February 7, 2022

Wisconsin Budget Project: Tax Shift Would Hike Taxes for People with Low Incomes and Give a Big Tax Cut to the Top 1%

ITEP Work in Action

Last month, an influential group of lobbyists released a proposal to raise Wisconsin’s sales tax to 8%, making it the highest state sales tax in the country, and eliminate the state individual income tax, Wisconsin’s biggest source of revenue. The plan would result in the largest tax cuts going to white households, with households of color receiving smaller tax cuts or having to pay more in taxes.

The proposed changes would give enormous tax cuts to the top 1% by income. Tax filers in the top 1% – a group with an average income of $1.7 million – would get a tax cut of $78,000 on average. That is more than a typical Wisconsin earns over the course of a year. In contrast, a tax filer in the middle 20% by income would get an average tax cut of just $357, or less than a dollar a day. Put another way, a filer in the top 1% would get a tax cut that is 219 times as large in dollar amounts as a tax filer in the middle group, on average.

Filers with low incomes would actually pay more in taxes under this plan than before the change. A filer in the bottom 20% by income, a group with an average income of $15,000, would expect to pay $460 more a year in taxes on average. Filers in the second 20% by income would also have their taxes hiked, paying $250 more on average. Taxes could also increase for middle-income Wisconsinites if the large reduction in total tax revenue results in cuts to state property tax relief or keeps that relief from growing in proportion to property taxes.

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