Scott Walker, Tax Killer?

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Dan Calabrese and other conservative websites pick up on a WisPolitics report on a subject this very blog reported on four months ago:

Gov. Scott Walker said Monday his administration’s ongoing discussion about taxes includes a look at whether it would be feasible to eliminate the income tax.

Walker said the conversation is starting now so his administration can take time well ahead of the next budget to figure out what employers, small business owners and the public believes “would be the biggest bang for the buck.”

“There are many states that do very well, better than most states in the country, that have no income taxes,” Walker told reporters during a stop at his Northern Economic Development Summit. “That’s one thing for us to look at. Is that feasible? What would that mean in terms of an economic boost? That’s not only for individuals, but small businesses in this state.”

Lt. Gov. Rebecca Kleefisch and Revenue Secretary Rick Chandler last week had the first of their roundtable discussions on taxes. Chandler said Monday those discussions are to get input from the public on what they’re interested in as well as what’s best for job creation. He said that could be changes to the income tax code or property taxes.

“We want to look at areas where we may not stack up well against other states, where particular aspects of our tax code may be out of line with other states,” Chandler said. “We want to get the overall burden down, and we want to make all elements of the tax code as competitive as possible.”

Where does Wisconsin “not stack up well against other states” in taxes? Basically all of them, but particularly in income taxes, because our state’s culture hates “rich” people. The purpose of a tax system should be to raise necessary revenue for the functions of government, not for any other purpose, including “fairness.” A system where everyone pays the same tax rate is “fair” because people with more income or who spend more pay more in, respectively, income and sales taxes.

Calabrese adds:

While John Boehner and Mitch McConnell are firing shots at conservative organizations for criticizing the latest GOP punt on fiscal policy, let’s see what’s happening in statehouses across the country – particularly in Paul Ryan’s home state of Wisconsin.

Scott Walker, who already went to war with public employee unions and won concerning collective bargaining rights, isn’t resting on his laurels. He’s now taking a serious look at eliminating Wisconsin’s state income tax – a move that would put Wisconsin on a par with economic strongholds like Texas and Florida. The conversation is beginning well in advance of the next budget cycle because Walker wants to have a clear sense of the fiscal and economic implications before he brings the idea before the Legislature. …

Democrats like income taxes, of course, because they can be used very efficiently as instruments of redistribution. Walker isn’t yet saying how he would otherwise restructure the state’s tax code to compensate for the loss of income tax revenue (assuming he would at all), but one obvious step would be an expansion of the state sales tax. Sales taxes, of course, are less prone to politicians’ manipulation, which is why Democrats don’t much like them. You can exempt certain things – like groceries and medicine – but you can’t build in the same myriad of complications that are possible with an income tax.

And of course, the best argument against income taxes is that they serve as a disincentive against earning, whereas sales taxes encourage savings and discourage consumption. That’s a dagger in the heart of Keynesians who think consumption alone drives economic growth. They prefer to impose punitive income taxes on the rich and redistribute the income to those who earn less on the theory that they will spend the money on their needs and all this consumption will drive growth. That’s why they’re demand-siders, because they think demand leading to consumption creates wealth. We’re supply-siders because we believe production adds value and creates wealth, thus making it possible for people to consume what represents value to them.

Actually, Walker is inflating this trial balloon because, well before the next budget cycle, he has a(nother) reelection. Assuming Walker survives the old and new threats on his life before the 2014 election, I’m skeptical about this, as I wrote four months ago, for a variety of reasons, beginning with arithmetic. In order to make up the loss of income tax revenue, some combination of three things will have to happen:

  1. Increase the state sales tax from 5 percent.
  2. Increase property taxes (or cut so much state aid to counties, municipalities and school districts that they raise property taxes to make up the lost state aid) in a state that is already in the top 10 in median property tax bills, in terms of taxes and in terms of percentage of personal income and property value. The income and sales taxes exist today in large part because of efforts at property tax relief. Those efforts, of course, failed.
  3. Cut state spending. Not just reduce the increase, but cut it. By a lot.

Do you see support among the average Wisconsinite for any of those three, let alone all of those three? Democrats demagogue every tax cut and every spending cut because they believe people don’t pay enough in taxes, and that government doesn’t spend enough money in this state. Too many Wisconsinites persist in the mistaken belief that our government services, including our schools, are great values, when they’re not, in either what we’re paying for them or their quality.

The comments on the Cain TV blog and on Facebook (as in 12,041 Likes on Cain’s site alone) indicate overwhelming support for getting rid of income taxes. Some comments may indicate less than fully thought out support of getting rid of income taxes. (Such as the political likelihood of whacking one-third of state government spending.) Others prove that other states have considerably lower taxes and much less government and provide services to their citizens just fine.

I find it unlikely that income taxes will die in Wisconsin. I am most interested to find out what Walker’s tax reform proposal will contain. What it must contain beyond tax cuts is constitutional, not merely statutory, limits on spending and constitutionally required voter or supermajority approval of tax increases. Never trust politicians to do the right thing; you have to prevent them from doing the wrong thing.

2 responses to “Scott Walker, Tax Killer?”

  1. dekerivers Avatar
    dekerivers

    California is a perfect example of why supermajority approval of tax increases is an absolutely horrible idea.

  2. From tax hell to tax purgatory? | StevePrestegard.com: The Presteblog Avatar
    From tax hell to tax purgatory? | StevePrestegard.com: The Presteblog

    […] income taxes creates a big math problem. Back in December I pointed out that if the state was going to eliminate income taxes, that would require some […]

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