My column for the West Bend Daily News is online. Here you go:
After weeks of speculation and trial balloons, the Wisconsin Assembly leadership released a plan called “Road to a Flat Tax.” The plan was primarily authored by State Rep. Dale Kooyenga and cobbles together some 30 ideas with the promise of fixing the state’s long-term transportation funding issues and cutting taxes.
It has become fashionable in Washington, and now in Madison, to tackle every issue with these massive omnibus bills that are just complicated and opaque enough to provide politicians cover from contentious political issues. The Road to a Flat Tax plan is no different. It packages some truly terrific and transformative proposals with a few policy and political duds with the hope of convincing legislators to pass the package with the excuse that most of it is good.
Let us start with the great parts of this proposal. The Road to a Flat Tax does just that. It would eliminate the state property tax, as Gov. Walker has proposed, and gradually move Wisconsin to a flat 3.95 percent income tax over the next decade. It does so by eliminating and changing several major tax credits and phasing out four of the five tax brackets. Wisconsin would end up with a fair and flat income tax. Wisconsin’s Republicans are not ambitious enough to eliminate the state income tax like seven other states, but a flat income tax is the next best thing.
The Assembly Republicans’ plan also repeals Wisconsin’s prevailing wage law for state projects, which would save taxpayers at least $300 million per biennium, according to a 2015 study by Wisconsin Taxpayers Alliance. The plan eliminates 180 positions from the Department of Transportation, which does not save any money yet, but gives the department more flexibility to reduce spending in the future. It reduces the state’s minimum markup law as it applies to gasoline (more on that later), lowers the gas tax, imposes a moratorium on roundabouts, imposes a fee on electric and hybrid vehicles and eliminates the ability of local governments to enact new wheel taxes.
Then there is the bad part of the proposal. The Road to a Flat Tax includes an intricate change to the way the state taxes gasoline that results in an overall tax increase. For the first time, the state would impose the state sales tax on gasoline. This is estimated to generate about $600 million in revenue over the biennium. In order to offset some
of that increase, the state would reduce the gas tax by 4.8 cents, thus shaving off $278 million of the increase. It would also change the minimum markup law to a mandatory 3 percent markup instead of the combined 9.18 percent. This would save consumers another roughly $50 million at the pump while cutting into the profits of gasoline retailers and wholesalers.
The end result after all of those changes is that Wisconsinites would see a tax increase of about $330 million per biennium. The increase in funding would be directed to paying down Wisconsin’s debt. Bear in mind, however, that funds that go into the Transportation Fund are fungible. Although the tax increase is allocated to debt reduction, that means that the money that would have been spent on debt service without the tax increase will now be spent on current transportation projects.
The tax increase to be spent on transportation has long been the ambition of Assembly Republican leadership and it at the heart of this proposal. Packaging it with a bevy of other tremendously positive initiatives appears designed to pull the tax increase through a reluctant Republican caucus. Rep. Kooyenga should be commended for advancing so many great ideas. Repealing the state’s prevailing wage law, implementing a flat income tax, eliminating the state property tax, and many other parts of the Road to a Flat Tax would be tremendously beneficial for Wisconsinites. But there is no rational reason, other than for political brinkmanship, to amalgamate all of these ideas into a single “take it or leave it” proposal. The legislature should take up each piece of the Road to a Flat Tax as separate bills and then vote on them based on their merits. Good legislation that would benefit Wisconsinites should not be weighed down by legislation that would not pass on its own.