Governor Evers’ proposed budget includes changes that would reshape Wisconsin’s tax code to give less of an advantage to wealthy and powerful interests, by reining in wasteful tax breaks for the rich and redirecting the benefits to the middle class and people with low incomes.

State tax policies can be a powerful tool for expanding opportunity and enhancing racial equity. But Wisconsin’s tax system is a major driver of economic inequality and contributes to the increasing concentration of income and wealth in a few hands —hands that are most likely to be white, due to a long history of racial discrimination.

Wisconsin’s tax system gives an advantage to very rich taxpayers by requiring them to pay a smaller share of their income in taxes, while requiring taxpayers with lower incomes to pay correspondingly more of their income in taxes. Due to powerful interests that have been able to rig the rules to their own benefit, Wisconsin taxpayers in the top 1% by income – a group with an average income of $1.2 million – pay just 7.7% of their income in state and local income taxes. In contrast, taxpayers in the bottom income group, who have an average income of $14,700, pay 10.1% of their income in taxes on average.

Governor Evers’ budget takes two approaches to reducing the preference that our tax system gives to the very wealthy. The first is expanding tax cuts aimed at people with low and middle incomes, so that people with lower incomes pay a reduced amount of tax. To that end, his budget includes changes that would:

Expand the Earned Income Tax Credit , which goes to working parents with low incomes. Governor Evers’ budget increases the amount of the credit for families with one or two children, reducing taxes for these families by about $26 million in 2020 and $27 million in 2021. About 190,000 families would get an increase of about $140 in their credit, which they could use to make car repairs they need to get to work, pay for school supplies their children need, catch up on utility bills, and pay for other costs important to family functioning.

, which goes to working parents with low incomes. Governor Evers’ budget increases the amount of the credit for families with one or two children, reducing taxes for these families by about $26 million in 2020 and $27 million in 2021. About 190,000 families would get an increase of about $140 in their credit, which they could use to make car repairs they need to get to work, pay for school supplies their children need, catch up on utility bills, and pay for other costs important to family functioning. Improve the Homestead Credit , which delivers targeted property tax relief to low-income households, and helps seniors with low incomes afford to stay in their homes. Governor Evers’ budget proposal increases the maximum threshold of the credit to $30,000, and allows the parameters used in the calculation of the credit amount to rise with inflation. Those changes will cut taxes for people with low incomes by $39 million a year starting in 2021, and allow additional people to claim the credit.

, which delivers targeted property tax relief to low-income households, and helps seniors with low incomes afford to stay in their homes. Governor Evers’ budget proposal increases the maximum threshold of the credit to $30,000, and allows the parameters used in the calculation of the credit amount to rise with inflation. Those changes will cut taxes for people with low incomes by $39 million a year starting in 2021, and allow additional people to claim the credit. Add a new middle class income tax cut, which will provide 1.9 million tax filers with an average tax cut of about $217. For single filers, the tax cut phases out between $80,000 and $100,000 in income. For married couples, the tax cut phases out between $125,000 and $150,000 in income. This tax cut will reduce revenue by $421 million in 2020 and $412 million in 2021.

The other approach Governor Evers is taking to making the tax system less unfair is to close tax loopholes that give an advantage to the wealthy and powerful. Closing those loopholes would increase the amount of tax payed by the wealthy. The Evers budget would:

Limit the Manufacturing Credit , a tax break that allows manufacturers to pay next to nothing in income taxes. This credit has ballooned far beyond original cost estimates and is slanted to favor a small group of multi-millionaires. Companies do not need to create new jobs to be eligible to claim the credit, and even businesses that lay off workers, send jobs overseas, and close factories may receive the credit. Governor Evers has proposed allowing manufacturers to claim this credit only for the first $300,000 of their income, which would reduce the cost of this credit by $280 million in 2020 and $237 million in 2021. The result would be that big manufacturers and wealthy individuals would pay their fair share of taxes that are necessary to fund thriving communities, excellent schools, and modern transportation networks.

, a tax break that allows manufacturers to pay next to nothing in income taxes. This credit has ballooned far beyond original cost estimates and is slanted to favor a small group of multi-millionaires. Companies do not need to create new jobs to be eligible to claim the credit, and even businesses that lay off workers, send jobs overseas, and close factories may receive the credit. Governor Evers has proposed allowing manufacturers to claim this credit only for the first $300,000 of their income, which would reduce the cost of this credit by $280 million in 2020 and $237 million in 2021. The result would be that big manufacturers and wealthy individuals would pay their fair share of taxes that are necessary to fund thriving communities, excellent schools, and modern transportation networks. Tax income from wealth at the same rate as income from work . Wisconsin is one of only a few states that gives preferable tax treatment to income earned from investments (also known as capital gains), taxing that income at a lower rate than income earned from working. Governor Evers wants to eliminate this preference for people earning more than $100,000, or $150,000 for couples. This limitation would generate an additional $285 million in public revenue in 2020 and $220 million in 2021.

. Wisconsin is one of only a few states that gives preferable tax treatment to income earned from investments (also known as capital gains), taxing that income at a lower rate than income earned from working. Governor Evers wants to eliminate this preference for people earning more than $100,000, or $150,000 for couples. This limitation would generate an additional $285 million in public revenue in 2020 and $220 million in 2021. Eliminate a tax break for private school tuition, which allows people to subtract out the tuition they pay to private schools before calculating the amount of income tax they owe. An investigation by the Wisconsin State Journal found that the top 13% of tax filers by income claimed two-thirds of the value of the credit. Eliminating this credit would save $12 million in each of the next two years.

A few tax changes proposed by Governor Evers do not fit into the framework of cutting taxes for people with middle and lower incomes and increasing taxes for the wealthy. For example, Evers wants to increase the gas tax by 8 cents a gallon, and then link the gas tax to the cost of inflation so that the tax would incrementally increase each year. That move would increase revenues by $207 million in 2020 and $278 million in 2021. The gas tax is generally considered to fall harder on drivers with low and middle incomes than drivers with high incomes. However, Evers would mitigate the effect of the tax increase by repealing the minimum markup law for fuel, which prohibits retailers from selling gas below a specified price, with the result that consumers might actually wind up paying less at the pump.

In Wisconsin and elsewhere, the wealthiest have seen their incomes skyrocket in recent decades, while incomes have stagnated for the middle class and those who struggle to make ends meet. Wisconsin’s state and local tax system contributes to the growing chasm between the very rich and everyone else. The tax changes proposed by Governor Evers would be an important first step in moving our tax system closer to being a level playing field for Wisconsin families and businesses.

Tamarine Cornelius