The editor’s opinion from Marketplace, Northeast Wisconsin’s business magazine. (Obligatory disclaimer: Most hyperlinks go to outside sites, and we’re not responsible for their content. And like fresh watermelon, peaches, pineapple, grapefruit, tomatoes and sweet corn, hyperlinks can go bad after a while.)

April 28, 2008

America’s Dairyland vs. Flatland

The Milwaukee Journal Sentinel (a Journal Communications medium, as is Marketplace) notes that The New North is trying to attract consumers from Illinois coming this direction on vacation to avoid, of all things, high taxes:

“We hope to put together some of the retailers to see what we can do to promote the added benefits of the region,” said Joshua Morby, spokesman for The New North, a coalition of 18 counties in the northeast part of the state.

Chicago’s sales tax will go to 10.25% on July 1, as a result of a recent action by Cook County. Some parts of Cook County outside the city of Chicago will have sales tax rates ranging from 7% to 10%, depending on municipal rates.

Illinois’ base sales tax rate is 6.25%. Wisconsin’s base sales tax rate is 5%. In Milwaukee County, the rate is 5.6%, and many counties across the state are at 5.5%

“It’s not every day that we get to brag about the advantages of low taxes in Wisconsin,” Morby said.

The New North coalition envisions a campaign that will be timed for back-to-school shopping. The season will coincide with the tax rate increase in the Chicago area and with a time when many Illinois families are vacationing in Wisconsin.

Posted comments on this item at The Chicagoist show some interesting perspectives. One poster notes that Wisconsin’s income tax is higher (4.6 to 6.75 percent vs. Illinois’ 3 percent) and Wisconsin taxes retirement income, unlike Illinois, although Wisconsin doesn’t tax Social Security as of Jan. 1. (Bloomberg ranked Wisconsin the worst state for retirees, estimating that retirees pay an average of $17,528 in property, income and sales taxes.) On the other hand, a bill in Illinois’ Senate would increase personal income taxes 60 percent, and increase corporate income taxes from 4.8 percent (7.3 percent when adding a “personal property replacement tax”) to 8 percent.

One reason Illinois is considering tax increases at what is a bad time to increase taxes (are you listening, Sens. Obama and Clinton?) is because of public employee health care and pension obligations. One advantage Wisconsin has over Illinois is that there historically has been little corruption and patronage in government in this state; as for Illinois, well … as one wag put it, he wanted to be buried in Illinois so he could continue participating in politics. (Barack Obama is discovering as his presidential campaign starts to leak oil that being an Illinois politician is not necessarily a positive at the national level. The county Chicago’s in is known as “Crook County” for a reason.) One source claims that 4,000 retired Illinois state employees have pensions exceeding $100,000 a year. A number of Milwaukee County officials lost their jobs over a county retiree pension scandal. Many municipalities and school districts are also dealing with unfunded pension liabilities for their employees.

Morby’s tax comment might be the quote of the month. Several states, however, create tax holidays to take advantage of their higher-tax neighbors, particularly around, for instance, the holidays or school supply purchase time. The concept is purely supply-side — what they lose in sales tax revenue is gained in, for instance, increased profits for businesses. (That is a concept completely foreign to Wisconsin government.) As it is, only one Midwest state, Minnesota, has higher total taxes than Wisconsin, which is 14th highest. Perhaps Illinois, which is 16th highest, can pass Wisconsin soon, but only if Republicans maintain control of one house of the Legislature to prevent Gov. Jim Doyle’s next attempt to pass the largest tax increase in Wisconsin history.

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