Gov. Scott Walker threw out an interesting idea quoted by the Milwaukee Journal Sentinel:

Gov. Scott Walker said Wednesday that he would be interested in exploring the idea of repealing the state income tax, but added that a lot of work would have to be done to explore how that would be accomplished.

Walker, speaking to reporters at the Wisconsin State Fair, was asked by a reporter if he was thinking about repealing the income tax. Walker said that he gets asked that question a lot.

The governor said he wanted to move forward on tax reform. Asked specifically about repealing the income tax, Waker said: “That’s an area I would be interested in, but there’s a lot of ground work that would have to be done. Everything from deciding what would replace it to how to do it.”

Walker said he was not making any recommendation “one way or the other.” But he acknowledged that in his expected run for re-election next year, a “comprehensive tax-reform package” would be included in the campaign.

This requires a brief review of Wisconsin’s (excessive) taxes. The income tax, which “celebrates” its 102nd anniversary this year in Wisconsin (and became law in the U.S. 100 years ago last February), was created in part to reduce the state’s first widespread tax, property taxes. When, nearly five decades later, property taxes and income taxes were adjudged to be insufficient to fund growing state and local governments, not to mention further complaints about property taxes, the sales tax was created — first at 3 percent before increases to 4 percent in 1969, and 5 percent in 1982. The Legislature allowed counties to institute a 0.5 percent sales tax after that, and predictably all but 10 counties have sales taxes, supposedly to reduce property taxes too. Brown County has a 0.5 percent sales tax to fund the Lambeau Field renovations, and five Milwaukee-area counties have a 0.1-percent sales tax to fund Miller Park.

Taxes are dropping by $704 million during the 2013–15 budget cycle, according to the Legislative Fiscal Bureau. That, however, is only one-third of the $2.2 billion foisted upon us by Walker’s predecessor, Gov. James Doyle, and the 2009–10 Legislature, then controlled by Democrats. And that isn’t going to change Wisconsin’s well earned reputation as a tax hell anyway. That won’t happen until the state enacts the biggest tax cut in its history, something that will dwarf any tax cut or tax increase in this state’s history.

The first thing Walker should propose, as you know from this blog, is eliminating corporate income taxes. That would be an incentive to businesses here as well as businesses contemplating moving out of their current states. Businesses are the government’s tax collectors; taxes assessed on businesses are paid by businesses’ customers, which is a violation of the concept of tax clarity. People should be able to see clearly the taxes they’re paying.

Media Trackers finds a common theme among GOP governors:

Walker is not alone among Republican governors looking to end state income taxes. Louisiana Governor Bobby Jindal floated an income tax elimination plan to his state legislature earlier this year. Jindal momentarily stopped pushing for the plan for now, but has indicated he wants to bring it up again in the future.

The Wall Street Journal reported in January that Nebraska Governor Dave Heineman also proposed terminating his state’s income tax. That same story also pointed out that a study conducted by noted economist Art Laffer found that job creation in states with zero income tax far outpaced job creation in states with an income tax.

A new analysis by economist Art Laffer for the American Legislative Exchange Council finds that, from 2002 to 2012, 62% of the three million net new jobs in America were created in the nine states without an income tax, though these states account for only about 20% of the national population.

The looming presidential contest could also influence Walker’s tax reform calculus. By enacting a tax cut in this budget, and talking about further reform – particularly such a bold step as eliminating the income tax – the Governor puts himself on a more than equal footing as potential GOP presidential nomination rivals. This, of course, all depends on Walker actually choosing to run.

So is it a serious proposal (lacking significant details, about which more momentarily) or not? One thing that makes you wonder is that even if Walker succeeded in getting the Legislature to kill the income tax doesn’t mean income taxes won’t come back someday. Wisconsin survived its first 65 years without income taxes, and its first 114 years without sales taxes. As far as I know, though, Walker is the first, and if not certainly the highest ranking, politician to propose eliminating roughly one-third of the state tax system. (I was taught in two state government classes at UW–Madison that property, income and sales taxes are kind of the three-legged stool of Wisconsin taxation, each taking up roughly one-third of our tax bill, though that has shifted from one tax to another over the years and with the economy.)

If you are going to get rid of state income taxes, you must not merely set income tax rates at zero, because a future Democratic governor and Legislature could easily bring them back. Voters would have to vote by referendum (following approval of consecutive sessions of the Legislature) to amend Article VIII of the state Constitution, which includes the sentence “Taxes may also be imposed on incomes, privileges and occupations, which taxes may be graduated and progressive, and reasonable exemptions may be provided.” (And while you’re at it, the state Constitution badly needs provisions with mandatory limits on spending and tax increases.)

The other sticky issue is whether Walker is ready for the political fight of the government cuts that would be necessary to match spending cuts to eliminating the revenue from income taxes, or raising the other two major taxes to make up the difference. A 50-percent increase in sales taxes would increase the rate to 7.5 percent, before the 0.5-percent sales tax in all but 10 counties. Polls indicate that Wisconsinites complain about sales taxes the least, but there’s a bit of a difference between 5.5 percent and 8 percent.

As for property taxes, about which Wisconsinites complain the most: Consider these statistics from Tax-Rates.org:

• The median property tax bill in 2012 was $3,007, ninth highest of the 50 states.
• Said median property tax bill totaled 4.81 percent of median income, eighth highest of the states.
• Said median property tax bill was 1.76 percent of the property on which said tax bill was paid, fourth highest of the states.

(See? We are still a tax hell.)

That property tax bill translates to a net mil rate — the total of school district, municipal, county, technical college and state property tax mil rates — of $17.605 per $1,000 valuation. (Assessed or equalized? For purposes of this comparison, it doesn’t matter.) If you own a house that generates a $3,000 property tax bill, how would you feel about paying not $3,000 in property taxes, but $4,500 in property taxes? Of course, you can write off property taxes on your income taxes, but (1) not if state income taxes don’t exist, and (2) not if the proposed federal tax reform (assuming it ever happens) includes eliminating the ability to deduct state and local taxes. (Of course, the latter may happen anyway, because the state and local tax deduction is a subsidy to high-tax states such as Wisconsin.)

I am skeptical as well because of the obvious (based upon the last half-decade or so, though it’s much, much older than that) animus toward wealth in this state. The spittle generated every time the words “tax cut” are brought up should be enough to short out the state’s entire electric grid. Doyle and his Democrats increased taxes by $2.2 billion stupidly believing that the “rich” wouldn’t do anything to reduce their tax burden. They discovered to their surprise that “rich” people have resources to avoid taxes, with resulting nine- and 12-digit budget deficits.

The other inconvenient part of this discussion is that for all the talk of chopping up government (and government does nothing to contribute to our quality of life), and for all the legislative successes Walker has had, government is not smaller, and taxes aren’t really lower in this state. The Department of Natural Resources apparently has enough employees to staff baby deer-killing SWAT teams. “Executive assistant” positions still exist in state government. The state still has 3,120 units of government. State and local governments still have redundant levels of police. (Two words: “State Patrol.”)

So you’ll have to pardon my skepticism about eliminating state income taxes. Until Walker comes out with a plan, it’s just election-year (or election-year-eve) talk.