Friday, January 3, 2014

Walker's Seventh Level of Tax Hell

Walker's Seventh Level of Tax Hell

by Fighting Bernie Starzewski

Abandon hope all ye who enter here" - Gates of Hell” 
― Dante AlighieriInferno

When we should like this!
Republicans often refer to Wisconsin as Tax Hell but all they want to talk about are income and corporate taxes. That's why Governor Walker is again floating the idea of going to an all sales tax scheme only there is no inner circle of hell we could endure that would turn the State upside down more so than the 15% rate it would take to replace income taxes with a sales tax.

Wisconsin has three main methods of taxation not including things like user fees and licenses: Income tax, sales tax and property tax. Almost no property taxes go to the state. Those are used to fund local governments and schools. Rather the state sends income tax money back to locals to help defray property taxes which are only slightly less regressive than sales taxes. Under Act 10 that took a big hit at the expense of public workers which in turn hit the local econimies by draining their disposable income. We have seen the effects in Wisconsin's lagging economy ever since. If that was a shock to the economy a tripling of the sales tax would more like a nuclear bomb.

With the current structure of deductions it is often the case that working people can catch a break. Sick? Unemployed? Disabled? Retired? Business having a bad year or maybe investing in the future? Income taxes cut you some slack. Business may even receive refunds on past year's taxes if the losses are bad enough and can carry losses forward for years if that does not cure it. Not so with the sales tax! Its just there and it must be paid. Unlike State income tax, sales taxes are not deductible on Federal individual income taxes. Charitable donations cannot be claimed against them either. No exceptions. No escape. Abandon all hope!

In order to minimize the objections Walker has hinted he might also eliminate sales tax exemptions to cut the necessary 15% sales tax rate. But those exemptions include things like food and farm supplies. Tax food? Seriously? The devil you say!

The degree of shifting it does to the tax burden is almost unimaginable. The lowest two fifths of us would see our burdens more than double. The middle 1/5 still over a 40% rise. Only the very top 2% would we see a drop in net taxes paid which I think, is the real goal here.

A large sales tax would devastate the economy and make Wal Mart the state's largest tax agent. It would send customers streaming to the borders much like the oleo buyers of old. It would add $2000 to the price of a typical car wiping out dealers anywhere near our borders and add more to the cost of a Big Mac than a $15 minimum wage with none of the positives.

Yet TEA Republicans glibly engage in magical thinking that denies the numbers. The last time Walker proposed this enough of his party had the good sense to cower away from it. Hopefully Walker is just doing this for its shock value. He is after all running for President and crack pots like Huckabee who have been pushing this bilge for years need to be impressed. 
Older data but still relevant.
But there are enough of the mathematically impaired to make you worry with Republican numbers in the Legislature. So, the next time you hear some politician gurgling about this, think about the extra 10% it will cost you at the check out and tell him to shut the hell up!

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