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 24, 2008

Happy (?) Tax Freedom Day

Today is, according to the Tax Foundation, Tax Freedom Day in Wisconsin — the day when the estimated amount of taxes equals the estimated amount of income generated. (An explanation of how that’s determined can be found HERE.)

Wisconsin’s federal, state and local tax burden as a percentage of income (13th highest this year) is always one of the nation’s highest for two interdependent reasons — government spends a lot of money in this state, and Wisconsin usually lags the national average in income. As it happens, in 2005 (the last year with available figures), median household income was actually higher in Wisconsin ($48,903) than in the nation ($48,023). Per capita income, however, is lower ($30,898) than the national average ($31,632). The explanation for the differences is simple: Wisconsin has one of the highest workforce participation rates in the country; there are more multiple-earner households in Wisconsin than in the rest of the U.S.

The Wisconsin Taxpayers Alliance has an explanation in “Why Are Wisconsin’s Taxes High?”, which quotes historian Daniel Elazar as putting Wisconsin into the third of three groups of political cultures among the states — “Moralistic,” which considers government “a positive instrument with a responsibility to promote the general welfare.” Elazar put an interesting mix of nine states in that category — Maine, Vermont, Michigan, Wisconsin, Minnesota, North Dakota, Colorado, Utah and Oregon. That is as opposite as you can get from the “Individualistic” model, found in a belt of states almost exactly south of the Moralistic Belt, that “emphasizes the centrality of private concerns” and places “a premium on limiting community intervention.” It shouldn’t be surprising that, when the study was written in 2003, seven of the nine Moralistic states ranked in the top 18 states for tax burden.

Put together the worldview from our Yankee forefathers that was “activist and favorably disposed to government” and the evangelical Protestant-based “Social Gospel view,” and you get:
  • “A system of numerous local governments funded to an increasing degree by state, rather than local, taxpayers.”
  • Tax-funded public education that started even before Wisconsin became a state.
  • The Wisconsin Idea, “a multi-campus university that was engaged in the state’s public life.”
  • A much more pro-union environment than most states.
  • “An extensive network of health and social service programs.”
  • And the coup de grace, “income and inheritance taxes that could both redistribute wealth and income — and provide the funding base needed to support the active government that many Yankees, Scandinavians and Germans” who settled this state supported.
About that last point: There is another way to describe “redistribute wealth and income.” The more concise and precise term is: “Theft.” Any taxation that goes past paying for the actual functions of government should be considered theft, which, while it may be "moralistic," doesn't strike me as being moral at all.

Being part-German and part-Scandinavian, I guess I should apologize on behalf of my misguided ancestors for foisting upon all of us what the WTA study calls our “‘high-tax, high-service’ state today.” (This past winter made me curse my ancestors for coming to this state in the first place.) The second half of that assertion is correct only in that government does a lot in this state; the assertion that government does a lot well in this state is dubious at best.

According to the U.S. Census Bureau, 42.6 percent of Wisconsinites (including half of your editor/columnist/blogger) are of German origin. Germany was where socialism and communism were born. To tamp down socialism, German chancellor Otto von Bismarck enacted the world’s first old age pensions and disability insurance and worker’s compensation. (He also gave one of the great government quotes of all time: “Laws are like sausages. It’s better not to see them being made.”)

Wisconsin’s unique contribution to our political culture was the Progressive movement started by Robert M. “Fighting Bob” La Follette, governor, U.S. senator and the namesake of my Madison high school. The good things the Progressives did (direct primary elections, direct election of U.S. senators, the referendum, fierce opposition to discrimination) were overcome by La Follette’s assertion during his days as governor that two major spheres of business, timber and railroads, were the biggest evils of the time. In his 1922 U.S. Senate campaign he proposed government takeover of railroads and utilities. Two years later, he ran what’s been called “the most successful leftwing Presidential campaign in American history.” La Follette’s two sons, Robert Jr., a U.S. senator from 1925 to 1947 (replaced by, ironically, Joe McCarthy), and Philip, governor from 1931 to 1933 and from 1935 to 1939, created their own Progressive Party, which called for the creation of several new state agencies to parrot Franklin Roosevelt’s New Deal, and even called for the distribution of milk as a public utility.

La Follette’s Progressive movement (as opposed to Theodore Roosevelt’s Progressive movement; I wrote a college term paper on the differences between the two) is the most influential political movement in this state’s history. Wisconsin’s Progressives made the envy of wealth politically palatable, and that attitude moved into the Democratic Party after the Progressive Party died in 1946. Wisconsin was, no surprise, the first state to institute an income tax, in 1911. Maybe Fighting Bob didn’t intend for what at the time was considered to be big business to metastasize into big government, but that’s what happened in Wisconsin. (In fact, there is a school of thought that claims that regulation of railroads worked to the benefit of the established railroads and against their potential competitors.)

The Germans who came to Wisconsin were used to and were believers in big government. Progressives opposed wealth and focused on workers to the exclusion of business of any size, ignoring the fact that without businesses, there are no workers. Put the two together, and you have outsized government and undersized incomes.

One more reason is that government in Wisconsin is big — big as in a lot of governments. When faced with choosing between the New England town model and the more common county model of government, Wisconsin chose … both. As a result, we have 72 counties, 190 cities, 400 villages and 1,260 towns, plus 426 school districts, 16 technical college districts (to go with our 13 University of Wisconsin System two-year schools, but that’s a topic for another day), and several hundred special districts with taxing powers. Also as a result, we have 573 police departments to go with 72 county sheriff's departments, and 863 fire departments, 35 of which are full-time (that is, non-volunteer) departments. Fox Cities taxpayers are paying the salaries and benefits of eight police chiefs (which is seven too many) and 10 fire chiefs (which is nine too many). State taxpayers are paying the salaries and benefits of 426 school district administrators, which is at least 100 too many.

Those who want to cut taxes and government spending in Wisconsin have to fight our ancestry and history, plus 2,292 units of government, plus organizations that believe that your taxes aren't high enough. On that cheery note, Happy Tax Freedom Day.

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