State tax burden up in Wisconsin despite generally steady rates

Last updated on May 11th, 2022 at 09:41 pm

Wisconsin residents saw an increase in taxes paid as a percentage of personal income in 2021 as a surge in economic activity following the early stages of the COVID-19 pandemic grew collections faster than income rose, according to a new report from the Wisconsin Policy Forum.

State tax collections increased 9.2% to $22.61 billion in fiscal 2021 while personal income for 2020, the most data, increased 5.2%, the report found.

As a result, the state tax burden climbed from 6.7% to 7% of personal income.

Property and local taxes, on the other hand, dipped a tenth to 3.5% of personal income. Combined, state and local taxes were 10.5% of personal income, up from 10.3% in 2020 but still the fourth lowest year on record, according to the Wisconsin Policy Forum.

The report attributed the increase in state taxes to the recovery from the COVID-19 pandemic, effects of federal stimulus and court decisions related to out-of-state and e-commerce retailers.

Individual income tax collections, the largest state tax, increased 6.2% from 2020 to $9.28 billion as part of the larger economic rebound. The report noted that increase lagged behind national estimates for a 14.7% increase.

Sales tax collections also increased from 2020, up 9.2% to $6.37 billion. It was the largest increase since 1983, which followed an increase in the rate from 4% to 5%, the Wisconsin Policy Forum report noted.

“The increase resulted in part from the reopening of certain businesses that are key for the sales tax such as bars, restaurants, and hotels. It also likely reflected an ongoing shift in consumer spending during the pandemic toward goods” the report says.

Corporate franchise and income tax collections also climbed in 2021, increasing 59.2% to $2.56 billion. The report attributed the increase to federal pandemic aid helping to boost incomes, tax payments delayed by the pandemic shifting into 2021, an increase in state auditors and tax changes that led to more businesses paying at the corporate level.

Among other taxes, liquor and wine tax revenues climbed 17.9% to $64.9 million, beer tax revenue was up 10.7% to $9.4 million, cigarette tax collections fell 2.6% to $509.8 million, collections for other tobacco products grew 1.5% to $92.7 million, and the tax on vaping products brought in $1.6 million, an 18% increase.

The report noted the vaping collections were short of the $3.2 million forecasted when the 5 cent per milliliter tax was enacted in 2020.

Gas tax collections fell again as many people continued working at home and business and vacation travel was constrained. The $959.4 million collected was a 6.2% decrease.

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Arthur covers banking and finance and the economy at BizTimes while also leading special projects as an associate editor. He also spent five years covering manufacturing at BizTimes. He previously was managing editor at The Waukesha Freeman. He is a graduate of Carroll University and did graduate coursework at Marquette. A native of southeastern Wisconsin, he is also a nationally certified gymnastics judge and enjoys golf on the weekends.

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