Update: Walker reverses. Chain yanking revealed. (Walker administration considering nearly tripling WI’s sales tax…)

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Theme song for this post – and Scott Walker:

UPDATE 12:44PM (Around 8 hours after news of the previous plan came out):
It seems Walker was just yankin’ Wisconsin’s chain while bolstering his Tea Party brethren on the national front.

From Jason Stein at MJS: “Scott Walker isn’t getting on the let’s-get-rid-of-income-tax train yet, not in the budget bill he’s introducing on Feb. 20.

But Walker said that in the following 2015-’17 budget he’ll at least look at what governors in Kansas and Louisiana are doing to replace their states’ income tax with a higher sales tax”
Screen print below:

Link to MJS article.

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This morning’s post:

Welcome to today’s edition of Let’s Poke at Sanity With a Sharp Stick and See What Happens, performed by The Walker Administration and underwritten by Jane Q. Wisconsin-Taxpayer.

Take a quick look at the chart above on Wisconsin’s 2007 taxes. This comes from the Institution on Taxation and Economic Policy.

Then consider that the Walker administration in the guise of DOA chief Mike Huebsch is floating a proposal to take Wisconsin’s 5% sales tax to around 13% and eliminate the income tax.

From WHBL.com:
“The state sales tax rate is currently 5 percent; Huebsch says adding 8 cents would allow the state to eliminate income taxes. ”If we were just going to eliminate the income tax and raise our sales tax to match that, we would have to raise it somewhere in the neighborhood of about 8 cents. We would have to go to about 13, maybe 13 1/2 cents in our sales tax.” Individual income taxes equaled $7.0 billion in 2012 in Wisconsin.” – Wednesday, February 06, 2013 4:32 a.m. CST

It’s pretty obvious isn’t it? Huebsch’s suggested plan wipes out the blue columns in that graph and you can see that the people who earn higher incomes stand to benefit the most. Huebsch’s plan rachets up the red sales tax columns and clearly as it stands, the less you earn, the more red you disproportionately pay in sales tax in Wisconsin. The poor will pay for the gains of the wealthy in this plan. It’s regressive.

Safe to assume this could hurt small businesses, as well.

My dad used to say “The rich get richer and the poor get poorer”. This plan is my dad’s statement on meth – probably one of the few burgeoning products in this state’s economy by now with the direction these rejects are taking us.

Let’s hope there are a few economists still tucked in the Capitol building who can talk some sense into Huebsch and Walker. Lord knows they’re not listening to me.

Footnote: Let’s just remember for a moment that Mike Huebsch, the head of Wisconsin Dept. of Administration (DOA), is the individual entrusted with standing behind a December 2011 to present crackdown on assembly and speech in Wisconsin’s Capitol.

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  10 comments for “Update: Walker reverses. Chain yanking revealed. (Walker administration considering nearly tripling WI’s sales tax…)

  1. Zippy
    February 9, 2013 at 7:42 pm

    Not to worry. With a little luck, Walker will be gone in January, 2015.

  2. Bruce Eggum
    February 6, 2013 at 7:26 pm

    People would avoid Wisconsin to avoid this outrageous tax, devastating our business community and reducing state revenue. Hell Wisconsinites would “cross the border” to avoid this tax.

    People would avoid Wisconsin to avoid this high tax. This would Totally collapse our business community. Hell, Wisconsinites would drive across the border to avoid this irrational tax.

  3. Zac
    February 6, 2013 at 5:31 pm

    This graph only shows percentages of family income. How much money is paid by each level of income in real dollars?

    I am not a Dem, I am not a GOP-er, I am just a common sense independent that thinks having income tax AND sales tax is just taxing the same money twice. You tax my money when I get it, and tax it when I give it to someone else, AND you tax them on that same money I just gave to them for receiving it… Why does this have to be so complicated.

    Lets simplify the tax code:

    The highest 20% would lose the ability to write off their income taxes. They would pay much much more in real dollars on every unnecessary frivolous thing they buy. Can’t write off the corporate jet if you don’t get writeoffs. Just sayin.

    The lowest 20% who will not “benefit” from elimination of income tax, would also likely not be hampered by it when you realize food and perscriptions (for examples) are not taxed.

    The real people who benefit from this are the people trying to save money. Smart middle class people who like to put money into savings accounts or payoff debts would have more money to do so.

    Elimination of the blue line would benefit the top 80% of people. That is what this graph tells me.

    • GeoffT
      February 6, 2013 at 9:04 pm

      There’s a visible blue line for the top 80% of families, but what you’re missing is the flip side: i.e. the burgundy line becoming 2.6x bigger (5% to 13% rate). Hence any income band whose sales taxes total more than 5/8th of their income taxes (i.e. the bottom 80%) will see their total taxes rise under this scheme.

      *That* is what the chart is telling us.

      The lowest income quintile families may still not pay sales taxes on food and prescriptions, but they sure will be paying 8% more on everything else: furniture, clothes, dishes, cleaning supplies, diapers, repairs, heaters etc etc. This is a long long way from “likely not be hampered”.

      • Zac
        February 7, 2013 at 2:00 pm

        The idea the burgundy line will rise at 2.6x for ever bracket is not true.

        Let’s look at the math in this study:

        Take the average income of the bottom 20% from the link provided, $12,700. Take that times the 6.3% they supposedly spend on sales tax and you see $80.10 spent on sales tax. Now divide that by Wisconsin’s 5% rate and you get $16,002 in discretionary spending by that group.

        Take the maximum salary of that group, $20,000. Apply the same calculations and you get $25,200 in discretionary spending.

        So this group somehow spends approximately 25% more on discretionary spending than they make in income. This does not include housing, food, child care, etc.

        See where I am going?

        The math behind these graphs is either faulty or misleading, which invalidates any further assumptions based on these numbers.

        • Zac
          February 7, 2013 at 2:01 pm

          Sorry, that 80.10 is supposed to read 800.10. Typos happen.

        • GeoffT
          February 7, 2013 at 3:41 pm

          There are two things you’re not accounting for here:

          Firstly, the state sales tax is not the only sales tax: almost every county has another 0.5% and some have 0.1% stadium taxes too. The chart is labeled “State & Local Taxes in 2007″ after all.

          Secondly, the burgundy bar also includes excise taxes (alcohol/cigarettes/gas). It is labeled “Sales & Excise” after all.

          If you want to be perfectly precise about it, the burgundy bar for the lowest income quintile would go up by nearly 8%, from 6.2% (eyeballing the latter) for a rise of nearly 2.3x.

          That’s a ceiling rather than a floor, but it doesn’t really matter: there is no question that this move would hurt the lowest 20% by income of families.

          As you add in a greater fraction of non-excise-taxed-but-sales-taxed items & value with increasing income this will of course trend towards 2.6x (there are limits to how much alcohol, cigarettes and gas people can usefully consume but no similar limits on the price and quantity of many other consumer goods) and my 5/8th is thus still a perfectly good ballpark for estimating that families with the lowest 80% of incomes would be burned by this.

          • Zac
            February 7, 2013 at 5:54 pm

            My point is that these lines aren’t in a possible proportion. You can’t “eyeball” who benefits.

            The math tells us: Even if you repeat my process with the second quintile, and factor in a 6% instead of 5% (5.6% being the maximum possible sales tax in Wisconsin), after adding in the property tax and income tax, they only have $700 left for the year to cover food, housing, day care, insurance, etc (all untaxed spending).

            You have to agree no one can pay for all of those things with $700 a year. This means the burgandy line CANNOT be as high as it is for that quintile.

            If you repeat for the third quintile, you leave approximately $10k for untaxed spending (possible, but unlikely). Only for the top 40% does this graph even become logically possible.

            Your argument is that if you add a flat tax to everyone, the bottom suffers “disproportonately”. This is true if it is a dollar or 100 dollars. It is a meaningless tautology. It focuses on “percentages” of income and it ignores real dollar ammounts and economic forces.

            I will agree all day long that raising sales tax 8% is not the way to go, this was obviously just a thought experiment taken out of context to ‘hate’ on “the other guys”…

            But you can’t deny, states without income tax have had on average .5% MORE economic growth than those that do have it.

            I beleive in eliminating income tax, but the revenue has to be raised from property and sales/excise tax (or even better a VAT tax) AND you have to eliminate wasteful spending as well.

  4. GeoffT
    February 6, 2013 at 5:23 pm

    So looking at the charts the bottom 80% gets stuck with the bill, it’s a wash for the 80-95%-ers, and the top 5%-ers make out like bandits.

  5. Joanne Brown
    February 6, 2013 at 2:56 pm

    I certainly hope you are wrong on this, BC.

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