The "Taxpayer Protection Amendment": Restricting What Doesn't Need Restricting

A Legislative Fiscal Bureau report came out yesterday that details the impact of the revenue amendment that squeaked through the Assembly last week by a 50-48 margin.

Proponents will surely point to the fact that the report shows public revenues would be cut by $5.9 billion under the amendment over a 28-year stretch, while those opponents who favor a more restrictive amendment have already said the report shows that the amendment that passed doesn’t do enough.

Unfortunately, they’re both missing what’s most informative about the report.

According to the LFB analysis, under the Assembly-approved amendment, the state was $501 million under the limit in 1983-1984, the most under of all the years, and it was $1.7 billion over the limit in 1999-2000, which is the highest over of all the years.

We are constantly told by proponents that this amendment is intended to decrease taxes -- hence, the title "Taxpayer Protection Amendment." So it would follow that the year the state government was the most under the amendment’s revenue limit, the tax burden would be lowest, while in the year the state was most over the limit, the tax burden would be highest.

A look at the numbers, however, tells a different story.

Another LFB analysis (see page 64) demonstrates that in 1983-1984, the year the state was most under the limit, total state and local taxes in Wisconsin were $130.07 for every $1000 in state personal income. In 1999-2000, the year the state was most over the limit, the figure was $128.17 per $1000 of state personal income.

In other words, the tax burden was less in the year the state took in $1.7 billion over the limit than it was in the year the state was $501 million under the limit.

Of course, this type of analysis is a bit pointless because the Assembly-approved amendment is almost sure to fail this week in the Senate. But what an analysis like this one does is highlight a larger issue with all of the amendments offered this year (and those that are sure to come in the future).

Due to the complexity of public finance, it is impossible to accurately target taxes without necessarily creating the loopholes proponents of an amendment won’t accept.

Every amendment offered this year deals with government revenue, not taxes or even spending. Yet when arguing for an amendment, advocates have used nothing but statistics on taxes. They defend this by claiming that taxes are the real issue.

Of course, a reasonable response is why not just restrict taxes if that’s the ultimate goal? Quite simply, the answer goes, because that creates the unwanted loopholes that allow governments to increase revenue sources such as fees and assessments.

But that’s exactly the problem with proponent’s arguments. They don’t want to consider non-tax revenue until it’s useful for them. Yet the very fact that such things as fees and assessments could be increased if taxes alone are limited proves that all revenue sources need to be part of the discussion from the start.

And on the score of total governmental revenue, UW-Madison economist Andrew Reschovsky found that Wisconsin ranks 23^rd in the country in relation to personal income -- less than one percentage point above the national average.

So it's unsurprising that when it comes to non-tax revenue, like fees and assessments, Wisconsin ranks quite low in relation to the rest of the country. In fact, in relation to personal income, the LFB ranks (see page 4) Wisconsin 25^th in the nation in terms of charges such as fees and 41^st in the nation, nearly 13% below the national average, for all other forms of general revenue like assessments.

Thus, on the issue of government revenue, there is simply not a crisis in Wisconsin. Yet that is exactly what all of the amendments proposed this year cut -- not taxes.

And there’s just no way to limit taxes to the satisfaction of the far fiscal right through the maze of public finance without restricting what doesn’t need restricting.