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Eliminating the state income tax could mean paying higher sales tax

Bigger pay checks could mean paying more money for other items

GREEN BAY, Wis (WFRV)-- Taxpayers in Wisconsin could receive bigger paychecks in the future.  That’s something Gov. Scott Walker would like to see.

“What’s the best way to reform taxes?  Is it to eliminate income taxes?” Walker said during a press conference in Marinette Wednesday.

Walker said he’s seriously considering eliminating income taxes.

“I’ve asked Lt. Governor Rebecca Kleefisch and the Secretary of Revenue to start holding listening sessions.  They started about a week ago and they’ll go for the first 5-6 months of 2014 as well," Walker said

According to the U.S. Census Bureau, in 2012, Wisconsin generated $16 billion in total revenue tax; $6.8 billion came from personal income taxes and $4.3 billion from general sales tax.  So if Wisconsin did eliminate income taxes, how would the state make up the difference?

 “States cannot run a budget deficit so if they eliminate one revenue source and keep the same level of spending then the have to raise taxes elsewhere," said UWGB Economics Professor, Tom Nesslein.

Wisconsin wouldn’t be the only state to do this— nine states don’t have a state income tax but they make up the difference elsewhere.

Those states include Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas, Washington, and Wyoming.

Nesslein said one option would be to raise the state sales tax; Right now, it’s at 5%.

That would mean consumers could pay more for items like clothing, alcohol, or gasoline. 

“It would be hard to make it up.  That’s probably why they would also have to propose spending cuts," said Nesslein.

But those are details the Governor hasn’t ironed out.

“We don’t have a specific plan on the table right now but we’re looking forward to hearing from people across the state," he said.

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