Wisconsin Taxpayer Alliance Finds Trends In Wisconsin Income Tax Filings

This year’s recent tax season marked only the second in more than two decades that some state income taxpayers faced a major tax increase.
A new analysis of 2009 state income tax returns by the Wisconsin Taxpayers Alliance shows the impact of the increases that were enacted as part of the 2009 Wisconsin budget.
At or above $200,000, the average tax increased four percent to $29,980. This effect was most evident at $1 million and above, where the average tax paid rose 13.5 percent to $168,383; for filers with incomes under $200,000, the average tax declined 3.7 percent to $1,539, the report says.
These high-income groups were the only ones affected by the tax hikes, because raising the top income tax rate from 6.75 percent to 7.75 percent fell only on joint filers with more than $300,000 of income and single filers with incomes of more than $225,000, the document reads.
Similarly, the effect of halving of the state tax break for capital gains—the other major personal tax hike—likely fell on middle- and upper-income filers, those most likely to own stock or other investments.
Overall, the total number of state income tax filers fell 1.9 percent from 2.89 million in 2008 to 2.83 million in 2009. That was the lowest total since 2.76 million filers in 2006. Wisconsin Taxpayers Alliance researchers point to the recession as a main cause for the decline in filing.
However, the researchers also note that the drop in filers was greater at high-income levels: at or above $1 million in income, -15.2 percent to 2,949; between $500,000 and $1 million, -9.4 percent to 6,738; and between $200,000 and $500,000, -7.0 percent to 38,654.
The Wisconsin Taxpayers Alliance suggested several possible reasons for these declines. One theory the alliance has is that the recession probably led to scant profits or losses among small business owners and investors, pushing them out of top tax brackets. Higher income and capital gains taxes may also have had an effect, the alliance says, particularly for those contemplating once-in-a-lifetime sales of family businesses.
In other findings, the Wisconsin Taxpayers Alliance reported that about half of 2009 filers (52.1 percent) had incomes under $30,000. This group accounted for 11.7 percent of income and 4.1 percent of state income taxes paid. At the other end of the spectrum, the $100,000-and-above group accounted for 9.4 percent of all filers, reported 40.3 percent of total income, and paid 51.1 percent of total income taxes.