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The number of Wisconsinites reporting income greater than $1 million in Wisconsin fell about 15 percent between 2008 and 2009, according to a new report by the Wisconsin Taxpayers Alliance. But because of a recent tax hike for high income earners in the state, millionaires actually paid a larger share of the state’s tax burden in 2009. The tax watch group says 2009’s trends could foreshadow those in the 2010 tax returns just filed.

According to WisTax, only about 2,900 people reported adjusted gross incomes of $1 million or more in 2009, down from about 3,400 in 2008. The report attributes the decline to the recession, particularly its effects on small business owners who, through business losses, may have fallen out of millionaire status.

Wisconsin’s millionaires paid almost $500 million in state income taxes in 2009, 8.7 percent of the state’s income tax burden, up from 8.5 percent in 2008.

The tax hike – retroactive back to Jan. 1, 2009 – was approved in mid-2009 as part of the state budget. It raised the rate for the state’s top income bracket ($300,000 for joint filers and $225,000 for singles) from 6.75 to 7.75 percent.

At the time, business groups said the increase, along with a cut in a capital gains exemption, would make the state less business friendly. The budget expanded some tax credits encouraging entrepreneurship, but James Buchen, lobbyist for the Wisconsin Manufacturers and Commerce business group, said the budget, overall, was “these sort of modest steps forward but then a giant step backward.”

For Wisconsin residents who made more than $200,000 in 2009, their state income taxes increased an average of 4 percent.

But for those making less than that, they went down by 3.7 percent despite no basic changes in the tax rates. WisTax says these declines were largely due to the current law which ties tax brackets and standard deductions to inflation. As they were adjusted upward, the deductions became greater and some people fell into lower brackets, meaning they paid lower rates.

These savings were only possible, however, because most residents’ income was flat in 2009 and didn’t keep pace with inflation.

Taxes went down the most for the lowest income earners. People making between $10,000 and $20,000 a year paid 13.5 percent less. People making between $20,000 and $30,000 paid 7 percent less.

There were also more people who, apparently, had little to no income: There were almost 2 percent fewer returns filed in 2009 than in 2008.

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