Fiscal Facts: State tax ranking hits all-time low
The ratio of state and local taxes that Wisconsinites paid as a share of their personal income fell to the lowest levels on record in 2022. The same was true of our state's national rank for this share, known as the tax burden.
Strong income growth, tight property tax limits, and recent state income tax cuts helped lower Wisconsin's tax burden to 9.9% in 2022, well below the national average of 11.1%.
Once a top-10 state for its tax levels -- ranking as high as #3 in 2000 -- Wisconsin now has fallen to well below the national average. In 2022, its tax burden ranked 35th. And since 2000, Wisconsin's tax burden -- and 50-state tax ranking -- decreased the most of any state.
To analyze Wisconsin’s taxing and spending rankings, the Wisconsin Policy Forum uses annual data from the U.S. Census Bureau, plus population and personal income figures from the U.S. Bureau of Economic Analysis. The latest Census data is for fiscal year 2022 (July 2021 to June 2022).
A $1 billion income tax cut in Wisconsin was a significant factor in the divergence of its tax burden from the national average. State lawmakers and Gov. Tony Evers lowered the tax rate in the state’s third income tax bracket from 6.27% to 5.3% starting with calendar year 2021.
From 2021 to 2022, individual income tax collections rose by 10.2% nationally -- but fell 0.5% in Wisconsin. With inflation running hot in 2022, total state and local tax collections grew 12.6% nationally. In Wisconsin, the income tax cut helped limit the growth in state and local tax revenues to 4.6% in fiscal 2022. Without this tax cut, the tax burden would have still fallen but less sharply.
At the same time, there is a link between taxation levels and spending levels. State and local spending as a share of income in Wisconsin fell from 18.6% in 2021 to 18.3% in 2022, and the state’s rank fell slightly from 29thhighest to 30th.
K-12 spending is one area in which Wisconsin's spending rank has declined significantly. The state’s spending on K-12 schools totaled 3.8% of personal income in 2022, compared to 3.9% in 2021 and 5.2% in 2000. The state’s rank in this category in 2022 was 31st, vs 24th in 2021 and 8th in 2000.
Going forward, local property tax referenda in Milwaukee, Madison, and other communities – as well as increases in Milwaukee sales taxes -- may slow or halt the decline in this measure. Still, there's little doubt about the impact this trend has had for both bills to taxpayers and spending on public services.
This information is a service of the Wisconsin Policy Forum, the state’s leading resource for nonpartisan state and local government research and civic education.
