The cost of a promise

One thing I’ve learned in my years on Joint Finance is that words have a price. It’s easy to say things and make promises that sound good without realizing -- or at least without explaining -- what kind of hit it would mean to the state budget in extremely tight financial times.

One such vow in the newspaper a few months back caught my eye. Milwaukee County Executive Scott Walker told an editorial board that if he were to ever run this state, he would eliminate Wisconsin’s tax on retirement income. Here’s what the resulting article in the La Crosse Tribune stated:

“[Walker] also promises to eliminate Wisconsin’s tax on retirement income, which he says hurts investment in Wisconsin because wealthy retirees flee to more tax-friendly states.”

So what would be the cost to keep wealthy retirees from fleeing? In such matters, the best answer comes from the Legislative Fiscal Bureau. There is a detailed three-page answer you can read here, but it boils down to this:

A loss of $460 million per year.

That's $920 million we'd need to replace in a biennial budget. To put that in perspective, that is almost the equivalent of running the entire state Department of Corrections for one year.

So how would he cover that cost? Walker doesn’t say.