Wisconsin's Three Billion Dollar Hole

It is fun winning elections. It is no fun running a government in miserable economic times. The Milwaukee Journal Sentinel tells us: State Democrats face $3 billion budget hole

Capitol Democrats, you just got what you wished for. Are you still sure it's what you want?

For at least two years, you'll have to run state government - and it's in a deep financial hole.

...crafting the next two-year budget. That won't be easy because Doyle has said that budget faces a deficit of more than $3 billion.

The problem goes back a decade to flush times when the Republicans spent without limit, cut taxes, and failed to save for a rainy day. Then came the economy collapsing when the dot com bubble burst and the subsequent stock market collapse following 9/11.

The Democratic majority is inheriting a structural problem that goes back to when the Republicans controlled the Governor's office and at least one if not both houses of the legislature. 

In recent years the best Governor Doyle and the recent Democratic Senate majority could do was jerry-rig temporary solutions and hope the economy would recover so that sales taxs and income tax revenues would increase. Assembly Republicans made sure there were no permanent solutions. Matters only got worse.

There are some tough choices facing the legislature and the Governor next session. Fail to raise taxes, and the state's infrastructure collapses and the budget deficit worsens to the point where it can create permanent damage to Wisconsin's economy.

Raise taxes imprudently, and Republicans will exploit the crisis by appealing to beleaguered home owners on fixed incomes. The irony of course, is that the Republicans and WMC enacted numerous tax cuts in the recent years that benefited the wealthy and shifted the responsibility of paying for government onto middle class families with incomes well under $100,000.

Revenue collections must be increased.

The worst way to do it is is to follow the Republican-WMC model by shifting costs to the property tax. Most desirable is increasing the income tax rates and make it more progressive. That combined with modifications to the sales tax open up creative solutions.

Democrats must come to understand that expansion of the sales tax may not be all that regressive. Especially when we consider that a significant portion of it is paid by out of state residents. The legislature must look at increasing the rate, especially to help pay for education, and expanding what it covers while leaving the exemptions for health, shelter, and food, along with modifications to the income tax.

Keep in mind that while WMC bellows about Wisconsin being one of the highest taxed states, that claim is misleading. Government gets revenue from two sources - taxes and fees. Wisconsin is a very low fee state. When fees and taxes are combined, total government revenues collected by Wisconsin put us in the middle of the 50 states.  A reasonable increase in sales and income tax revenues will not change our competitive position.

As for the continual loss of manufacturing jobs, that is a product of Republican-Gingrich-Norquist based trade policies that contend that there should be free international markets even though Asian competitors pay slave wages and their industries are heavily subsidized by their governments.

When Washington fixes the trade problems, Wisconsin will do just fine as long as we have an educated, well-trained work force.

Comments

[Irwin Fletcher]

It is so refreshing to see that the old ways have not changed. The first thing that comes from the mouths of Democrats is tax increases and class warfare. Punish the rich, those who have worked hard to be successful must have their wealth confiscated in the name of all that is good.

The issue that faces Wisconsin is a lack of revenue,out of control spending, and excessive levels of government. By lowering tax rates, both individual and corporate the state will attract business and increase revenues. One only has to look to Ireland to see how successful they have been at attracting industry by cutting corporate tax rates. One only needs to look to Wisconsin to see why businesses are leaving and the tax burden is being shifted to the property tax and individual taxpayers. The old are being driven from their homes and the young cannot afford to stay here.

By raising the sales tax people will look to other means to make purchases. We live in the internet era and everything can be purchased online, therefore avoiding state sales taxes. As the state has decided not to go after lost sales tax revenue on cigarettes, more and more people will shop online to avoid an even higher tax rate. So a higher rate will not generate new revenue.

As businesses leave and take their jobs with them, taxes generated by income will also go down. Less revenue again.

So good luck with those tax hikes, it will not solve the problem, revenue shortfall, but instead increase the debt and make Wisconsin an even worse place for business.

But it sure does feel good to punish rich people, doesn't it.

[raul]

I must say, I agree with my friend Fletch.

Again, typical liberal Democrat solutions from Paul.

He's probably on the hotline to Fidel Castro to get his advice.

[dadofone]

Thought I heard, "as much as $5 billion," being quietly attributed in a news cast, as a quote from the gov yesterday.

Half a week in Iraq.

d