Shared Prosperity and Taxes

“…building broad-based prosperity requires investing in what works – and we can’t do that without taxes.” Tamarine Cornelius, Wisconsin Budget Project

Too often we refer to taxes as a “burden.” Taxes are not portrayed as an opportunity, a public investment, a responsibility of patriotic citizenship. This limited vision does not serve us well.

The Wisconsin Budget Project is a non-partisan organization that analyses these issues. Referring to the tax cuts and budget choices that cut public investments in people, they say

“Not only have past tax cuts failed to spur job growth, they have made it harder for Wisconsin to build a strong economy, by reducing the revenue that Wisconsin needs to invest in the fundamentals of economic growth.”

These “fundamentals” are all the government services and infrastructure on which the economy depends (sewers, water, law enforcement, courts, roads, schools, and necessary regulation of business, etc.). The costs of these necessary services increase with inflation so endless tax cuts are nonsensical and counter-productive.

Public services are needed all the time, not just during good economic times. Many costs, like maintaining good schools and roads, will be lower when addressed on a steady, ongoing basis instead of managing by crisis. It is cheaper to do bridge maintenance each year than to defer needed work until the bridge collapses.

We can easily afford to do all of this. What Wisconsin needs is a fair tax system that collects enough revenue to support the public services required of a modern society. What is needed is adequate funding of all the government services, infrastructure, and public investments that are the foundation of a modern society and successful economy.

How do we create adequate revenue to accomplish this task? What is needed is a restructuring or our priorities and tax policies. The Wisconsin Budget Project says,

“For too long, we’ve all been told that there’s not enough money in the budget to help our communities thrive. That is not true. Actually, there is enough. Making a budget is about making choices. Lawmakers can choose to help private special interests that rig the system, or lawmakers can choose to promote the common good.”

According to the Wisconsin Budget Project closing only TWO unnecessary tax loopholes can go a long way to create a fair system that provides the revenue to invest in our communities. The Manufacturing and Agriculture Tax credit has reduced public revenues by $1.4 billion since it began in 2013. It cost $334 million in fiscal year 2019 but is not targeted at job creation. Any manufacturer with profits can qualify for the credit, regardless of whether they are adding or CUTTING jobs. Only 0.3 percent of Wisconsin tax filers received the credit, with nearly 80 percent of the credit going to individuals earning over $1 million.

The other loophole is taxing capital gains at a lower rate than earned income. This means workers often pay a higher tax rate on their wages than speculators pay on the profit from flipping stocks or real-estate. The Wisconsin Budget Project says the top 2% of tax payers receive half of the capital gains tax breaks. Eliminating this loophole would provide about $164 million per year for vital public needs.

There are a number of other ways to create a fairer tax system and pay for the investments in people we all need. Here are some other examples.

Collect unpaid taxes from the deadbeats! Wisconsin loses an estimated $1.6 billion every year in uncollected taxes. Collections actions by the Department of Revenue recover about $400 million a year. Collecting taxes that are owed is not an increase in taxes.

Collect taxes from the 60% of corporations operating in Wisconsin who pay NO income taxes. These companies benefit from the roads, police, fire, and other public services. They should contribute. I think GE or Bank of America could afford to help out before we cut our school funding.

Cut lower priority spending. Any rational ranking of state government services would place education toward the top. As an example, maybe we should cut the Department of Tourism before education. The tourist industry could probably do its own advertising. Maybe Foxconn could find its own financing in the free markets.

Stop contracting out government services. We pay more for less service, when private, for-profit companies replace public employees in providing services. It is not true that the private sector can do it better or cheaper. Harper’s magazine sites studies that the federal government pays 87% more for contracted work.

Cut the counterproductive spending. It is well known that preventive social services such as prenatal care, Head Start, and youth after school programs save money in the long run. It is better to provide education than to fill up prisons. Health care is cheaper than illness.

Control medical insurance costs. Government in Wisconsin spends billions of dollars for public health care programs and employee health benefits. Controlling the extremely high cost of health care would provide large savings for the state budget.

Get real about business incentives. There is little evidence that tax breaks for businesses create jobs or do anything for the economy other than reduce public revenues (and the tax “burden” of millionaires). If trickle-down economics really worked, we would have had continuous boom times since Ronald Reagan!

Don’t buy into the conservative lies, whining, and lack of vision. Wisconsin can afford to invest in people. But this will require public investments and the recognition that we are all better off when everyone is better off. It requires sharing the “burden” and the prosperity.

Learn more at:

Wisconsin’s Path to Shared Prosperity” by the Wisconsin Budget Project

Institute for Tax and Economic Policy

Citizens for Tax Justice