State To Dump Income Tax for More Sales Tax?

According to a report by the Wisconsin Radio Network, Department of Administration Secretary Mike Huebsch says Governor Scott Walker is “considering” raising the sales tax from 5% to 13-percent.

That increase would provide enough revenue for the Governor to eliminate the income tax in Wisconsin entirely.  “For the first time in, I would say the last 20 years, this is getting much more discussion across the nation,” says Huebsch.  “And I think it’s being led by governors like Bobby Jindal in Louisiana who are trying to figure out ways that they can eliminate their income tax. That’s really the motivation here. They want to eliminate the income tax.”

Increasing the sales tax to eliminate the income tax would likely meet fierce resistance from many parts of the state.  For one, retailers on the border areas would suffer as shoppers would be able to cross into Minnesota, Iowa, Illinois or Michigan simply to avoid an extra 8% fee on their purchase.

You can also expect Democrats to oppose the change, because the sales tax is considered a regressive tax that hits the poor more than it hits the wealthy.  Poor and lower-income people spend a larger portion of their income on items that will face an extra 8% tax, which is higher than their income taxes.  Opponents of higher sales taxes argue the wealthy don’t spend as much of their income-proportionally-on taxable items, and therefore aren’t hit as hard.  The income tax in Wisconsin, however, is considered a progressive tax, in that those who earn more pay more.

Huebsch made these remarks while addressing members of the Wisconsin Counties Association.  “The honest and in depth discussion of that is just beginning in Wisconsin,” though he says, “It’s about to hit the front pages.”

update: Assembly Speaker Robin Vos (R-Burlington) says raising the sales tax is “not on the table in Wisconsin.”  Vos says Huebsch and Walker were just responding to questions about other states raising the sales tax in order to reduce income taxes.

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