Wisconsin must reject Ontario’s embrace of high taxes, increased spending, and more regulation — the cause of economic stagnation in a once-thriving manufacturing center
Wisconsinites should pay close attention to the disastrous impact of recent policy choices that have produced “two lost decades” in one of its Great Lakes neighbors.
Wisconsin and Ontario are both manufacturing centers with similar economic strengths and vulnerabilities. Wisconsin is actively considering several of the policies that contributed to decline just across the lakes. The Badger State should learn from Ontario’s mistakes.
The onset of economic stagnation in Ontario approximately coincided with a change in its provincial government’s approach in the early 2000s toward greater government involvement in the economy. The size of the provincial government expanded, with real-per capita government spending climbing by approximately 40 percent over the 2000s. To pay for all this, the province increased its top personal income tax rate by 3.12 percentage points in the early 2010s while failing to index top rates to inflation, leading to ongoing annual stealth tax hikes, as taxpayers found themselves in higher tax brackets without an increase in their real earnings.
Ontario also took a more heavy-handed approach to regulation. The provincial government mandated a rapid phaseout of coal from the energy sector, leading to skyrocketing electricity prices. The province also increased its involvement in the labor market by increasing the minimum wage by 75 percent over 13 years, more than twice the inflation in that period.
The impact of this policy package has been disastrous. From 2001 to 2024, inflation-adjusted per person economic growth in the province has been approximately half the weighted average of states and provinces in the manufacturing-heavy Great Lakes region. Median employment income barely budged in real terms over 20 years. Its manufacturing sector failed to bounce back from the shock of the 2008-09 recession, while one study estimated that high electricity prices destroyed 75,000 jobs in seven years. Young people are fleeing in droves in the face of a youth unemployment rate that now stands at 17 percent, with experts identifying rapid minimum wage increases as a major contributing factor.
It is alarming that many of the policies that have undermined Ontario are under active consideration in Wisconsin. The size of the state government has begun to expand more quickly in recent budgets, and there are calls to facilitate further spending growth by repealing Act 10, which has helped restrain state and local government labor costs for 15 years. Gov. Tony Evers has proposed trying to pay for more spending the same way Ontario did, by raising the top personal income tax rate.
What’s more, there are frequent calls to accelerate the phaseout of coal and decarbonization generally despite evidence that moving too fast has high costs. Earlier this year legislation was introduced to double Wisconsin’s minimum wage immediately, with further increases to $20 per hour by 2030.
More generally, Wisconsin’s regulatory environment is shifting in a more interventionist direction following a recent state Supreme Court ruling that weakened legislative oversight of agency rulemaking. Evers’ recent veto of a bill that would have blocked sharp fee increases for the livestock trade illustrates how this shift is already producing higher regulatory costs.
Over the past 15 years Wisconsin has taken substantial steps in the direction of more economic freedom, which evidence shows has helped encourage prosperity and growth. Reversing course and embracing a government-centered economic model of tax hikes, unrestrained spending growth and heavier regulation would be a disaster. Ontario’s recent history provides a policy blueprint for how to grind a prosperous manufacturing jurisdiction into stagnation. Wisconsinites must reject calls to follow it.
Ben Eisen is vice president of research and policy for the Badger Institute and former director of Ontario policy studies with Canada’s Fraser Institute.
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