One Wisconsin Now Perpetuates Myth that Higher Taxes Will Solve Budget Deficit

 

In a recent press release, liberal advocacy group, One Wisconsin Now, slammed Governor Scott Walker’s proposal to require a super majority for any tax increase, calling it a plan that “could doom the state’s economic future to California-sized deficits.”1 Unfortunately, One Wisconsin Now provides no facts to back up this allegation. This is a case of mistaking correlation for causation.

If the secret to solving budget deficits was high taxes, as One Wisconsin Now seems to imply, California and Wisconsin would be well on their way to a budget surplus. Unfortunately, high taxes in both states have contributed, not solved, a burgeoning budget crisis. According to sampling of data compiled by the non-partisan Tax Foundation, California2 and Wisconsin3 suffer from some of the highest taxes in the country.

 

 

  • California’s Business Tax Climate ranks 49th. Wisconsin’s ranks 40th.
  • California has the 3rd highest individual income tax. Wisconsin has the 11th.
  • California has the 7th highest Corporate Income Tax. Wisconsin has the 17th.

A careful review of the facts prove that California and Wisconsin have massive budget deficits because they’ve spent recklessly for decades and amassed billions in unfunded pension liabilities. At the current level of tax collection, California would have to devote 4.15 years of tax revenue to its pension fund to fulfill obligations. Wisconsin would have to devote 6.29 years of tax revenue to fully fund its pension obligations.4

Walker’s proposal to require a super majority to raise taxes won’t send Wisconsin careening towards a “California-sized deficit.” It will simply make it more difficult to raise taxes. What will lead Wisconsin in that direction is to continue reckless spending levels, not tackling the massive unfunded liability of state pension obligations, and perpetuating myths that high taxes are the answer to budget deficits.

 

3 http://www.taxfoundation.org/research/topic/67.html
4 http://www.kellogg.northwestern.edu/faculty/rauh/research/JEP_Fall2009.pdf

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