STATE DEFICIT? LET'S TAX OUR WAY OUT OF IT

I read this Sunday in the Milwaukee Journal-Sentinel and nearly got sick to my stomach. Not ONE single suggested cut in spending, but a laundry list of revenue increases and justification for making those increases. First of all, revenue assumptions and increases have put us in this position. AND the Wisconsin Taxpayers' Alliance said last week that the Governor's projections for the deficit may be a bit overblown (perhaps to justify some of those "revenue enhancers"). According to the Journal-Sentinel, "Todd Berry, president of the group, said the $5.4-billion number assumes that state agencies will get an additional $2.8 billion in spending they requested for the next two years, which he calls a "fictitious" assumption. And, Berry said, Doyle's scenario also assumes that the so-called "structural balance" -- the long-term imbalance between spending commitments and tax collections - remains at $800 million per year for each of the next two years. That's about $1.6 billion of Doyle's $5.4-billion deficit. Berry said. But, if the $800-million per year structural imbalance was fixed in the first year of the two-year budget cycle, it is not a problem in the second year, he added. Sure, Berry said, there are major financial problems facing state government. It results from the "collective bad judgment" of past Capitol officials from both parties, he added. In reality, Berry said, if elected state officials found the courage to raise an additional $1 billion in the first year of the next two-year budget, "The (deficit) problem evaporates." Berry said Doyle's $5.4-billion deficit estimate is "really the opening pitch in a multi-inning budget game. It's in the interest of the executive ... to get people to pay attention." Also accusing Doyle of over-hyping the deficit number was Republican Sen. Neal Kedzie of Elkhorn. In a column Friday, Kedzie also noted that the $5.4-billion deficit figure assumed that state agencies would get $2.8 million more in new spending by mid-2011."

OK, now on to more ways to take money from your wallet/paycheck....

How to raise money for our state - By Dennis Collier, Jack Norman And Jon Peacock
Posted: Nov. 22, 2008

Wisconsin must weather the global fiscal crisis in a way that protects vital services and infrastructure. Our communities and businesses will not rebound well if we allow deterioration in the quality of our public structures, including everything from roads to schools, from the justice system to help for the unemployed, from public health to public transportation. Caught between increasing needs and stagnant revenues, Wisconsin faces difficult choices. There is a search for greater efficiencies and reductions in public institutions, but there are limits to what this can accomplish without harming essential services. Wisconsin is not a high-cost state for state and local government, nor does it have a large civil service. Wisconsin ranks 21st among the states in revenue collected for state and local government - taxes and fees - as a percentage of income, according to the Census Bureau. Wisconsin ranks 42nd in public employees relative to population. Thus, it is both necessary and feasible to examine the revenue side of the equation and find additional funds so communities can survive the economic crisis without slashing the very public institutions needed for renewed prosperity.

With that perspective, we offer a menu of options to increase revenue. No specific item is endorsed. However, some subset among them is necessary for a balanced approach to addressing deficits while preserving vital public infrastructure. Gov. Jim Doyle already has said he will seek new taxes on oil companies and hospitals. Other possibilities for revenue-enhancing tax reforms include the following (revenue estimates based on the most recent government data):

Sales taxes, in which Wisconsin ranks 33rd in the United States as a percent of income:
• An increase of one percentage point in the state rate - from 5% to 6% - would generate at least $800 million annually.
• Extending the sales tax to non-medical professional services - from advertising to tax preparation - would generate $300 million.
• Extending the sales tax to business services - from credit rating agencies to public relations to outplacement services - would generate $230 million.
Business taxes, in which Wisconsin ranks 27th:
• Closing loopholes that allow the largest firms to avoid paying state taxes on profits earned in Wisconsin - enacting so-called "combined reporting" is the best method - could ultimately generate several hundred million dollars.
• Eliminating the "domestic production deduction," which almost entirely benefits companies with over $100 million in assets, would eventually generate at least $40 million.
• Switching to an alternative method of taxing business activity, such as replacing the tax on corporate profits with a tax on business receipts. This could not only make the business tax less volatile but would prevent large firms from using accounting techniques that eliminate their tax liabilities. Even if smaller firms were exempted -say, exempting the first $1 million in revenue - a tax of only 0.2% could generate an additional $400 million.
Personal income taxes, in which Wisconsin ranks 14th:
• Increasing the top individual tax rate from 6.75% to 7.75% would generate about $180 million.
• Taxing all capital gains, as the federal government does, would generate about $280 million.
• Restoring the tax on up to half of Social Security earnings - for couples' income above $32,000 - would generate $100 million.
• Eliminating the itemized deductions credit - most of which went to filers with income above $100,000 - would generate $320 million.
Miscellaneous taxes:
• Reinstating the tax on inheritances - while exempting the first $1 million in an estate - would generate $95 million.
• Restoring the annual inflation indexing of the gas tax would generate $32 million for each penny of gas tax.

For a fuller description of these and other changes, including a summary of which taxpayers each change would effect and their status as progressive or regressive in impact, see our Catalog of Tax Reforms Options for Wisconsin, available at www.wisconsinsfuture.org. Dennis Collier is a consultant for the Institute for Wisconsin's Future and a former director of the Tax and Fiscal Policy Bureau in the state Department of Revenue; Jack Norman is research director for IWF; and Jon Peacock is research director for Wisconsin Council on Children and Families.

http://www.jsonline.com/news/opinion/34903414.html