then you’ll be happy to see that adding in these extra costs drops Wisconsin’s tax burden rank to 37th in the country. In 2000, this combined burden was 16.6%, the 19th highest in the country.
Before you get too excited about that “progress,” here’s something else to consider:
This means the average person is paying $400 less now in real dollars than they were over twenty years ago. Clearly, fiscal conservatives still have a lot of work to do.
However, we should take a moment and consider how bad things could be if fiscal conservatives weren’t as aggressive as they were in Wisconsin over that time. Let’s look at what the combined burden was in Illinois from taxes, fees, and utilities.
Illinois is heading in the opposite direction as Wisconsin, but Wisconsin is still worse off than Illinois was in 2000. Illinois had a 13% combined burden in 2000, while Wisconsin had a 14.2% burden in 2022.
14.2% of personal income in Wisconsin went to state and local government taxes, fees, and charges in 2022.
Claim 2: Personal income in Wisconsin increased by 8.8% in 2022.
According to the study: “personal income (a measure including wages, interest, dividends, and government payments to individuals) rose by 8.8% in Wisconsin and 9.2% nationally.”
This is a fairly easy claim to fact check. We simply take the personal income figure from 2022 and compare it to the personal income figure from 2021 using the same data from BEA that WPF supposedly used.
MacIver could not replicate the Wisconsin Policy Forum’s result of 8.8%. We also calculated the national personal income increased at 3.1% using the same methodology. WPF’s claims about personal income growth, based on the available data from the sources in its study, is false.
Personal income increased by 2.7% in Wisconsin in 2022.
Claim 3: Wisconsin had the largest tax burden decrease in the nation from 2000 to 2022.
The study reports, “In falling from 12.5% in 2000 to 9.9% in 2022, Wisconsin’s tax burden dropped by 2.6 percentage points, or 20.9%. Both of those decreases were the largest of any state in the nation over those years.”
MacIver calculated Wisconsin’s tax burden for 2022 to be 9.6%. Using the same methodology, we got 11.7% for 2000. That’s a change of 2.1 points, or 17.9%. That’s the second largest decrease in the country, after Wyoming’s 20.9% decrease.
WPF’s study might be deeply flawed, but its initial concept is solid: combine economic data from BEA and tax data from the US Census to determine how state and local government tax policies are affecting their residents’ quality of life. WPF barely scratched the surface in exploring what that data revealed. Here are two items that the MacIver Institute latched onto.
Item 1: Property Taxes Are Still Way Too High
WPF reported that property taxes grew by 2.9% from 2021 to 2022 in Wisconsin. The math checks out.
In 2000, the property tax burden in Wisconsin was 3.6% of personal income, the 10th highest in the country. In 2022, the property tax burden in Wisconsin was 3.0%, the 16th highest in the country. Yes, that is progress, but it also shows that Wisconsin has a long way to go.
For the record, in California in 2022, the property tax burden was 2.8%, the 22nd highest in the country.
3% of personal income in Wisconsin goes to property taxes.
Item 2: Personal Consumption Expenses Rising Fast
There are several fascinating datasets on BAE’s webpage where the Wisconsin Policy Forum pulled personal income data for its story that add vital context such as “Personal Consumption Expenditures by State.”
The overall cost of goods in Wisconsin increased by 9.51% per capita from 2021 to 2022, the second highest increase in the country by a hair. New Hampshire beat Wisconsin for first place with a 9.52% jump. In Illinois, it was 7.2%.
The cost of eating out increased 11.4% per capita, the highest in the country. Gasoline and other energy goods jumped by 9.5% per capita in Wisconsin, the third highest jump in the country. Housing and utilities are up 10.6%, the 15th highest in the country.
Things could be much worse in Wisconsin, but they could also be much better. Wisconsin residents are struggling right now, and politicians should not be celebrating one flawed study’s claim about supposedly low taxes. Here are some points to remember:
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