A Discussion of Wisconsin’s
Tax System

Lieutenant Governor Kleefisch
Secretary Rick Chandler
1
• Job creation is the top goal for the Walker
administration
– Tax reform is a key element in the state's job creation
eff...
Governor Walker's Tax Reform Initiatives
Highlights of Reforms Implemented in 2011 and 2013

• Income tax reform initiativ...
Reversing Direction on State Taxes
State taxes have been cut in the most recent two budget periods
11-13 budget

13-15 bud...
Income Tax Reform Initiative
• Significant tax rate reductions were included in
2013 and 2014 initiatives
– Taxes are redu...
Governor Walker's Tax Reform Initiative
Reduces Income Tax Rates
Tax Rate Reduction
Bottom Rate

2nd Rate

3rd Rate

4th R...
Income Tax Payments Are Reduced
for Taxpayers at All Income Levels
Middle Class Taxpayers See the Greatest Relief

7
Holding the Line on Property Taxes
Property taxes have been controlled in the most recent two budgets
Holding the Line on Property Taxes
Property taxes have been controlled in the most recent two budgets

• Property taxes fo...
Wisconsin’s Tax Makeup

10
Wisconsin’s State and Local Tax Mix
Sources of tax revenue
State and local tax collections for 2012-13, Millions of Dollar...
Wisconsin's State Tax Mix
State Sources Of General Fund Revenue
FY 13 GPR Tax Collections (Total $14 Billion)
Income ($7.4...
Wisconsin’s Revenue and Tax Rank
State and local revenue for 2010-11
Wis % of
pers inc

U.S. % of
pers inc

Wis
rank

Amt ...
The Individual Income Tax

14
Wisconsin’s Individual Income Tax
• Total revenue collected: $7.470 billion per year
– This is 53% of the state general fu...
Key Points – Income Tax
• Most states (43) have an individual income tax
– Seven states (including Florida, Nevada, Texas ...
Wisconsin Income Tax Brackets
Married filing jointly, 2013

Taxable income

Marginal tax rate

$0 - $14,330

4.40%

$14,33...
The Property Tax

18
Wisconsin’s Property Tax
• Total revenue collected: $10.649 billion per year
• The property tax is $2,938 per typical
home...
Who Levies the Property Tax?

20
Key Points – Property Tax
• The largest portion of the property tax goes to school
districts, followed by municipalities a...
Key Points – Property Tax
• Businesses pay property taxes on much of their personal property
– Certain types of business p...
Key Points – Property Tax
• Wisconsin’s uniformity clause requires that all
taxable property be taxed at the same rate wit...
The Sales Tax

24
Wisconsin’s Sales Tax
• Total revenue collected: $4.707 billion per year
– This is 31% of the state general fund

• The sa...
Key Points – Sales Tax
• Under the Wisconsin statutes:
– Sales of goods are taxable unless specifically
exempted from tax
...
Key Points – Sales Tax
• Most states (45) have a general sales tax
– Exceptions: Alaska, Delaware, Montana, New Hampshire,...
Maximum State and Local Sales Tax Rates
Rates in neighboring states
State

State rate

Max local rate

Combined rate

Illi...
The Corporate Income Tax and
Other Business Taxes

29
Wisconsin’s Corporate Income Tax
• Total revenue collected: $925 million per year
– This is 6.6% of the state general fund...
Key Points - Business Taxes
• Wisconsin’s direct business taxes vary, depending on the
circumstances of the business:
– Co...
Recap and Issues for Discussion

32
Key Points - Recap
• Governor Walker has reduced taxes on
Wisconsin residents and improved the tax
climate
• Tax climate i...
Issues for Discussion
• What sort of tax reform would people like to see in the
future?
– Further individual income tax re...
Thank You
Discussion
35
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Transcript of "Tax tour presentation"

  1. 1. A Discussion of Wisconsin’s Tax System Lieutenant Governor Kleefisch Secretary Rick Chandler 1
  2. 2. • Job creation is the top goal for the Walker administration – Tax reform is a key element in the state's job creation efforts • Wisconsin's tax climate has become more competitive in the past three years – Wisconsin has historically had an above-average tax burden • What ideas should be considered for future tax reform? 2
  3. 3. Governor Walker's Tax Reform Initiatives Highlights of Reforms Implemented in 2011 and 2013 • Income tax reform initiative – Rate reductions, focused on middle class rate cuts – Increased deductions for Health Savings Accounts, health insurance premiums, child care and private school tuition – Tax simplification • Business tax incentives – Manufacturing and agriculture tax credit – Investment incentives – WEDC credits • Total tax reduction of $1.4 billion in 2011 and 2013 3
  4. 4. Reversing Direction on State Taxes State taxes have been cut in the most recent two budget periods 11-13 budget 13-15 budget 13-15 budget Biennial tax reduction compared with base year $0 ($200,000,000) ($400,000,000) $408 million $506 million ($600,000,000) ($800,000,000) ($1,000,000,000) $1,084 million ($1,200,000,000) Total tax cuts: $2 billion in two budget periods 4 Source: Department of Revenue
  5. 5. Income Tax Reform Initiative • Significant tax rate reductions were included in 2013 and 2014 initiatives – Taxes are reduced by $748 million – Rates were reduced for all brackets – Largest reductions were for middle class taxpayers – Provides broad-based tax relief • Increases in deductions provided additional tax relief 5
  6. 6. Governor Walker's Tax Reform Initiative Reduces Income Tax Rates Tax Rate Reduction Bottom Rate 2nd Rate 3rd Rate 4th Rate Top Rate Before 4.60% 6.15% 6.50% 6.75% 7.75% After 4.00% 5.84% Rate 6.27% 7.65% Overall Income Tax Reduction From Rate Cuts: $748 million (Amount of reduction in budget bill for Tax Years 2013 and 2014) 6
  7. 7. Income Tax Payments Are Reduced for Taxpayers at All Income Levels Middle Class Taxpayers See the Greatest Relief 7
  8. 8. Holding the Line on Property Taxes Property taxes have been controlled in the most recent two budgets
  9. 9. Holding the Line on Property Taxes Property taxes have been controlled in the most recent two budgets • Property taxes for the typical homeowner have gone down each year Governor Walker has been in office • Property taxes for the typical homeowner went up 27% in the decade prior to Governor Walker taking office • Property taxes for the typical homeowner are estimated to be lower next year than when Governor Walker took office 9
  10. 10. Wisconsin’s Tax Makeup 10
  11. 11. Wisconsin’s State and Local Tax Mix Sources of tax revenue State and local tax collections for 2012-13, Millions of Dollars Property taxes $10,469.9 39.7% Income taxes 7,496.9 28.3 Sales taxes 4,707.7 17.8 Motor vehicle taxes 1,396.1 5.3 925.4 3.5 1,425.1 5.4 $26,393.8 100% (incl. gas tax & vehicle registration fees) Corporate income taxes Other (incl. unemp comp tax, cig & other excise taxes, utility, ins premium,) Total 11
  12. 12. Wisconsin's State Tax Mix State Sources Of General Fund Revenue FY 13 GPR Tax Collections (Total $14 Billion) Income ($7.4 billion) Sales ($4.4 billion) Corporate ($0.9 billion) Excise Taxes ($0.7 billion) Public Utility ($0.3 billion) Insurance Companies ($0.2 billion) Miscellaneous Taxes ($0.1 billion) 12
  13. 13. Wisconsin’s Revenue and Tax Rank State and local revenue for 2010-11 Wis % of pers inc U.S. % of pers inc Wis rank Amt above nat’l avg Total tax collections 11.8 10.9 10 + 9% Property taxes 4.5 3.6 10 + 26 Indiv income taxes 3.0 2.3 12 + 28 General sales taxes 2.0 2.4 35 - 16 Corp inc taxes 0.4 0.4 18 -- Fees/charges 3.4 3.5 30 -3 15.2% 14.4% 14 + 6% Taxes and fees 13
  14. 14. The Individual Income Tax 14
  15. 15. Wisconsin’s Individual Income Tax • Total revenue collected: $7.470 billion per year – This is 53% of the state general fund • The income tax is $1,304 per capita • Wisconsin’s rank is 12th of the 50 states – Wisconsin’s rank in the Midwest is 3rd of 12 states – Wisconsin's rank among our neighboring states is 2nd of 5 states 15
  16. 16. Key Points – Income Tax • Most states (43) have an individual income tax – Seven states (including Florida, Nevada, Texas and Washington) have no individual income tax • Wisconsin has graduated individual income tax rates, with four brackets starting at 4.40%, then increasing to a top rate of 7.65% – Seven states have a flat rate system, with rates ranging from 3.07% to 6.00% – 36 states have graduated rates 16
  17. 17. Wisconsin Income Tax Brackets Married filing jointly, 2013 Taxable income Marginal tax rate $0 - $14,330 4.40% $14,331 – $28,650 5.84% $28,651 – $315,460 6.27% $315,461 and up 7.65% 17
  18. 18. The Property Tax 18
  19. 19. Wisconsin’s Property Tax • Total revenue collected: $10.649 billion per year • The property tax is $2,938 per typical homeowner • Wisconsin’s rank is 10th of the 50 states – Wisconsin’s rank in the Midwest is 2nd of 12 states – Wisconsin's rank among our neighboring states is 1st of 5 states 19
  20. 20. Who Levies the Property Tax? 20
  21. 21. Key Points – Property Tax • The largest portion of the property tax goes to school districts, followed by municipalities and then counties and technical college districts – The state forestry tax portion of the total statewide levy is less than one percent • In the most recent tax year 4.5% of personal income will go to property taxes 21 Sources: Department of Revenue and Wisconsin Taxpayers Alliance
  22. 22. Key Points – Property Tax • Businesses pay property taxes on much of their personal property – Certain types of business property have been exempted from personal property taxes (e.g., manufacturing machinery and equipment, computer equipment, inventories, waste treatment equipment) – Much personal property owned by businesses is still assessed and taxed (e.g., furniture, equipment other than manufacturing and computer and waste treatment equipment) • All non-exempt property owners (individuals and businesses) pay property taxes on their real property (buildings and land) • Individuals do not pay property taxes on any personal property (vehicles, furnishings, investment holdings, etc.) 22
  23. 23. Key Points – Property Tax • Wisconsin’s uniformity clause requires that all taxable property be taxed at the same rate within each jurisdiction (with limited exceptions) • Specific classes of property can be exempted from tax – All property owned by federal, state and local governments and by churches, educational institutions, non-profit hospitals, non-profit housing organizations and certain charities is exempt from the property tax 23
  24. 24. The Sales Tax 24
  25. 25. Wisconsin’s Sales Tax • Total revenue collected: $4.707 billion per year – This is 31% of the state general fund • The sales tax is $822 per capita • Wisconsin’s rank is 35th of the 50 states – Wisconsin’s rank in the Midwest is 11th of 12 states – Wisconsin's rank among our neighboring states is 4th of 5 states 25
  26. 26. Key Points – Sales Tax • Under the Wisconsin statutes: – Sales of goods are taxable unless specifically exempted from tax – Sales of services are not taxed, unless specifically listed as subject to tax • Wisconsin has adopted a number of sales tax exemptions – Most of the biggest exemptions are for necessities, sales to non-profits and governments, and business inputs – Most of the exemptions Wisconsin has are also provided in the majority of other states 26
  27. 27. Key Points – Sales Tax • Most states (45) have a general sales tax – Exceptions: Alaska, Delaware, Montana, New Hampshire, Oregon • Wisconsin's state sales tax rate of 5.0% is lower than in the majority of other states • Wisconsin has several local option sales taxes – Counties can adopt a local sales tax at a rate of 0.5% – Stadium districts in southeastern Wisconsin and Brown County have sales taxes • Wisconsin's maximum state/local sales tax rate of 5.6% is lower than in the majority of other states 27
  28. 28. Maximum State and Local Sales Tax Rates Rates in neighboring states State State rate Max local rate Combined rate Illinois 6.25% 3.75% 10.00% Iowa 6.00 1.00 7.00 Michigan 6.00 -- 6.00 Minnesota 6.875 1.00 7.875 Wisconsin 5.00 0.60 5.60 28
  29. 29. The Corporate Income Tax and Other Business Taxes 29
  30. 30. Wisconsin’s Corporate Income Tax • Total revenue collected: $925 million per year – This is 6.6% of the state general fund • Wisconsin's rank is 18th of the 50 states – Wisconsin's rank in the Midwest is 4 of 12 states – Wisconsin's rank among our neighboring states is 3rd of 5 states 30
  31. 31. Key Points - Business Taxes • Wisconsin’s direct business taxes vary, depending on the circumstances of the business: – Corporate income taxes tend to be at or near the national average (but vary greatly from year to year) – Income taxes on small businesses that are Sub S corps, LLCs or partnerships are determined by the individual income tax – Sales taxes on businesses apply to the same general range of goods and services as in the majority of other states – Property taxes vary, depending on the circumstances of the business 31
  32. 32. Recap and Issues for Discussion 32
  33. 33. Key Points - Recap • Governor Walker has reduced taxes on Wisconsin residents and improved the tax climate • Tax climate is important for job creation and economic development • Governor Walker is committed to continuing to reduce Wisconsin’s tax burden 33
  34. 34. Issues for Discussion • What sort of tax reform would people like to see in the future? – Further individual income tax reform (rate reductions, new credits and deductions, or other changes) – Property tax cuts – More business incentives • What approach to tax reform would people prefer to see? – Steady year-after-year reductions as the economy grows – Major restructuring of the tax system to enable major cuts in some taxes • Which taxes do people find the most and least acceptable? • What tax reforms would most effectively encourage job creation? 34
  35. 35. Thank You Discussion 35

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