Taxes may be up, but not as a percentage of income

It certainly sounds like good news. Wisconsinites paid a smaller share of their income in state and local taxes in half a century. That is the finding of a new report from the nonpartisan Wisconsin Policy Forum. Their report finds that Wisconsinites’ paid 10.3% of their income in state and local taxes last year, down from 10.4% in 2018. In fact, the percentage of our income being spent on our local and state tax obligations is at its lowest point since at least 1970. But is this really something to celebrate? The key to understanding this statistic is that it is measured as a percent of our income. It doesn’t mean our local and state tax obligations have gone down. In fact, quite the opposite. For the most recent fiscal year, Wisconsin’s state and local tax obligations actually increased by 4.5%. But the tax burden fell because personal income growth in Wisconsin grew more quickly than tax collections. So looking beyond the headline, the real story here is that in Wisconsin our tax obligation continues to rise, but we are better able to afford it because of rising wages, so when measured as a percentage of our income, the news looks good. But that assumes we have seen our incomes rise. Have you? Was your property tax bill down this year? The bottom line is our tax obligation continues to rise, but for some at least, it has gotten easier to write that check.