THE INCOME TAX IN WISCONSIN

...10 Taxes paid upon the farm...

...in Racine County, $11.56 per capita...

...in the village of Campbellsport, $11.69...

...Machinery, implements and tools used in farm, orchard or garden...

...Possibly a better method of taxation can be devised, which would take the place of the broken down personal property system, but any such plan should be scrutinized carefully...

...In the town of Ripon, the real estate pays 91.62% of the taxes and the personal property 8.38...

...The present Income Tax Law, known as chapter 658 of the laws of Wisconsin for 1911, probably required and received more hard work, from members, the governor, the tax commission, employees of the reference library and interested citizens than any other law passed by any legislature since the passage of the now famous Wisconsin law creating a commission to regulate railroads and public utilities...

...The records each year show a falling off of personal property taxes, instead of an increase...

...Growing crops...

...I have also been convinced there are many who would like to have a clear explanation of this law before committing themselves to an opinion upon it...

...In the first place, the following are EXEMPT from taxation, by local assessors or otherwise...

...Members, too, were at work constantly...

...700 $2800 The rate of tax on the first thousand dollars of taxable income is 1...

...And the present real estate tax, with the income tax as a substitute for the old personal property tax...

...Much has been said, through the press and otherwise, about this change in our system of taxation...

...A few comparisons in Fond du Lac County illustrate the inequality: In the town of Alto, the real estate pays 85.32% of the taxes and the personal property 14.68...

...The next step taken toward an income tax was by the Legislature of 1909...

...200 Hence a married man with two children would have $1600 exempt from his income, besides the other deductions, such as depreciation on property, losses during the year, interest paid on existing debts, taxes paid on property from which income is derived, insurance, and (if in business) for goods, clerk hire, advertising, etc...

...The average assessment in Kenosha county on moneys and credits was $71.68...

...Some believe the land values should pay all of the taxes...

...an adjustment of the rates, particularly as it applies to corporations...

...This is anything but uniform...

...The Wisconsin law now provides that its enforcement be left to the State Tax Commission with the assistance of the District Assessors, which insures impartial enforcement in all parts of the state...

...His income tax- would then be $28.50...

...2) what it is intended to remedy...

...Ohio under Governor Harmon is now enforcing this method, the enforcement being under the State Tax Commission...

...Some additional tax will be collected from the successful corporation, and this new tax will go to reduce the property tax upon other classes of property, including unsuccessful corporations themselves, which of course get no consideration under the property tax by reason of the fact that they have been losing money...

...The above figures do not purport to be correct, but are only taken for the purpose of explaining how the law works out...

...So from this source and from the salaried and professional class, who have not been paying on their incomes, but who have had the benefits of the state and local government, the schools, and police and fire protection, a large revenue should be added to the tax rolls, which should in turn require a less amount to be raised from personal and real estate, and at the same time distribute the tax more evenly...

...But the 71 offices held by County Supervisors of Assessments were abolished, and these cost the counties about $50,000 a year to maintain...

...the keeping secret, except to proper officials, of the tax roll...

...For example: A corporation assessed at $25,000, which makes a net profit of $5,000 a year would pay the highest rate of 6% of the income, which would be $300 tax...

...If it only made $1000 net profit (4% on the assessed valuation), its tax would be only 2% of the net profit or $20...

...but the public generally should consider carefully the question of the repeal of this law, as now quite a large amount of property is exempt from taxation, and this law if repealed would leave the real estate, stocks of goods and stock on farms to pay the entire taxes...

...125 Exemption for himself, wife and 2 children . 1600 Total deductions ........$ 2100 Balance of income taxable...

...If, however, his income tax amounted to $12, he would have to pay the difference, or $2...

...On this money out at interest the chances are he is now paying no tax, though in some localities he might be assessed for $10,000, and if the local rate were 1% he would be paying a tax of $100...

...Household furnishings, ornaments, jewelry and a watch...

...that personal property of all kinds, and especially moneys, mortgages and the like, have not been paying their share, but many will be surprised to know the real situation...

...His income tax, therefore, would be $7...

...There are but three known methods of taxation that at the present time could be offered to the people and they are: The single tax, raising all revenue by taxation of land values...

...How the Tax it Distributed THE TAX itself is distributed in the following manner: the state receives 10% of the amount collected for paying the expense of administering the law, and if of that 10% more is received than is required to pay that expense it goes into the general fund, 20% goes into the county treasury for use in paying the general expenses of county government and 70% to the town, city or village in which the tax was assessed, levied and collected...

...This committee did report a bill to the legislature of 1911, which was not in any way satisfactory to the members of either House or to any of the many people who appeared before them on the bill...

...There were many public committee hearings...

...A special committee was appointed to investigate the subject and report a bill to the next legislature...

...and it is for the Wisconsin citizen to determine whether he believes a system of taxation, with the present Income Tax Law as a basis, should be worked out, which requires each person to pay taxes for his share of government, schools, city and town improvements, and other benefits received by all citizens alike, according to their ability to pay, and to help equalize the unjust distribution we had under our other systems of taxation...

...For example...

...ROY E. REED A member of the Wisconsin Assembly and a practicing lawyer at Ripon, who has carefully analyzed the new income tax law, with a view to making its essential features plain to the readers of La Follette's...

...It has been some time since local assessors have availed themselves of their legal right to require the tax payer to give a full list of his personal property, but most citizens remember those long blanks furnished them in years past, which required in detail a complete list of personal property, including cash, mortgages, notes, bonds, etc...

...The reader must bear in mind all the time that the tax and rates are on the income and not upon the principal...

...in the village of Brandon, $56.87...

...2800 His deductions would probably be— Wages of hired man, 6 months @ $30......$ 180 Fire insurance premiums or assessments...

...In the village of Oakfield, real estate pays 68.88% and personal property 31.12...

...Hence I shall try, as briefly and as concisely as possible, to give the facts about this legislation—(1, its history...

...in the village of Oakfield, $74.54 (in 1910, $105.48...

...It passed in the Assembly by a vote of 71 to 1, and in the Senate, with 24 votes for it and no votes against it...

...So, on paying the personal property tax and presenting the receipt, he would have to pay no income tax...

...150 His total gross income would then be...

...No new Commission was created to administer this law as some think, as the State Tax Commission is a continuing body, which has been in existence for over twelve years...

...The income tax has been worked out successfully in Germany, France, Switzerland, England and other countries, and has been tried by several states in this Country, but has not been much of a success in those States, because the enforcement of it has been left to local parties the same as our personal property system was...

...In the city of Fond du Lac, real estate pays 76.4% of the total taxes raised and the personal property 23.60...

...some believe all forms of personal property and the real estate should pay the taxes...

...From the beginning of the session in January until the final passage of the present law in July, this measure was being constantly revised and perfected in an honest effort to get as good a law on the subject as could be worked out on a new question, and in an honest HON...

...With that condition existing, tax payers won't pay such a share of their income and assessors do not like to make them...

...The law provides for the following exemptions to individuals: A single person ..........................$ 800 A married man...

...In the Case of Corporations THE METHOD of taxing corporations under this law is somewhat different than that of individuals, and of course no exemptions are allowed...

...This leaves the personal property tax on all other articles to be collected as before, except that when the tax payer pays his personal property tax, he can subtract the amount of that tax from the income tax that may be against him...

...Any one can, with his own figures, determine his own tax...

...I might add here that any one who will examine the platforms of the Republican and Democratic parties, on which each party went before the people of the state in the fall election of 1910, will find a plank pledging to the people the passage of a graduated income tax law, with reasonable exemptions...

...have been assessed at the local rate, ranging from ? of 1% to 2%, which on a 6% note, bond or mortgage amounts to an annual tax of from 8% to 33 1/3% of the annual income of that note or mortgage, while in other localities these moneys and credits have not been assessed The following will give you some idea of how that has been done...

...In other words, a person having a big income would pay a larger tax than the man with a small income, just as a man who has much property should pay more taxes than the man who has little property...

...Furthermore it is evident from these comparisons that the personal property tax has been an unjust burden in some places where enforced, and a failure in most other places...

...Any person having a farm of that size and with such an income would have personal property of horses, cattle, hogs and feed, on which he would have to pay a personal property tax of $7 or more...

...effort to carry out the platform pledge made to the people in 1910...

...a man has paid a personal property tax of $10 and by his return to the income tax assessor he shows in the blank that he would have to pay an income tax of $10...

...If he did not have any other deductions allowed, he would have a taxable income of $1200, on which he would have to pay a tax of $10, on the first $1000 of taxable income, and $2.50 on the other $200, or $12.50...

...For example, if a man had money out at interest, say $50,-000, drawing 6%, his income would be $3000 a year...

...The income tax remedies that situation by assessing the income on the rates I have given above, so that on the first thousand dollars of taxable income, the one who gets the income would have to pay only a $10 tax, which is equivalent to a personal property tax on that amount of personal property of 1/20 of 1%, and if he had to pay the highest rate of 6% of the income for incomes over $12,000 it would be only equal to 3/10 of 1% on a 5% security...

...or it might lose money and yet have a high tax to pay...

...while under the old personal property tax, its tax might be anything, it might be very prosperous and escape with almost no personal property tax...

...This amendment was again adopted (Joint Resolution 19 S.) by the Legislature of 1907...

...Moneys and credits (which include mortgages...

...There remained but one other step to make this change in the state constitution, and that was to submit it to the people for a vote...

...Many public hearings were held, at which prominent men from all parts of the state, representing nearly every kind of business, presented their views...

...It carried by a majority of 85,696 votes for the amendment and 37,729 against it...

...65% of this would go to the city treasury and 35% to the town treasury, of course the county's 20% and the state's 10% to be deducted...

...NOW for the terms of the law...

...No doubt the dissatisfaction with the old personal property tax system, admitted by every one to be unjust, and the desire to provide a new and fairer distribution of our taxes, allowing to every one alike a proper exemption, caused the people in 1908 to adopt the income tax amendment, and the last legislature to enact the new law...

...No one will know, however, until after the taxes are paid next January, as the law provides heavy penalties for any one who receives or has charge of the blanks should he disclose or give out any information contained in them.############## There is also a penalty for persons making out a false report, and the assessor may, if he thinks the return not correct or if he knows persons who have not made returns, who should have done so, assess them such amount as he thinks is right, and the person if not satisfied with such assessment can take it before the county board of review...

...If a married man with two children, his exemption would be $1600...

...How It Works Out TAKE for example, the man on a 160 acre farm who has a wife and two children: Say his gross income from the farm and its products is...

...Mechanics tools...

...The old personal and real property tax, you are familiar with, taxing all kinds of personal property, including money, notes, mortgages, bonds, etc...

...And note this: Careful investigations made by the Tax Commission indicate that the average percentage in the state of the assessed value of personal property of farmers to its true value is about 63...

...60 Seed grain purchased...

...250 Rental value of his homestead at...

...the offsetting of taxes paid on real estate, against income from real estate, etc...

...If he has not paid a personal property tax, he would have to pay whatever his income tax return shows...

...200 For each person legally dependent on the person...

...1.50% on the third $1000 of taxable property and so on up until the rate reaches 6% of the income after the income is in excess of $12,000...

...100 Losses during year (horse or stock...

...The result of taxing moneys and credits under the old law was to cause people to avoid giving in to the assessor these items, temporarily forgetting them, so to speak, and where they were given in or assessed often the interest rate was higher, because a man who received 5% on his money and then had to pay out one-fifth of it, or 20% of his income, as a tax, felt he had to get it back in some way...

...Should that take place, those now most loud in their protests against the income tax, would be seeking seats in the Legislature for the sole purpose of passing an income tax law as a substitute for the personal property tax so enforced...

...Thus it will be seen that the tax falls upon the corporation making big profits and not upon the ones not making a reasonable return upon their investment...

...To Remedy Inequalities SUCH IS the history of this legislation in Wisconsin...

...Consider the following figures taken from the assessments of 1911: Of the total taxes paid in the state for everything, the average in the state is 80.78% paid by real estate and 19.22% paid by personal property of all kinds...

...Thus it will be readily seen that the counties save the amount they have paid each year for the Supervisor of Assessments and receive in addition the 20% of the income tax collected toward paying county expenses, which will require that much less each year to be raised by taxation on other property, real and personal, for county purposes, cities, villages and towns will raise only such amounts on these properties as are required for their purposes, less the amounts each receive from the income tax...

...1200 and for each child under 18...

...There is one other and further distribution of this tax collected, which is not fully understood, which the following example may explain: A person living in a city who gets a net income (after making the legal deductions) of say $2340 from his business and an income from land in a town of $1260 would make his total income $3600, and he being a married man without children would have an exemption of $1200 which would leave him a total net taxable income of $2400...

...This was done November 3, 1908...

...On the other hand, there is the person who pays no personal tax...

...Its History THE LEGISLATURE of 1903 attempted to pass an amendment to the state constitution permitting the passage of an income tax law, but through a defect this amendment was not valid...

...Take the case of the man on a good salary—say a professional man—who gets an income of, say $2800...

...This resolution added the following to section 1 of Article VIII of the state constitution, viz: "Taxes may also be imposed on incomes, privileges and occupations, which taxes may be graduated and progressive, and reasonable exemptions may be provided...

...When he presents his personal property tax receipt, his income tax will be cancelled...

...Some one called it a tax on prosperity, and it leans that way, as the more a person makes the higher are his taxes, but it also works the other way, because if that person has a lean year or has losses, that fact is taken into consideration and his tax is correspondingly less...

...Let us now examine what the law is intended to remedy...

...Every one knows that real estate has been paying more than its share of the taxes...

...In the town of Alto, the average assessment for each person in 1911 for moneys and credits was $40.57...

...Experience May Suggest Improvements FROM the experience of this year, no doubt many amendments can be made to the law, such as a shorter blank which will require only a certificate to be signed by the person, so it can be made out at home, without going to a notary...

...I wish merely to present the facts and leave readers to reach their own conclusions...

...and he may rest assured, that if the present income tax law is repealed, the old personal property tax system of a few years ago will be again put into effect, with one important change, viz:—its administration, not by local assessors, but by the State Tax Commission...

...25 Repairs on buildings...

...It is evident from these figures that in some localities moneys and credits (bonds, mortgages, etc...

...What is Exempt...

...of the manufacturers about 23% and of merchants about 40 %. The income tax has for its basis, the principle that each person shall pay a tax according to his ability to pay...

...Their tax rate is fixed by their earning power, based on the assessed valuation of their property...

...Claims are made that this tax will not produce any revenue and that it will not pay the expense of administration, etc., but those who have studied the question fully think differently...

...When holders of securities all over the state pay on such low rates there will be no object in holding back their credits from the assessor, and it would not pay to risk the penalty for failure to report the income thereon...

...The rates of tax for individuals are as follows: 1% on the first $1000 of taxable income...

...So the first step legally taken to that end may be said to have started with the Legislature of 1905, which passed Joint Resolution 12 A. by a vote of 80 to 10 in the Assembly and 18 to 12 in the Senate...

...He would have his exemption, if a married man with two children, of $16,000...

...2400 5% interest on $5000 in mortgages...

...But from what I have heard and from what I have read, I have come to think that the provisions of this important law are not fully understood by many citizens...

...in the town of Ripon, $1.24...

...in the town of Metomen, nothing...

...But to give one more example of how it has worked out I will take the counties of Racine and Kenosha for the year 1910...

...and in the city of Fond du Lac, $18.00...

...1.25% on the second $1000 of taxable income...

...and (3) its essential features...

...Household furniture, and musical instruments...

...In the village of Brandon, real estate pays 61.97% and personal property 38.03%-In the fifth and sixth wards of the city of Waupun, real estate pays 81.54% and personal property 18.46...

...The only new officers appointed were the 39 district income tax assessors, which are paid by the state...

...Other deductions would probably amount to $400, leaving a taxable income of $1000, on which he would pay a tax of $10...

...The State Tax Commission makes the assessment of the corporation...