Over the past several months, a number of improbable events have occurred, including the Cubs winning the World Series, Donald Trump winning the presidency, and the stock market going above 21,000. Gov. Walker’s proposed 2017-19 state budget adds another potential item to the list by permanently reducing property taxes and significantly increasing funding for K-12 schools.

Background 

Last session, lawmakers and Gov. Walker made property tax reduction one of their top priorities. This was achieved due to discipline on property tax controls that protect property taxpayers and significant property tax relief provided to K-12 school districts and technical college districts. Over the last several years, lawmakers have reduced property taxes by $506 million by using general purpose revenues (GPR) to fund technical colleges and K-12 schools. While these efforts have been successful in lowering property taxes, they are not considered “permanent” property tax relief because the allocation of GPR to various programs and initiatives changes with every budget cycle depending on the priorities of lawmakers.

The 2017-19 state budget, however, proposed permanent property tax relief by eliminating the state portion of the property tax levy, also known as the forestry tax. The forestry tax was first imposed in 1937 and remains the only state-imposed property tax. Until 2005, the tax was fixed at 20 cents for every $1,000 of property value; it is now 16.97 cents per $1,000. The annual forestry tax yields approximately $90 million per year and increases as the value of Wisconsin’s property tax levy increases. Proceeds are deposited in the forestry account of a larger state segregated fund, known as the Conservation Fund. The proposed budget continues to the same level of funding for the forestry program but uses GPR to fund the program. By removing the forestry program from the property tax, an owner of a median-priced home will save approximately $27 per year.

In addition to eliminating the state property tax, the budget attempts to keep property taxes low by (a) increasing the school levy tax credit by $87 million and increasing school aid by nearly $73 million, and (b) maintaining the controls on property tax levies.

For REALTORS^®, lowering property taxes and increasing funding for schools is the perfect combination. Housing affordability and the quality of local schools both impact homebuying decisions. Too often, families have one or the other. Moreover, those who advocate for lower property taxes are often labeled as “anti-public schools” simply because these issues are inextricably linked. This is compounded by the fact that most state budgets either reduce property taxes or increase funding for schools — but rarely does a budget do both. 

Wisconsin’s property tax burden 

Despite efforts by lawmakers over the last several years, property taxes are still too high in Wisconsin, as evidenced by Wisconsin’s ranking in comparison to other states and polling results of Wisconsin taxpayers. 

Wisconsin property owners pay among the highest property taxes in the country: According to Wallethub.com, the property tax is Wisconsin’s largest tax, with homeowners and businesses paying approximately $9.6 billion in property taxes, compared to $7.5 billion in income taxes and $4.8 billion in sales taxes. In 2015, Wisconsin’s property tax rate was the fifth highest in the country, while its income tax ranked eighth and sales tax ranked 37th. 

Surveys and polling consistently show that the property tax is the most onerous tax for Wisconsin businesses and residents alike: In 2014, Wisconsin business leaders identified the property tax as the most onerous tax during roundtable discussions held by Lt. Gov. Rebecca Kleefisch and Department of Revenue Sec. Rick Chandler. This is consistent with polling by the WRA in February 2014 that showed 60 percent of Wisconsin voters feel that property taxes are too high. Finally, in the January 2014 Marquette Law School poll, when asked which tax they would like to see cut, 42 percent of Wisconsinites identified property taxes, compared to 34 percent for income taxes and 22 percent for sales taxes.

Message to lawmakers 

Last month, during the REALTOR^® & Government Day event in Madison on March 15, over 300 REALTORS^® visited the Capitol and lobbied their state lawmakers to support the governor’s proposed budget related to property taxes and school funding. In doing so, Wisconsin REALTORS^® conveyed the following message:

• We support property tax reductions, and we support good schools: Property taxes affect the affordability of homes and the profitability of businesses. High property taxes create a barrier to homeownership and job growth in Wisconsin. As REALTORS^®, we also know the importance of good schools and strong local communities to homeowners and a successful real estate market. Good schools have a positive impact on neighborhoods and local housing markets. In fact, surveys show that the quality of local schools has a significant impact on the decision of prospective homebuyers on where to buy a home. 
• We strongly support the additional school funding provided in the state budget: Gov. Walker has proposed a $650 million increase over two years, which would be the most state aid provided to K-12 schools over the last decade. The WRA supports an increase in K-12 funding.
• We believe the proposed state budget maintains the governor’s commitment to reducing the overall property tax burden in Wisconsin: The budget maintains the local levy limits on local governments, which caps how much local governments can charge property owners to pay for local spending.
• The budget also permanently reduces property taxes by $90 million per year by eliminating the state portion of the property tax. This will save the average homeowner $27 per year, and the savings will increase in the future as the value of the home increases.

Lowering property taxes and increasing funding for K-12 schools is one of the WRA’s top state budget priorities. The WRA will continue to work with Gov. Walker’s administration and lawmakers on both sides of the aisle to pass these changes into law.

Tom Larson is Senior Vice President of Legal and Public Affairs for the WRA.