Beware of tax trades
September 13, 2012
If there is one universal principle that ought to guide efforts to reform any tax code, it’s that complexity is the enemy of fairness. The converse, that simplicity promotes fair treatment for the greatest number of taxpayers, is also true.
But sometimes what looks like simplicity is really a shell game.
Recent discussions in Madison about overhauling Wisconsin’s tax code focused on reducing income tax rates across the board to encourage economic growth. But land mines wait for naive reformers to step on them.
The biggest land mine is the idea of raising one tax to get rid of another. A trial balloon floated last week sought to revive the old idea of increasing the state sales tax to finance income and/or property tax reductions.
WisPolitics noted that conservative commentators objected on the grounds that “past efforts to raise the sales tax led only to temporary relief of the growth in property taxes.” We’ll go one step further and suggest a trip back to the history books: Wisconsin has no general tax today that was not contrived initially as a device to relieve property taxes.
The property tax dates back to territorial days. The income tax was envisioned early in the last century as a fairer way to raise revenue, so we got an income tax but somehow, the bad old property tax never went away. The sales tax was first proposed in the 1950s as a reform addressing the supposed unfairness of the property tax. Since its enactment it’s been raised repeatedly, always for the same purpose, but we still have the property tax alongside the other taxes that were supposed to replace it.
Fool me thrice?