"During my tenure as governor, Wisconsin’s overall tax burden went DOWN."
Tommy Thompson on Tuesday, October 4th, 2011 in a campaign fundraising email
Thompson says Wisconsin’s tax burden went down while he was governor
Battered by some conservatives for supporting tax hikes as Wisconsin governor, Tommy Thompson is fighting back as he launches his U.S. Senate bid.
When he announced his candidacy in early October 2011, the Republican signed a pledge to oppose higher income tax rates. Thompson said that over his 14 years as Wisconsin’s chief executive, he "always fought to get the long arm of government out of the pockets of working families."
"In all, I cut taxes 91 times," Thompson wrote in a campaign fundraising email on Oct. 4. "And I’m extremely proud of the fact that I saved taxpayers $16 billion through my tax reform initiatives, and during my tenure as governor Wisconsin’s overall tax burden went DOWN."
Thompson said he "cut income tax rates not once…not twice…but THREE times! Once we started cutting taxes we didn't stop."
We’ll tackle a variety of claims about Thompson’s record on taxes and spending in the weeks and months ahead, but thought we’d start with his overarching statement that during his tenure from 1987 until his departure for the Bush administration in February 2001, "Wisconsin’s overall tax burden went down."
That’s a hefty claim.
Thompson is pointing to a measure ("tax burden") that goes beyond just the trend in total state and local taxes collected. Those collections roughly doubled during his time as income tax payments soared due to a robust economy for many of those years.
"Tax burden" takes those total collections -- including property, income, sales, corporate and other taxes -- and divides them into all personal income earned in the state. It does not reflect what every individual experienced; it’s a composite measure of the composite statewide tax bite, or burden.
The "burden" measurement is considered the gold standard for measuring tax impact.
On tax burden, Thompson’s campaign pointed us to a 2011 study by the Tax Foundation, a Washington, D.C.-based research organization. It put Wisconsin’s tax burden at 11.7 percent of the state’s personal income in Tommy’s first year, and down to 10.5 percent in his last.
That’s a noteworthy drop.
For perspective, let’s look at what some studies and measures show.
Thompson said the burden went down, but for whom? Most significantly, were there tax increases in the 12 years in between his first and last that added up to a cumulative tax hike?
First, a few important statistical notes.
The basis of all relevant studies we found is the U.S. Census Bureau’s estimates of state and local tax collections. The Tax Foundation study cited by Thompson tries to adjust the census numbers to account for so-called tax exporting -- taxes on oil in Alaska, for example, are collected there but paid in large part by residents of other states. The group also estimates tax collections in years the census does not do so.
Most tax studies we found, including state-by-state comparisons assembled by the nonpartisan Wisconsin Legislative Fiscal Bureau, stick to the original Census Bureau numbers, citing uncertainties with estimating "tax exporting."
The two methods produce numbers that agree on much of what happened under Thompson, with some exceptions we’ll note below.
Neither reveal a consistent easing of the tax burden in the Thompson era.
Take a look:
The Tax Foundation study ranked Wisconsin’s burden the second-highest in the nation in 12 of Thompson’s 14 years -- but the state fell to a No. 7 ranking in his last year, fiscal 2001. The other studies showed some early progress but basically flat at No. 4.
Here’s a closer view:
- Ten years after Thompson took office, the overall tax bite was the the same or virtually identical as in year one, according to both types of studies. But major tax cuts in Thompson’s last budget pushed the tax burden down at the tail end, compared with the first year.
- In the 12 years in the middle, the tax bite went up four times based on the Tax Foundation accounting, and nine times in various other studies.
- Income tax burdens -- largely because of major tax cuts under Thompson and state lawmakers in the 1997 and 1999 budgets -- dropped when comparing his first and last years. The burden surged up in most years, but then fell dramatically, settling in to a drop of 2.7 percent compared with his first year.
- Property tax burdens swung up in the first half of Thompson’s governorship, then began a major, sustained decline thanks in large part to state property tax relief programs and limits on taxes. In the end, that burden was down 5 percent when he left office.
- National rankings: Wisconsin was a top-10 tax state when Thompson started -- and when he departed.
(In the most recent comparison available, Wisconsin’s total tax burden was 13th in most rankings based on the latest census estimates, but the Tax Foundation put it at sixth.)
It’s worth noting that "tax burden" includes taxes levied at the local level, not just by the state. But it’s the best guage of a governor’s record because the state has mighty influence over local property taxes through state aid.
A final word on the figures. There’s actually a hole in the census data for Thompson’s final fiscal year, July 2000 to July 2001.
That’s a potential problem in judging Thompson’s record, because the drop in tax burden comes toward the end of his tenure. But researchers are mostly untroubled, saying the big income tax cut approved under Thompson took effect -- in part -- the year after he left. So Thompson should get some credit for the drop in the tax burden reflected in fiscal 2001-02, when Scott McCallum was governor.
"The tax burden fell during (fiscal years) ‘02 and ‘03, the last two years covered by the 2001 budget bill, which was jointly developed by Governors Thompson and McCallum," said John Koskinen, chief economist, Wisconsin Department of Revenue.
And don’t forget the Tax Foundation study does cover his last year, by estimating based on the previous year’s census figures.
Finally, using the 2001-’02 year as a proxy for Thompson’s final one, we crunched the numbers on his cumulative record -- not just comparing year one to his last year.
We found a net drop in the tax burden (9 or 10 percent) over the course of his time, depending on which methodology is used.
Thompson told would-be donors to his Senate campaign that he’s "extremely proud" that during his time as governor, "Wisconsin’s overall tax burden went down."
The drop in the tax bite came late in the Thompson era, and some particular levies such as income taxes were on a wild roller-coaster ride. Further, data weaknesses prevent a precise judgment of the trends.
But Thompson referred specifically to the overall tax burden, a measure that is commonly cited in multiple studies. And based on frequently cited studies, our own calculations and observations by experts, his claim is on target with some clarification.
We rate this statement Mostly True.
Published: Sunday, October 23rd, 2011 at 9:00 a.m.
Tommy Thompson, campaign fundraising email, Oct. 4, 2011
Tax Foundation, Wisconsin state-local tax burden 1977-2009, Feb. 23, 2011
Wisconsin Legislative Fiscal Bureau, State and Local Government Expenditure Rankings, January 2009
Wisconsin Taxpayers Alliance, tax burden rankings, accessed Oct. 14, 2011
Email exchange with John Koskinen, chief economist, Wisconsin Department of Revenue, Oct. 18, 2011
Interview with Mark Robyn, Tax Foundation economist, Oct. 14, 2011
Interview with Dale Knapp, research director, Wisconsin Taxpayer’s Alliance, Oct. 14, 2011
Email exchange with Darrin Schmitz, consultant to Tommy Thompson, Oct. 11, 2011
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