Happy New Year everyone! The holidays are always a good time to reflect on the past and contemplate the future. I think 2015 holds the promise to be a very special year — for our industry and our association. Perhaps the most exciting opportunity of the New Year is the growing chorus of policymakers and state leaders calling for major changes to an old problem: Wisconsin’s chronically high property taxes. Wisconsin's over-reliance on the property tax pits housing affordability against vital government services against business profitability.
To be sure, we’ve made progress over the past several years in reducing property taxes. For example, during the last legislative session, nearly half the property tax load for technical colleges — some $406 million — was moved permanently off the property tax and to the state where a broader range of general fund taxes will support them.
We loudly applaud any and all reductions in the property tax. But Wisconsin needs a comprehensive tax reform strategy if property tax cuts are to continue and be maintained over time and if critical programs and services paid for by property tax revenues are to be preserved or enhanced.
Why focus tax reform on the property tax? Because the property tax is the oldest, largest and most unpopular tax in the state, and has been for a long time. It is our most burdensome tax relative to income. By more than three-to-one, business pays more property tax than any other tax. It’s most unfair to low-income households. And past attempts to “buy down” levies with additional local aid from the state hasn’t worked since our property tax levies are 11th highest in the nation, 25 percent above national norms.
As currently constituted, the property tax generated $10.6 billion in 2013-14. By comparison, the personal income tax generates $7.5 billion — more than 20 percent lower! The sales tax produces about $4.4 billion, less than half the property tax. Residential property taxes, which are those paid by homeowners, account for 70 percent of the total levies.
And people feel it. Our own statewide survey in 2014 revealed that 41 percent of the public wanted to cut property taxes, compared to 27 percent who wanted income taxes cut and 11 percent who wanted sales taxes reduced. After a year of statewide roundtable meetings on tax relief and reform, Lt. Governor Rebecca Kleefisch and Department of Revenue Secretary Rick Chandler recently submitted a report to Gov. Walker that identified property taxes as the most common concern facing all working families and small businesses. The report said, “Of the various topics discussed at each roundtable event, the need for property tax relief was the most often emphasized. Many participants are concerned that Wisconsin property taxes are a barrier to competitiveness and that the high property tax could negatively offset a good price on a home.”
It’s one thing to identify a problem and complain about it. It’s a very different thing to propose solutions. Last year, WRA leadership asked the nonpartisan Wisconsin Taxpayers Alliance (WTA) to review Wisconsin’s tax structure and produce a flexible menu of possible changes that would bring balance to Wisconsin’s tax structure and reduce the over-reliance on the property tax as a revenue source. The WTA has now completed that task.
Over the next several months, the WRA plans to help facilitate a public and legislative dialogue on permanent solutions to Wisconsin’s persistently high property taxes. The choices won’t be easy and likely won’t occur overnight. But our hope is that by presenting ideas about recalibrating Wisconsin’s tax code — and in the process lowering property taxes — we can help ignite ideas and eventually realize real, systemic property tax reforms.
Like what you ask? Perhaps moving more property tax-funded programs to the state — like the forestry tax or more technical college costs. Perhaps moving some specific school costs or county judicial and/or human resources programs to the state. Or perhaps providing local government with new or expanded non-property tax-based revenue sources. Watch for us to present these alternatives and begin these discussions in the near future.
With a new year and a newly elected legislature and governor, Wisconsin has a real opportunity to think big and to permanently solve a big problem that has vexed us for a long time. The time has come to implement real and lasting property tax relief and reform in Wisconsin.
The new year is indeed a good time to reflect on the past and contemplate the future.