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DOR tax study to show who is really paying what
12/14/2004

Study could prove key analytical tool in tax relief debates of 2005-06

By Joanne M. Haas
WisPolitics.com

Later this week the state Department of Revenue is scheduled to release a tax burden study that has been months in the making and will be at least 100 pages for the taking, The staff at the state Department of Revenue are in their final edit before releasing what is anticipated to be a complex and complete analysis of what has happened to the tax burden in Wisconsin since 1979 -- the last year such a study was published.

Months in the making and at least 100 pages for the taking, the staff at the state Department of Revenue are in their final edit before releasing what is anticipated to be a complex and complete analysis of what has happened to the tax burden in Wisconsin since 1979 -- the last year such a study was published.

"A long, long time ago," says professor Andrew Reschovsky of the Robert M. La Follette School of Public Affairs at the University of Wisconsin-Madison. "I, and other people have been trying to argue the world has changed. The economy has changed. And we keep changing tax policy."

When the 1979 study was released, Reschovsky told WisPolitics in an interview, "that was really a model for such studies across the country."

Twenty-five years worth of state tax policy changes have been enacted while both Republicans and Democrats have been in charge, making it impossible to label it a partisan failing. Still, it is hard not to wonder whether some of the tax policies that some argue have shifted the tax burden from businesses to homeowners would have been implemented had any of the previous administrations performed such a tax burden study spelling out the potential long-term effects.

But more important for the administration is whether the study be embraced and used as a research tool to craft genuine tax relief touted daily at the Capitol as the next Legislature assembles for a bumpy two-year session leading to the 2006 gubernatorial election.

The tax burden study has been done completely in-house with a few on the outside of state government offering their insight. That's where Reschovsky fits in. He's one of a few at the UW-Madison who served as an advisor to the study, and also recently reviewed a final draft of the study he says will be released by the Revenue Department "soon."

And that's about all he'll say about specifics. He's pledged a vow of silence when it comes to the actual contents of the state study, but promises the contents will be worth a read, and another read, and another.

Reschovsky says the various scenarios covered in the study should make it "a powerful analytical tool" for any lawmaker crafting a tax relief proposal. Any tax policy proposal could be modeled with the tax burden study to determine who will be impacted.

A tax policy whiz, Reschovsky has managed to irk more than once the likes of Wisconsin Manufacturers and Commerce, and those on the bus to pass a version of the Taxpayers' Bill of Rights constitutional amendment by saying in numerous public appearances that the data shows Wisconsin homeowners are paying more in taxes than businesses and saying business taxes aren't necessarily the job-chasing demon some say they are.

Reschovsky was one of the authors of a study released in August addressing what he calls "the silly game of doing state rankings" when it comes to taxes and spending. Various special interest groups have a fancy for this, but Reschovsky argues against comparing just tax or spending numbers of various states.

"People want to use these rankings to say something about standards -- 'we are too high for... or too low for your perspective,'" he says, adding such rankings typically show Wisconsin high because they only rely on simple comparisons.

The real question and the real comparison, he says, should focus on what a typical Wisconsin citizen gets from government. What do a person's taxes buy? Wisconsin ranks 15th highest, Reschovsky notes, when it comes to state and local taxes plus fees. However, Wisconsin residents may not pay as much for services such as garbage pick-up and roads as citizens in states ranked with lower taxes and fees.

"We're moving in the direction of lower burdens," he says, adding his data ranks Wisconsin 19th in spending.

The DOR tax burden study will look at the impact of various taxes -- including income, property and corporate but not sales. But the focus will be taxes relative to a person's income -- any and all income. And look for conclusions about who actually has to pay the tax.

For example, a personal income tax hits the person, but the tax on corporations gets a lot more complicated. It could result in a price hike on a product, pushing the impact to an out-of-state consumer, meaning the tax impact gets exported. Also wages might be lowered or the impact may be pushed to the people who own the company stock, who may live in other states.

Another example is the landlord. After a property tax increase does the landlord raise the rent? Or, does he or she keep the rent the same, and swallow the tax hike to remain competitive in a tight market.

When it comes to the TABOR debate, Reschovsky says the data must be examined.

"One of the things that is driving some people (to support TABOR) are the people who face high property tax burdens. Their taxes are high relative to their income," he says, adding that can be true particularly for elderly people. "That's a real phenomenon."

Individuals are burdened, he says, but overall, things are better in Wisconsin.

The way policy-makers have opted to deliver property tax relief "has been in a very inefficient way. We've done it by forcing lower property tax rates."

The most striking example, he says, was when the state in the 1990s agreed to fund two-thirds of education and place revenue limits on schools. The state provided more dollars, but property values went up and forced the school rates to go down. "The mill rate goes down every year," he says, adding some may see that as a great thing. But the lowered property tax rate applies to every single owner of property.

"We give the same rate to the little old lady who can't afford to live her house... We give the same property rate reduction to the Illinois resident who owns a vacation home here," he says. "It is very untargeted relief."

The tax burden study "will identify who are the people -- the characteristics of the people who really pay high taxes relative to their income," Reschovsky says. "And target it to those who really need it."


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