If TABOR ever interfaces with the facts it is dead. But thanks to people like Charlie Sykes, that is a big “if.”
TABOR in Wonderland
Right-wing Milwaukee radio host Charlie Sykes has a new acronym and his very own litmus test. “RINO” or “Republican In Name Only” is the label Sykes applies to Republicans who dare depart from the party line when it comes to another of his favorite acronyms, TABOR (Taxpayers Bill of Rights). Sykes wants to make it clear that this is unacceptable behavior in the Wisconsin Republican Party.
Sykes was referring specifically to Gregg Underheim and Michael Lehman when he coined his clever phrase, but since then Sen. Mike Ellis and few other responsible Republicans have also spoken out against this unsound, demagogic “policy” proposal.
TABOR actually has nothing to do with rights, but never mind that. TABOR would essentially amend the state constitution by mandating a cap on state and local spending and taxation increases, limiting them to inflation plus population growth (barring a full-scale referendum to override the cap).
The pro-TABORs have done some research—or some polling anyway. Sykes cites a survey done by Wisconsin Manufacturers and Commerce (practically the Sisters of Charity) showing that 74 percent of Wisconsin voters would back a constitutional spending/taxation cap and a solid 65 percent would still support a cap, even after being provided with “a litany of arguments against the caps,” no doubt passionately delivered by WMC’s fine pollsters. In politics, anyway, surveys are better than facts.
This survey does manage to demonstrate two things: 1.) People in Wisconsin have quite a few misconceptions about the state of taxation in Wisconsin (hence their support for one of the most fiscally reckless pieces of legislation in Wisconsin history); and 2.) After decades of concerted GOP indoctrination, they are reluctant to let go of those misconceptions (hence their resistance to WMC’s attempts at playing devil’s advocate).
The first misconception just about everyone has about taxes and spending in Wisconsin is that they have been rising at some astronomical rate. As a matter of fact, they have not been rising at all.
Yes, taxes have been rising faster than inflation, but they have been doing that for the last 50 years. Nationally, state taxes have increased an average of 3 percent over inflation annually, except in the 1990s when that rate fell to 2 percent. Inflation is a measure of the cost of living. It is not a measure of cost of government nor is it a measure of income growth. Taxes in Wisconsin, measured as a percentage of Gross State Product, remained very steady throughout recent decades and began to fall off sharply after 2000.
The second misconception people have is that the middle class pays most of the income taxes in Wisconsin. This depends largely on who is considered middle class, but the fact of the matter is that the middle class could not possibly afford to shoulder the brunt of the state’s tax burden. This is not to say that the rich pay anything approaching an exorbitant, or even fair, tax burden, but both misconceptions stem from a general ignorance of just how large Wisconsin’s income gap really is.
A 2000 Center on Budget and Policy Priorities report found that, in the late ‘90s, the top fifth of Wisconsin income earners accounted for 42 percent of all income. Add to this the next fifth and you have already accounted for 65 percent of all personal income. The richest 20 percent of Wisconsinites made 8.2 times as much as the poorest fifth and 2.5 times as much as the middle fifth. Rich people pay more in taxes simply because they have much more money. This gap is growing. Between the late 1980s and the late ‘90s, the richest 20 percent saw their inflation-adjusted income rise by 30 percent. The middle fifth saw a respectable 13 percent increase. The poorest 20 percent at least did not lose ground at 2.1 percent.
These gains are all over and above inflation, and they provide a good explanation of why taxes rise faster than inflation. A great deal of our tax money goes toward paying government employees. If the state wishes to keep qualified people in public service, it must pay a competitive wage. Market wages rise faster than inflation.
While the wealthy pay most of the taxes, they still pay a lower tax rate than the middle class and the poor. A 2002 Study by the Institute on Taxation and Economic Policy of Washington D.C. found that the richest 1 percent of Wisconsinites actually pay the smallest portion of their income in state taxes of any group studied, just 8.1 percent of their total income. The lowest fifth paid 10.2 percent of their meager income in state taxes. The middle fifth paid the highest rate at 11.9 percent. (The top 20 percent, collectively, averages 10.8 percent).
A smaller percentage of the total income of the wealthiest few is considered taxable earned income by our state’s tax laws. Wealthy people are also not hit quite so hard by property and sales taxes (not to mention federal Social Security taxes). Since 1989, taxes as a share of income have risen for the poorest 60 percent of Wisconsinites (35 percent of total state income), and fallen for the wealthiest 40 percent (65 percent of total state income). They have risen most sharply for the poorest fifth and fallen most sharply for the top 1 percent.
Couple this with Wisconsin’s plummeting corporate tax rate and you have just about the whole picture. The rich have gotten much richer and pay less in taxes than they have in decades. The poor have seen their taxes rise but because of the small share of the economy the poor control, these increases could not possibly make up revenue losses caused by falling taxes on corporations and the wealthy. The overall picture is a state with a $3.2 billion structural deficit not because it over-spent but because it under-taxed. Charlie Sykes’ solution for this: Put a constitutional cap on tax increases using an index intentionally picked to mandate an effective tax cut every year.
The tax system does desperately need an overhaul, but TABOR is obviously a thinly veiled attempt by the wealthy elite to lock in gains they have made at the expense of the rest of us. If legislators only had the political wherewithal, we could easily fix the tax code and eliminate the fiscal crisis.
Sykes and his acronym illustrate the primary obstacle looming in the path of any such meaningful discussion. Any legislator who tries to interject reason and fact in this debate will be shouted down and targeted. Retiring Rep. DuWayne Johnsrud’s comments about the difficulty of being a moderate Republican in today’s Wisconsin Legislature demonstrate that Sykes has plenty of foot soldiers willing to carry his extremist banner. It is either lock-step or step off.
April 20, 2004
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Peter Gruett lives in Madison and is a former FightingBob.com intern who maintains the Sodom on the Lakes Web log.