Five Options to Lower the Income Tax Rates in Wisconsin

Junjie Guo, Kim Ruhl and Ananth Seshadri

Executive Summary:

In this report we evaluate five options to lower the income tax rates in Wisconsin, which are higher than the rates in most other states. We build a comprehensive model of the Wisconsin economy and its tax system, and present the long-run effects accounting for behavioral responses from households and firms. We find lower tax rates increase capital, labor and output in Wisconsin. The increased economic activity partially offsets the loss of revenue from lower tax rates. We find significant benefits for the median-income household. Even low-income households who pay zero tax benefit from higher wage rates induced by lower tax rates.

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