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Tuesday, Aug. 12, 2014

Walker’s Wisconsin Is a New—and Struggling—Wisconsin

New study shows tax and spending cuts haven’t created jobs and undermine our future

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A new review of policies put in place during Gov. Scott Walker’s term in office shows Wisconsin breaking with longstanding state tradition by cutting taxes for the wealthy while driving up debt and shortchanging low-income residents and public investments.

What’s more, Walker’s small-government policies haven’t resulted in his promise to create 250,000 private sector jobs in his first four-year term.

The report, by Tamarine Cornelius and Jon Peacock of the Wisconsin Budget Project (WBP), looked at the impact of a slew of tax cuts enacted by Walker and the Republican-controlled Legislature on taxpayers, as well as their decisions about investments in schools, health care and the safety net.

Traditionally, Wisconsin policymakers—including Republicans—have supported public schools and low-income earners and had created nationally recognized safety-net programs, such as BadgerCare.

But Cornelius told the Shepherd that the Walker-era policies have broken with that tradition.

“It is a big change compared to our history and it’s a big change in what has worked for Wisconsin over the last many years,” she said.

 

Tax Cuts, But Not Enough Jobs

Cornelius said the aim of the new report, “Breaking with Tradition,” was to collect in one place the many decisions made by state policymakers since January 2011 and to determine whether they have resulted in promised job growth.

“A lot of these decisions have been rooted in the understanding that lawmakers are making these decisions and making these cuts to services that are important in Wisconsin,” Cornelius said. “But there’s an exchange here. The exchange is that because of these decisions Wisconsin would have turbocharged job growth. That hasn’t held true. We wanted to raise the question, if we haven’t gotten the results we hoped for from these changes, maybe this isn’t the right path for Wisconsin to go down.”

As documented in the report, some of those big decisions include:

Plenty of tax cuts: According to the nonpartisan Legislative Fiscal Bureau (LFB), lawmakers have cut taxes 43 times since 2011. But that has siphoned $1.9 billion from state coffers from 2012-2015.

Tax cuts went to the rich: Walker’s major tax cuts primarily went to the wealthiest Wisconsinites. The WBP report noted that the top 1% would receive a tax cut of $2,518 annually, while those in the bottom 20%—residents with an annual income averaging $14,000—would get a tax break of just $48. Even worse, Walker raised taxes on low-income earners and seniors by cutting the Earned Income Tax Credit and the Homestead Credit.

Those who can least afford it are paying the most: Walker’s major tax cuts have disproportionately advantaged the richest. WBP found that while the top 1% pays 6.6% of their income in taxes, the rest of us are paying a larger share of our income in taxes. Those with the highest tax burden—9.9% of their income—are earning on average $30,000. Not far behind, those in the middle income tax brackets—with average incomes of $49,000 and $76,000—are paying 9.8% of their income in taxes. Shockingly, those in the lowest 20%—with incomes averaging $14,000—are paying 9.3% of their income in taxes, a higher share than those making on average $119,000 (9.2%) and $233,000 (7.8%).

“Under our state’s tax laws, those who can least afford it devote a bigger share of their income to pay for services such as schools, roads and bridges, and public safety,” Cornelius and Peacock concluded.

Debt is growing: While Walker is cutting tax revenues, he’s charging more on the state credit card. Lawmakers try to keep debt repayments under 4% of tax revenues, but in 2014 they spiked to 5.26%.

The looming budget hole: As a result of tax cuts and anemic job growth, Wisconsin is facing a budget deficit in the 2015-2017 cycle. The state will need at least an additional $640 million to pay for our current obligations. The Transportation Fund alone has a projected $224 million shortfall. And Walker chose to reform Medicaid programs on his own, rejecting federal funds that would have covered 100% of the cost to expand BadgerCare under the Affordable Care Act. That’s forced state taxpayers to provide at least $119 million more in this two-year budget cycle.

Education cuts hurt poor districts the hardest: Walker famously slashed public education funding, from elementary school to the University of Wisconsin System to the state’s technical colleges, while also gutting public sector employees’ collective bargaining rights. WCCF found that the funding cuts hit high-poverty school districts the hardest, with $703 less state support per pupil in the 2011-2012 school year, while low-poverty districts saw a reduction of $319 per pupil.

Job-creation woes: Walker’s Wisconsin has consistently created jobs at less than the national average, and he’s created just 40% of the 250,000 private sector jobs he promised to deliver in his first term. Wisconsin has averaged 4% job growth from December 2010 to December 2013, while the country as a whole had job growth of 6.6%, and Michigan (8.7%), Minnesota (6.3%), Iowa (5.2%) and Illinois (4.2%) are all creating jobs at a healthier pace than Wisconsin.

“Four years ago, Wisconsin was made a promise,” Cornelius and Peacock wrote. “The promise that the best way to generate economic growth was through significant tax and spending cuts. The tax and spending cuts have occurred, but unfortunately for all of us, the promised job growth has not.”