Frederica Freyberg:
Individual income tax revenue for the state of Wisconsin went down more than 35 percent in April compared to the same time last year, helping to set up the current fiscal emergency. Our next guest is a doctor of public policy in economics and has his own prescription for Wisconsin's deficit problem. Professor Andrew Reschovsky can practice this kind of fiscal medicine because he's not a politician for whom the word taxes spells suicide. Thanks for being here.

Andrew Reschovsky:
Thank you.

Frederica Freyberg:
What is your reaction to the Doyle administration and its deep, deep cuts that they're outlining to fix this latest deficit hole?

Andrew Reschovsky:
I think that cuts are dangerous for the state if we start looking at it, if we look at cuts for education. That means bigger class sizes. It means fewer teachers, fewer courses. If a child doesn't get a good education this year because of the budget problems, it's hard for them to make it up. And in the end, the growth, the long-term growth and prosperity of Wisconsin depends upon having a good education.

Frederica Freyberg:
Well, as you know, republicans, as we just heard, and the governor himself oppose tax hikes, but obviously the alternative to cuts in state programs is to increase revenues by tax increases and you have detailed some of those that you think might represent a fix here. One of them is the taxing capital gains as ordinary income to take $160 million a year. What about that trickle down argument?

Andrew Reschovsky:
The argument is, I think, that, oh, if we tax capital gains, there won't be any businesses, there won't be new jobs in the state. But the fact is almost all the capital gains, when the stock market starts going up again and we have gains, are from stocks that you and I hold. They have nothing to do with jobs in the state of Wisconsin. We could target some relief to new entrepreneurs and new businesses, which we do, in this state, and that makes sense. But let's tax capital gains at the same rate of all other income.

Frederica Freyberg:
Now, another one that you talk about is restoring the estate tax, but that obviously is not popular with the moneyed set, and wouldn't it run people out of the state to Florida or something?

Andrew Reschovsky:
You know, a lot of the people are going to move to Florida because the winters are nicer, as we know, and there's not a lot of evidence that people are fleeing because of a little bit of differences in estate taxes. The estate tax affects only a very few of the very richest Wisconsin residents. And we lived quite well with an estate tax for many years and have only recently gotten rid of it. We could put it back and raise considerable revenue.

Frederica Freyberg:
We had it for about 100 years and got rid of it because it was too complicated and there were too many exceptions to it. You're saying bring it back, wouldn't affect all that many people. We've also got the gas tax, and this, you know, Gov. Doyle and others suggest this is the very kind of tax that hits the working Wisconsin family, and why do you want to go there?

Andrew Reschovsky:
I guess for a couple of reasons. We had a gas tax that was indexed for inflation until 2006. And the legislature did away with indexing. So each year relative to the cost of living gas tax is actually going down. And we need — you always want to ask the question — nobody likes taxes. But I like even less the fact that we would cut Medicaid, that we would cut education, that we would cut the university. It's that kind of tradeoff. Three cents a gallon or something like that is not a large amount.    

Frederica Freyberg:
You even want to go after the beer tax. $50 million off the back of brewskis. That's sacrilegious in this state.

Andrew Reschovsky:
There's a proposal to increase the beer tax by fivefold. At the end of the day that would mean 3 cents a bottle beer tax. That is not going to affect even heavy drinkers. And if it discourages a little drinking, it will save the state money on medical care, so forth.

Frederica Freyberg:
The other thing you go for is increasing the top income tax marginal rate on incomes of over $150,000. You're starting to edge toward that middle class.

Andrew Reschovsky:
The nice thing about the income tax particularly in these difficult times is it's a tax that's only paid by people who have jobs and income, not by those who are suffering, whose income is suffering.        

Frederica Freyberg:
We need to leave it there, but thanks very much.

Andrew Reschovsky:
My pleasure.