State and local tax burdens are frequently compared and ranked, but the proverbial devil is often in the details. For example, at $20,000 of income, a family of four in Wisconsin had the 33rd highest income tax load in the U.S., but at $75,000 that burden was seventh highest. Similarly, an owner of a $150,000 house in Milwaukee paid $3,846 in 2012 property taxes, fourth highest among large cities across the nation, while a Rice Lake owner paid $3,229, seventh highest relative to other small-town homeowners.
Ranking states on their overall tax burdens is a favorite pastime of politicians and pundits. These comparisons are informative, but they often mask differences among states in their approaches to taxation.
For example, these rankings generally do not distinguish between families with incomes of $25,000 versus $50,000 or $100,000. Yet, in some states, the taxes these households pay can claim very different shares of income. In others, they may be more similar.
Two national reports—one from Minnesota and another from Washington D.C.—help fill this gap, allowing state-by-state comparisons of tax burdens at different income levels. The information found in these reports combined with broader measures of tax burden allow for a more complete picture of the relative tax burden faced by Wisconsin families.
THE BIG PICTURE
Annual figures from the U.S. Census Bureau are most commonly used to compare state tax burdens. Unfortunately, they are not particularly timely: The latest data are for fiscal 2010-11 (2011).
That year, Wisconsin’s state and local governments collected $25.6 billion in taxes. To compare with other states, that total is adjusted for population or income. Wisconsin’s total taxes equalled $4,499 per capita (17th highest) and 11.6% of total state personal income (11th). When government fees are added, the totals rise and ranks fall slightly ($5,783 and 18th; 14.9% and 15th).
Personal income is a broad economic measure that includes wages, benefits, government payments, interest, and other income sources. The tax figure is equally broad and includes collections based on individual and corporate incomes, sales, and property, among others. Because Wisconsin’s per capita income is about 4% below average, the state’s rank for taxes relative to income is typically higher than its per capita rank.