Wisconsin’s state income tax collections reported to the U.S. Census Bureau averaged $960 per capita in 2003, sixth highest among the 43 states with state income taxes, and 27.1% above the average for these states. The state ranked eighth in 2001 and 2002, and seventh from 1995 to 2000. Relative to personal income, Wisconsin income tax collections in 2003 were $32.13 per $1,000. Only Oregon ($39.70) and New York ($33.06) were higher, according to WISTAX, a nonprofit, nonpartisan organization dedicated to public-policy research and citizen education.

WISTAX researchers noted that the state’s individual income tax system is fairly progressive, with higher-income taxpayers paying a greater share of their income in taxes compared to lower-income taxpayers. Returns with incomes from zero to $10,000 had an average income tax rate of 0.3%. Rates are calculated before applying refundable credits. Those with incomes between $10,000 and $20,000 had an average tax rate of 1.3%. Average rates rose steadily by income. Those with Wisconsin adjusted gross income (WAGI) above $200,000 had a rate of 6.2%. This latter group accounted for 13.8% of WAGI, but paid 19.4% of state income taxes.

The study also noted that high-income filers in Wisconsin generally pay more income tax than comparable filers in other states. For a married couple with no children and income of $100,000, Wisconsin had the ninth-highest state income taxes nationally. For filers with incomes from $65,000 to $94,999, Wisconsin ranked 10th. However, the Badger State was one of 12 states with an income tax but no tax on a couple having a $20,000 income.

According to WISTAX, Wisconsin relies to a greater extent on individual income taxes than most states. In 2003, Wisconsin's individual income tax collections were 43.1% of total taxes, according to the U.S. Census Bureau. The Badger State was eighth among the 43 states reporting collections. Sixteen states raised less than a third of their total taxes through the income tax, while 23 raised between one-third and one-half through income taxes.

Recent income tax cuts have reduced the state’s income tax share. In fiscal 2003-04, individual income tax collections were 49.1% of state general fund tax revenues, the lowest percentage since 1989-90. The income tax share peaked in 1999-2000 at 54.5% of general fund taxes. This proportion fell 3.3 percentage points in 2000-01 and another 1.5 points in 2001-02.

Changes in the income tax law combined with economic sluggishness have led to fluctuations in collections in recent years. WISTAX notes that, from 1993-94 through 1997-98, income tax collections rose fairly steadily. However, in the years following, many changes were made, including a temporary repeal of the school levy credit (1999), reductions in income tax rates (1998, 2000 and 2001), and indexing of tax brackets for inflation (beginning in 1999). In addition, economic conditions worsened beginning in 2000.

The temporary repeal of the school levy credit was largely responsible for the 15.5% rise in collections in fiscal 1999-2000. The combination of indexing, tax rate reductions, reinstatement of the school credit and an economic slowdown led to a 13.5% decline in 2000-01, followed by a 3.4% drop the next year. A recovering economy helped boost income tax collections 4.5% in fiscal year 2003-04.

The WISTAX report noted that Wisconsin currently has four tax brackets. Twenty-one states have more. Wisconsin’s income tax rates range from 4.6% for the lowest incomes to 6.75% for the highest. After application of the standard deduction, personal exemptions and nonrefundable credits, taxpayers, on average, paid 4.4% of WAGI in individual state income taxes in 2002.

Wisconsin created personal exemptions effective with tax year 2000 to replace the dependent and elderly credits. Wisconsin’s 2004 personal exemptions for single taxpayers ($700) and married taxpayers ($1,400) both ranked 30th among the 43 states with income taxes.