Since 2011, Wisconsin lawmakers have made it a high priority to cut taxes, particularly personal income and property taxes.
The tax cuts they have passed have disproportionately gone to Wisconsin residents with the highest incomes. Middle-class residents received less than the wealthy and residents with low incomes received the smallest tax cuts, according to the Wisconsin Budget Project.
There are several methods to measure the size of tax cuts for various income groups.
But regardless of the measure used, highest earners received the largest tax cut on average and the lowest earners received the smallest tax cut.
Methods of comparing the size of the tax cut include:
• The share of total tax cut, measured in terms of the revenue loss to the state, directed to each income group. Using this measure, the group of taxpayers in the top 1 percent received a combined tax cut that was nearly 11 times as big as the combined tax cut received by taxpayers in the bottom 20 percent — even though there were 20 times as many taxpayers in the group with the lowest income.
• The average tax cut in dollar amounts that taxpayers received in each income group. Measured this way, taxpayers in the top 1 percent by income received an average tax cut 57 times as large as taxpayers in the bottom 20 percent.
• The tax cut as measured as a share of the taxpayer’s income. Using this measure, the tax cuts received by the top 1 percent of taxpayers by income were more than twice as large on average as the tax cuts received by taxpayers with the lowest incomes, even after the relative sizes of their incomes was taken into account.
While lawmakers were focused on cutting taxes for those with high incomes, they also passed several tax increases aimed at Wisconsin residents with low incomes.
In 2011, Wisconsin lawmakers cut the state’s Earned Income Tax Credit, an action that had the effect of increasing the amount of taxes paid by working parents with low and moderate incomes.
Also in 2011, lawmakers cut the Homestead Credit, which keeps property taxes low for homeowners and renters with low incomes.
Together, those changes resulted in taxpayers with low and moderate incomes paying $263 million more in taxes in the six-year period that started in July 2011, according to the Legislative Fiscal Bureau.
ABOUT THE TAX CUT
Wisconsin state lawmakers have passed more than 50 tax cuts since 2011, when Gov. Scott Walker began his administration and Republicans gained control of both the state Senate and Assembly.
Some of those tax cuts have negligible effects, reducing the amount of state revenue by less than $1 million a year. Others of the tax cuts were significant, reducing state revenue by several hundred millions a year.
The analysis from the Wisconsin Budget Project includes the combined effect of 13 personal income, corporate income and property tax cuts passed between 2011 and 2016.
These changes reduced state revenues by an estimated $1.7 billion in tax year 2017.
The analysis includes every change to general fund taxes and property taxes that changed the amount of revenue collected by more than $10 million in fiscal year 2017, as estimated by the Legislative Fiscal Bureau and the Institute for Taxation and Economic Policy, with the exception of a 2013 update of the state’s revenue code to conform with changes made at the federal level.
The analysis does not include tax cuts with smaller effects or the changes to the EITC and the Homestead Credit.
MEASURED AS SHARE OF REVENUELOSS,HIGHEST EARNERS GOT BIGGESTTAX CUT
Of the $1.7 billion in major tax cuts for 2017 included in the Wisconsin Budget Project analysis, the lion’s share went to Wisconsin residents with the highest incomes.
The top 1 percent of residents by income — a group with an average annual income of $1.7 million — received 24 percent of the value of the tax cuts, amounting to $420 million in 2017.
Taken together, the top 20 percent of residents by income got 60 percent of the tax cuts, or $1.0 billion. The remaining 80 percent of residents split the other 40 percent of the tax cut.
The large share of the total tax cut received by the group of highest earners stands in contrast to the amount received by the group of Wisconsin residents with the lowest 20 percent by income: just 2 percent of the value of the tax cuts, or $40 million of the $1.7 billion. Those residents had an average annual income of $15,000.
MEASURED IN DOLLAR TERMS, HIGHEST EARNERS GOT BIGGEST TAX CUT
In dollar terms, the value of the tax cuts rose with income level, with each income group receiving a larger average tax cut than the groups with lower incomes.
The top 1 percent of earners in Wisconsin received an average tax cut of $10,015 in 2017, or about $193 each week. Wisconsin residents in the bottom 20 percent of earners received an average tax break of $175 in 2017, or about $3 a week.
The tax cut received by the top 1 percent was 57 times higher than the tax cut received by the lowest income group. That means the top income group saved more on taxes each week than the lowest income group saved over the course of the entire year.
MEASURED IN SHARE OF INCOME, HIGHEST EARNERS GOT BIGGEST TAX CUT
Highest earners got the biggest tax cuts on average and lowest earners the smallest, when the value of the tax cut is measured as a share of income.
This way of comparing the size of tax cuts takes into account relative income size.
Measured as a share of income, Wisconsin residents with the highest incomes received the largest tax cut in 2017.
Their tax cut amounted to 0.70 percent of their income, more than twice as large as the tax cut of 0.33 percent of income for Wisconsin residents in the bottom 20 percent of income.
The other income groups received tax cuts as a percent of income that were roughly similar to each other, with average tax cuts of between 0.54 percent and 0.62 percent of their incomes.
Wisconsin Budget Project said, "By directing the bulk of the tax cuts at taxpayers with high incomes, lawmakers further tilt Wisconsin’s tax system in favor of the wealthy."
In Wisconsin, as in most other states, taxpayers with the highest incomes pay a smaller share of their income in state and local taxes on average than taxpayers in other income groups. This attribute was already in place before 2011, when Walker’s administration and recent Republican dominance of the Legislature began and the characteristics of the tax cuts passed since 2011 then has likely reinforced that aspect of Wisconsin’s tax system.