Column: State over spending, over taxing
By Michael J. Fredrich
The state Senate committee on Job Creation, Economic Development and Consumer Affairs took their show on the road to Manitowoc last week to solicit testimony on their plan to jumpstart the economy in Wisconsin. To their credit, they are all well intentioned and they want Wisconsin businesses to do well.
Unfortunately, the economic proposals offered in the economic development package called Invest Wisconsin are at the same time laudable and quixotic. The plan does not address the fundamental problem we have in this state, to wit; all levels of government—state and local—spend too much money and our tax burden is too high. It is that simple. Wisconsin has languished in the top five highest taxed states for longer than I can remember.
The most recent issue of The Wisconsin Taxpayer reveals a disturbing trend. The state population is not growing. Over the five-year period 1995-2000 the net population increased by only 7,282 people (338,108 in 330,826 out). We lost one Congressional seat.
So, who comes to Wisconsin? It should be no surprise that if you have a very generous social safety net vis-à-vis surrounding states you will attract lower income, less educated people, which is preciously what is happening.
Who is leaving reveals more about the tax climate in this state: People with incomes greater than $75,000 leave and people with higher education (which usually correlates to higher income) leave. Very few high net worth people retire here. Over the five-year period, Wisconsin lost people with a combined net worth of $4.72 billion. If you do not think this out migration is due to the high taxes in this state, you have your head in the sand.
There is also much hand wringing over the "brain drain" in Wisconsin. We have a good and readily accessible public university system, which produces high quality graduates. Why do they leave? They leave because there are better opportunities elsewhere. They leave because they can make, and keep, more of their earnings elsewhere. They are voting with their feet.
The burden of decades of high taxes has resulted in a stagnant economy. On a per capita basis, we rank eighth highest in state income taxes, 11th highest in property taxes and second highest in gasoline taxes. Any one of these rankings would be troubling but combined they are toxic to economic growth.
Spending is the problem. During the 10-year period, 1991-2000, total state spending increased 77 percent from $6.3 billion to over $11.2 billion—an average of 7.7 percent per year. Over that same period inflation, as measured by the consumer price index, increased an average of 2.78 percent per year. State spending increased at a rate nearly three times the rate of inflation. No wonder we have a problem. Ask yourself—did my income increase 7.7 percent each year for 10 consecutive years?
Excessive spending is not a Democratic or Republican issue. Both parties are equally complicit. Neither has demonstrated a resolve to curtail spending. Unless this problem is addressed, Wisconsin's structural disadvantage vis-à-vis other states will continue. We will continue to languish in our little socialist enclave.
The only way out is this mess is to incorporate strong spending limits into our state constitution through a taxpayer bill of rights amendment—TABOR. TABOR will restrict spending increases for all levels of government. State and local bureaucrats don't like the idea, which is probably all you need to know about its efficacy. TABOR would fundamentally change the spending landscape in Wisconsin, which must happen if we are to ever have a chance of getting out of the top five highest taxed states. It has worked successfully in other states and it will work here.
Michael J. Fredrich is president of Manitowoc Custom Molding.
# posted by TPDN : 11:25 AM
