Back in the days when the states were called "laboratories of democracy," Wisconsin was one of the great innovators of social and governmental policy. That is one reason it's significant that this state, under the leadership of a liberal Democratic governor, is seriously considering a tax-reform plan strikingly similar in its principles to the one President Reagan endorsed in his State of the Union address.
Back in Washington, the wiseacres say of tax reform: Forget it. Senate Majority Leader Bob Dole, preoccupied with the agonies of budget-cutting, mumbles, "Maybe next year." At the downtown restaurants, Reagan's proposal is dismissed as a wonderful employment program for special-interest lobbyists. Many political reporters see it as a diversion, a bit of camouflage designed by the White House media team.
But here in the hinterland, a politician like Tony Earl, who comes from a part of the political spectrum very different from Ronald Reagan's, has no trouble at all in seeing the innate appeal of tax simplification and tax reform.
In his third year as governor, Earl has made a Reaganesque tax reform the centerpiece of his program. There's some obvious politics in his ploy, for one of the principal sponsors of tax-simplification at the federal level is Sen. Bob Kasten of Wisconsin, the freshman Republican whom Earl may decide to challenge next year.
But statehouse Republicans credit Earl with sincerity -- and just marvel that this liberal Democrat in a state that pioneered the progressive income tax would take the lead in pushing a tax plan so similar to Reagan's.
Earl's proposal would reduce the maximum rate of the state income tax from 10 percent to 8 percent and make proportional cuts for middle-income earners, in return for elimination of almost all credits and deductions. The current eight-rate structure would be boiled down to three rates, with a sliding standard deduction keeping the principle of progressivity and taking 98,000 low-income earners off the rolls.
While Reagan's tax plan is supposed to be revenue-neutral, Earl -- who raised taxes to close an inherited deficit his first year as governor -- is taking advantage of a state surplus of more than $300 million to offer the sweetener of an overall $132 million cut through his simplification plan.
According to the governor, "Two- thirds of the benefit of the tax cut will accrue to middle-income taxpayers. At the same time, the top rates will come down and we'll get this punitive reputation as a high-tax state off our backs."
That last motivation is central in Earl's thinking -- another indication of how far the younger generation of Democratic liberals is moving from the party's past. A poll done for a "strategic development commission" Earl appointed last year reported that Wisconsin's reputation as a high-tax, high-spending state was a major barrier to economic expansion -- with the income tax a specific irritant.
Earl said in a recent interview that "at first I was skeptical" about the suggestion that rates be reduced and special deductions eliminated. But like the congressional tax-simplification advocates of both parties, Kasten and Rep. Jack Kemp (R-N.Y.), Sen. Bill Bradley (D-N.J.) and Rep. Richard GepI came to believe that the purpose of a tax system should be to raise needed revenue, not shove economic activity or social policy in a certain direction."
There is, of course, strong resistance to that notion -- especially from the real- estate industry fighting to protect the mortgage-interest deduction, and churches and charities worried about the deduction for contributions. Legislators say they have heard fom National Guardsmen, city of Milwaukee retirees and dozens of other groups concerned about their special status. But only one- fifth of the tax filers employ any deductions, and the lure of lower rates and a one-page tax form is a real incentive for the other 80 percent.
The fight crosses party lines, with Earl's fellow Democrat, state Senate Majority Leader Tim Cullen, condemning the plan far more harshly than top Republicans have.
But Earl has grasped a political point that Reagan clearly understands: In today's political climate, it is good politics to be for tax simplification, tax reform and tax reduction -- even if it risks the ire of important interest groups. The sight of this liberal Democratic governor lining up on Reagan's side of the issue ought to tell those skeptics in Washington something about which way the wind is blowing.