WI Republican tax reforms are working

Laffer Curve vindicated

Madison schools dig deeper into our pockets 

A certain Republican governor who attracted tens of thousands of enthusiastic visitors to the State Capitol in early 2011 had a favorite saying. “The reforms are working!” he would say. So chagrined were spend-happy State Senate Democrats that they fled Wisconsin for scenic Rockford, Illinois and its ruinous taxes. Odd, because people who actually live there are fleeing Illlinois’ high taxes.

Scott Walker

Almost nine years later, non-partisan analysts confirms Gov. Walker’s wisdom and Democrats’ folly.

Tommy Thompson

State and local taxes in Wisconsin last year (2019) as a share of income were the lowest in 50 yearsthe Wisconsin Policy Forum reported this month. Most of that improvement (from a conservative standpoint, at least) occurred since 1994 under a transformational governor named Tommy Thompson. In fact, combined state and local taxes went down by 22% in the last 25 years.

Another measure: fifty years ago in 1970 average state residents spent 14% of their income on state and local taxes. In 2019, the tax bite was only 10.3 percent. For a household with a combined annual income of $100,000 that represents a one-year savings of $3,700 in constant dollars.

No thanks to Democrats. In the mid-1990s, my old boss and legislative Republicans:

  • indexed the state income tax to prevent automatic inflationary increases
  • imposed spending controls on local school districts
  • capped property tax levies by municipalities
  • reduced income tax rates across the board and, 
  • under Scott Walker and his Republican legislature, enacted Act 10, which forced public unions to contribute to their own pensions and health care and pried loose work rules from teachers’ tight grip.

Share of income

Note well the qualifier. State and local taxes “as a share of income.” Because the record of the last 25 years verifies the principal lesson of the Laffer Curve: Taxes properly reduced can increase tax revenue.

For all you Bernie and Fauxahontas supporters, Wisconsin corporations paid nearly 50% MORE in taxes last year.  “Corporate taxes react quickly to economic conditions and part of their rise was due to the growing economy,” WI Policy Forum reports.

Revenue is up

Overall state and local tax revenues increased by 4.5% in fiscal year 2019 (which ended 06-30-2019) — the most since 2011 and nearly twice as much as they rose in 2018. 

But personal income grew more quickly — by 5.1%. What happens in that scenario? Families purchase more goods, thereby juicing the economy. Perhaps they trade up to that bigger home. Or they invest, earning interest (thereby also stimulating economic growth) in the red-hot stock market. Employers hire more workers, raise employee pay, pay higher stock dividends.

More coal on the fire, please!

This is sad news to the “higher taxes” crowd. But take heart, our acquaintances. Like most folks in Orchard Ridge, the Stately Manor’s property tax bill for this year (2020) increased 9.0% thanks to a 12% increase in school taxes, which account for nearly half the total local tax bill.

In what the Policy Forum calls “raw dollars” Madison’s $22.1 million property tax hike was the largest in the state and twice that of the much larger Milwaukee’s $11.6 million. (As percentage, Madison asked 7.2% and Milwaukee 4.6% more from their taxpayers.)

Of course, our … acquaintances could always move to Democrat-controlled Illinois. They need the headcount. No state lost more population in the last decade. The independent think tank called Illinois Policy reports:

Population decline reached record levels in 2018, the year after the Illinois General Assembly passed the largest permanent income tax hike in state history, while population decline in the second year of the tax increase continued at a faster rate than before the tax increase. This result comes as no surprise as the 2017 tax hike has likely deterred new investment and job creation, making Illinois a less promising state in which to find opportunity. …

Despite high taxes being the No. 1 reason Illinoisans want to flee the state, lawmakers are asking Illinoisans to approve a $3.4 billion progressive income tax hike on Nov. 3, 2020.

Blaska’s Bottom LineRemember Illinois this fall when Madison Metropolitan School District hits you with yet another referendum to blow the hinges off the state’s spending controls. A school district that fires black and latino educators for trying to restore order in the classroom. Better yet, remember it on April 7 when you vote for school board.

What do YOU think?

About David Blaska

Madison WI
This entry was posted in Act 10, Madison schools, Republicans, Scott Walker. Bookmark the permalink.

7 Responses to WI Republican tax reforms are working

  1. Cornelius Gotchberg says:

    Proponents of the “gimmee gimmee more More MORE high quality/quantity free $#!t” Lefties (AnonyBob, hankdog/old baldy, The Gotch pal geo_, Leo, Butch, et al, unavailable for comment.

    “They need the headcount.”

    Reduce the bodycount!

    These numbers wouldn’t be quite as bad if Chicago residents adhered to “Common Sense” gun laws, am I right?

    The Gotch

    Liked by 1 person

  2. Mark Porter says:

    While lowering taxes can produce benefits there has been little to no economic research that has validated the Laffer curve. Moreover we only need look west to Kansas to see an example where lower taxes did not produce an increase in revenue. And Brownback paid that Laffer price. I would argue that sound, even conservative (gasp!) fiscal policies are a better option. Leave Laffer on the napkin from whence it came.

    Like

    • Mark Porter says:

      Not to mention our two year old federal tax cuts that, while mildly stimulating the economy, have yielded trillion dollar ANNUAL deficits (emphasis mine). And the corporate profit repatriation appears to have failed as well. Back to you, Dave.

      Like

      • David Blaska says:

        During the first 11 quarters of the Trump Presidency, wages for the bottom 10% of earners over age 25 rose an average 5.9% annually compared to 2.4% during Barack Obama’s second term, according to the latest demographic data from the Bureau of Labor Statistics. Wages for the middle two quartiles increased 3.2% compared to 2.2% and 2.7% between 2012 and 2016. Wage gains for the top 10% have held steady at about 3%. Less educated workers have also seen the strongest gains. Wages have risen at a 6.1% annual clip for workers over 25 without a high school degree and 3.9% for those with some college—both about three times faster than during the second Obama term. Wage gains have also accelerated though to a lesser degree—to 3.2% from 2.2%—for college grads. Rising wages have lifted millions of Americans out of poverty and off the government dole. The poverty rate for blacks (20.8%) and Hispanics (17.6%) is the lowest on record. The jobless rate remained steady at 3.5% as labor participation held at its recent high of 63.2%.

        Back to you, Mark.

        Liked by 1 person

        • Mark Porter says:

          All well and good Dave but the Laffer curve posits that government revenues will rise more than corresponding cuts in revenue. I won’t argue your stimulus point but I will argue that the tax cuts have not paid for themselves as promised. And our deficit spending roars along.

          Like

        • David Blaska says:

          My example was Wisconsin; our state proves the Laffer Curve.

          Like

  3. Gary L. Kriewald says:

    Madison liberals are addicted to raising taxes just as they’re addicted to scolding the rest of us for our lax efforts in reducing “climate change” (see letter by one Robert Owen, Jr. in today’s State Journal for a particularly nauseating example of the latter). And facts, to which they loudly proclaim their devotion, never get in the way. Dissenting opinions? The only thing the disciples of Tolerance won’t tolerate.

    Liked by 1 person

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