By Wyatt Eichholz
States without one turn to unique sources of revenue or growth-hindering options
Some are calling for elimination of Wisconsin’s individual income tax, which currently produces over $9 billion in annual revenue and accounts for over 40% of all state tax collections. Indeed, a resolution adopted at the most recent convention of the Republican Party of Wisconsin encouraged the state Legislature to “make Wisconsin an income-tax-free state” and noted that a number of other states already do without one.
To determine whether the proposal is realistic, this paper asks two primary questions: How do other states without an income tax fund their essential services? Under what circumstances would this be feasible in Wisconsin?
In sum, states without an income tax almost invariably have unique sources of revenue unavailable to Wisconsin or counterproductive to economic growth. Wisconsin, in order to eliminate the income tax, would likely have to raise its sales taxes higher than anyplace else in America and simultaneously enact unprecedented, dramatic spending cuts.
Proponents of limited government and efficient spending, the Badger Institute encourages discussion of specific spending cuts. There is, meanwhile, a different, realistic path to a better tax structure that leads to prosperity and opportunity — the flat tax.
