“Spacing out the rate reductions over a number of years protects the state budget from sudden and steep revenue drops,” noted the MacIver report, “giving sufficient time to make gradual adjustments so the transition to the new tax system is smooth.” Some Wisconsin lawmakers believe a phased in approach, possibly using revenue triggers, is the best way to implement needed income tax rate reduction. Wisconsin Senator Chris Larson (D) provided an example of this line of attack in his April 25 tweet calling SB 1 “a bill to give massive tax breaks to the rich.” But the MacIver Institute report found that a 3% flat tax, which is close to the rate implemented under SB 1, “would have a significant impact on the incomes of all Wisconsinites” and “allow working class people to keep more of their income.” Opponents of flat taxes often portray them as disproportionately beneficial to upper income households. The MacIver Institute, a Madison-based think tank, has studied the economic effects of implementing a “systematic glide path to a 3% income tax rate,” finding that such a reform “would give Wisconsin the most competitive income tax among Midwestern states while greatly improving the state’s attractiveness on a national level.” Nearly half of the states now have a flat income tax or no income tax. Even with the loss of Massachusetts, where a majority of voters decided in 2022 to go from a flat to a progressive income tax, the number of flat tax states has increased more than 44% over the past half decade, rising from nine to 13. In fact, more states have moved from a progressive to a flat income tax system in the past five years than in all of preceding history. While Wisconsin was part of the 22% increase in the number of Right-to-Work states over the past decade, enactment of SB 1 would have Wisconsin become part of another major state policy trend, the aforementioned flat tax revolution.
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