State Tax Burden Shows Desperate Need for Budget Reform

While the national media had their attention turned to our State Capitol over the last several weeks, the troubling results of a recent study on state and local tax burdens around the country seems to have evaded most people’s attention.  I believe, however, that it is critical for every taxpayer to hear about it because it further emphasizes the massive economic and budgetary challenges we are facing and why Wisconsin desperately needs to change course.

The study, conducted by the nonpartisan Tax Foundation, revealed that Wisconsin has the fourth highest combined state and local tax burden in the country as a percentage of income.  For fiscal year 2009, the most recent year that a full data set was available, per capita income in Wisconsin equaled $40,321, 25^th highest in the nation.  Eleven percent of that income, or $4,427, went toward state and local taxes of all kinds, such as property, income, sales, capital gains and many others – the fourth highest percentage in the nation.

Considering the billions of dollars in tax and spending increases passed in Wisconsin over the last few years, I am concerned that the 2010 data could be even worse.  As we seek to move ahead as a state, it is crucial to ask where big government and high rates of taxation, spending and borrowing have gotten us – and what we need to do to set things straight.

The consequence of our budget carelessness is a looming $3.6 billion budget deficit.  This came as a result of the fundamental dishonesty with which recent budgets have been balanced – using things like illegal fund raids and one-time federal money.  This dishonesty has given birth to a state government that has become a burden and an enemy to economic growth and job creation, rather than a partner.

Then, as our economy deteriorated, it became evident that our state policymakers were utterly incapable of seeing what their errors had wrought and adjusting accordingly.  Instead of focusing on what it would take to get government out of the way of private sector growth and get Wisconsin back to work, politicians in both parties focused instead on how to expand the size and scope of our government.  The cost has been traumatic for our economy, with the most recent quarterly U-6 underemployment index still hovering close to 15 percent.

By now, everyone knows that our current trajectory is fiscally unsustainable.  The inadequate “solutions” we have undertaken over the last few years have amounted to rearranging the deck chairs on the Titanic – or have actually made the ship sink faster. 

But the legislature, in partnership with Governor Scott Walker, is finally turning the corner from a policy standpoint and moving back in the right direction.  We’ve passed a number of bills aimed at restoring a climate of growth and job creation and, just a few weeks ago, Governor Walker introduced a 2011-13 budget bill that makes adult decisions and begins the task of fixing Wisconsin’s fundamental financial problems.  It accepts responsibility today for the careless decisions of the last several years and ensures that our children and grandchildren are not left with a crisis to deal with.

Employment is now making a modest rebound, but getting Wisconsin fully back on track is not going to be easy.  Every citizen of our state will be called upon to share in the difficult choices that lay before us.  And many citizens already have – with lost jobs, shuttered businesses, foreclosures and other financial difficulties.  But in the end, the responsible decisions that we’re making today will reward our shared sacrifice with a shared prosperity down the road.  And that’s something we can all look forward to.

To contact me with any questions or comments or to sign up for my regular e-updates, please send an e-mail to Rep.Knodl@legis.wi.gov or call me at (608) 266-3796.