My column for the Washington County Daily News is online and in print. Here’s a part:
Bearing in mind that the original estimate did not take into account the pandemic, the surplus tax collections are astounding. In the 2020-2021 state budget, the Republicans in the Legislature fought off Governor Evers’ attempt to raise taxes and cut them instead. The result is what we generally see when government cuts taxes — tax collections go up.
The simple reason for this is because money is taxed when it moves. When people have more money in their pockets because taxes are lower, they do not bury it in the backyard. They use it. When they spend it or invest it, the money is taxed, thus resulting in higher collections. In particular, the greatest contributor to the tax surplus was higher corporate income tax collections. Corporations took their tax cuts, invested them back into their businesses, and grew taxable profits.
There is a point at which cutting taxes will result in lower tax collections because the economy is already flush with money, but all indications are that the state of Wisconsin could still enact large tax increases and still see tax collections increase. This is because Wisconsin’s tax burden is already much higher than it should be to balance tax collections with economic movement.
The tax surpluses are an example of government and governance doing something well. The Republican tax cuts put money directly into the pockets of taxpayers and business owners without going through layers of government bureaucracy and expense. The result was that tax collections went up and the state could provide almost the same amount of relief as they received from federal taxpayers in the CRF.
The LFB’s two memos highlight how cutting taxes not only results in more taxes being collected, but they also render politicized and bureaucratic relief funds unnecessary by just letting taxpayers keep the money they earned.
The best government is the government that governs least.