Marginal Income Tax Rates in Wisconsin

Junjie Guo and Ananth Seshadri

Executive Summary:

• Statutory income tax rates in Wisconsin are higher than in most other states. Wisconsin’s
  
  statutory rate for the bottom-income bracket is the 19th highest among all states, and the
  
  statutory rate for the top-income bracket is the 9th highest. The tax system has become
  
  more progressive as well: the difference between the top and bottom statutory rates has
  
  more than doubled since 2000.
• A commonly used measure is the average tax rate, which is the ratio of taxes paid over income
  
  received during a year. A more relevant measure for policy analysis, and to predict
  
  the response to changes in statutory tax rates, is the effective marginal tax rate. The effective
  
  marginal tax rate measures the tax rate on an additional dollar of income given the
  
  circumstances of the household (which impact exemptions, deductions and tax credits).
• We calculate the effective marginal tax rates faced by Wisconsin households using data
  
  from the U.S. Census Bureau. These effective marginal tax rates depend on filing status,
  
  income level and many other household characteristics.
• We find that Wisconsin’s effective marginal tax rate is the 15th highest among all states,
  
  and it is above the median of the 50 states for nearly all groups. For married couples filing
  
  jointly where both spouses are above 65, Wisconsin ranks 9th highest among all states.
  
  For single filers below 65, Wisconsin ranks 17th highest in the United States.
• Wisconsin’s income tax rates remain uncompetitively high. A complete assessment will
  
  require an analysis of the trade-off between the benefit to the taxpayer from government
  
  services (some forms of government spending have a greater impact than others) and the
  
  benefit to Wisconsin households from tax cuts. In a subsequent report, we will present an
  
  analysis of this trade-off.