Taxing Times in Wisconsin

Tax season is upon us once again.  You likely have begun receiving your 2010 tax documents (W-2s, 1099s).  In Madison, the legislature is considering tax bills ranging from a tax deduction for hiring new workers to tax forgiveness for two years for new businesses moving to Wisconsin.   Today, Governor Walker signed into law an exemption from income for contributions to Health Savings Accounts (HSAs).

As a former tax attorney, I find the recent tax debates in Wisconsin particularly interesting.  One side is arguing that we need to pass a variety of tax deductions and breaks to attract more employers to this state to create jobs.  The other side argues that we will increase our estimated $3 billion deficit if we pass these tax bills because of lost tax revenues.

It is a well-known fact that Wisconsin has high individual income and property taxes.  Wisconsin’s individual income tax rates range from 4.6% to 7.75%.  These rates are a staggering 25% above the national average and rank 11th highest among states which impose an individual income tax, according to the non-partisan Tax Foundation.

Illinois recently made headlines because its legislature passed a bill raising individual income taxes 66%, but even with that rise, the Illinois individual income tax rate is only 5%.  The Packers may have beaten the Bears on Sunday to advance to the Super Bowl, but Wisconsin’s individual income tax rates are still 2.75% higher than Illinois’ rates in the highest tax bracket.   While Wisconsin may have lower corporate tax rates than many other states, the individual income tax rate in Wisconsin is particularly unfriendly to flow through entities (Limited Liability Companies (LLCs), Partnerships, Subchapter S Corporations, etc.) that are taxed at the partner/owner level .

Wisconsin property taxes are 23.6% above the national average.  These property taxes are the 8th worst property tax rates in the entire country.  The combined state and local tax burden in Wisconsin ranks 9th nationally.

Solutions to fix Wisconsin’s state and local tax problems are not easy.  For instance, if you want to reduce your property tax bill, you would need to address the high property taxes with your local school board, city council, county board, area technical college (if you have one), and state government, since all of these entities affect your property taxes.

The complexity of this problem in addressing property taxes is why Wisconsin needs a new generation of liberty-minded leaders to run for state and local office.  We need people to run for school board, city council, county board, state legislature, and other offices to address the high tax issue as well as many other issues stemming from big government.  It all starts with engaged citizens knowing what is happening at the local levels of government.  Attend a school board, city council, or county board meeting.  Follow what’s happening and voice your opinions.  If you do not like what they are doing, then YOU need to run for office and replace them!