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State and local taxes down again as share of income

For the eighth year in a row in 2019, Wisconsinites saw a decrease in the share of their incomes they pay in state and local taxes, dropping this measure of the collective tax burden to its lowest point in a half century.

The reduction occurred at the same time that state and local tax revenues increased by 4.5% in the fiscal year ending June 30, marking the biggest percentage increase seen since 2011 and nearly doubling the rate of increase for 2018.

Yet the tax burden fell nonetheless because Wisconsinites’ incomes were increasing quickly. Total personal income, which includes wages and salaries, investment income, and government benefits, rose by 5.1% to nearly $300 billion in calendar year 2018, the most recent year for which data are available. This left residents paying 10.3% of their incomes in state and local taxes last year, down from 10.4% in 2018.

This share has declined every year since 2011 and has been on a largely downward trajectory since the mid-1990s. It now is at its lowest point, according to Forum records going back to 1970.

In 1994, Wisconsinites paid 13.2% of their income in state and local taxes. If they paid the same percentage in 2019, collections of state and local taxes would have been nearly $8.5 billion higher than they actually were. (It should be noted, however, that this hypothetical number assumes that higher taxes and spending would not have affected Wisconsinites’ total income, which is highly unlikely.)

In 2019, the rise seen in state and local taxes resulted mostly from an increase in state collections, which were up by 6% in total. Corporate income tax revenues rose by nearly 50%, marking the biggest annual increase in decades, thanks in part to changes in federal tax law. Individual income taxes, the largest state tax, increased by 6.1%.

This information from the Wisconsin Policy Forum, the state’s leading resource for nonpartisan state and local government research and civic education. Learn more at wispolicyforum.org.

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