The grimmest time of the year for every Wisconsin homeowner is the day the annual property tax bill arrives. Whether the assessment went up or down, whether the economy is rising or falling, whether the political leaders are Democrats or Republicans, you can depend on that bill to go up every time.
It’s the most hated tax in Wisconsin. The state income tax gets snipped off every paycheck, and the repetition accustoms you (begrudgingly) to it. The sales tax falls with a daily drip, drip, drip that’s merely an annoyance. But the property tax bill hits home like an annual boulder from hell, an ever-bigger obligation you’re forced to shoulder.
It is the impact of that much-despised tax that helps explain why many Wisconsin homeowners are unhappy and why it almost doesn’t matter what the facts are regarding taxes here. People are convinced politicians are spending us into a hellhole of confiscatory despair.
The simple truth is that Wisconsin is an average state when it comes to total state and local government spending. Figures from the Wisconsin Taxpayers Alliance, which has tracked these issues for decades, tell the tale. We rank 22nd-highest. We spend $7,114 per person, slightly less than the national average of $7,171 in state/local spending.
When figured as a percentage of personal income (which is lower than average here), we look a tad worse: State/local expenditures average 21.7 percent of a person’s income in Wisconsin, versus 20.6 percent nationally. That small difference puts us in purgatory, perhaps, but hardly in Hades.
Yet our dreaded property tax is about 25 percent higher than the national average, and higher still for homeowners. How is this possible if our spending is average? Because Wisconsin’s approach to taxation beats up on homeowners.
Wisconsin came late (in 1962) to the sales tax and ranks below the national average in its use. We also rank below average in user fees (like sewerage fees, the vehicle registration fee and university tuition). That’s arguably a fairer approach, since sales taxes and fees are considered regressive, falling harder on low-income citizens. But it overlooks the fact that exemptions on food and necessities make the sales tax less regressive, and that tourists pay a good chunk of it. (The state also has no toll roads: We cheeseheads are nice to visitors, but tough on ourselves.) Inevitably, lower sales taxes and fees mean property and income taxes must be higher.
Compounding this effect, a bipartisan approach has over the years exempted manufacturing companies and agriculture from more and more of the property tax. While the burden for those two sectors has plummeted, the percentage of all property taxes paid by homeowners has soared, rising from 51 percent in 1970 to 71 percent in 2005, according to the nonpartisan Legislative Fiscal Bureau. Maybe that’s because homeowners are the one group that hasn’t hired lobbyists.
For years, Forward Wisconsin, the public/private group that markets this state to businesses, has bragged about our low taxes for businesses. That’s been confirmed in studies by both Ernst & Young and the Federal Reserve Bank of Boston; the latter found Wisconsin’s business taxes are lower than 35 other states. But lower taxes for businesses means higher taxes for homeowners.
Still, the state has made progress on its overall tax rating. In May, a Taxpayers Alliance report showed Wisconsin has dipped to the 11th-highest-taxed state, dropping out of the top 10 for the first time since 1980. As recently as 1999, the state ranked third. “The fact that we’ve moved out of the top 10 is definitely significant,” says Dale Knapp, research director for the alliance.
Far more significant is that Wisconsin now ranks 22nd in all revenues collected, including all taxes, fees and assessments, according to U.S. Census Bureau statistics. The state collects 17.2 percent of the average Wisconsinite’s personal income, compared to the national average of 16.9 percent. Once again, this teensy difference doesn’t justify the tax hell charge.
The state has actually done a pretty good job of clamping controls over spending by counties, municipalities and local school districts. Too good, some would say. Many school systems are cutting curricular offerings like art, music and gym, and increasing class sizes, all changes that could hurt students and our future work force.
The result is an often vicious debate between tax hawks and school supporters. But it needn’t be that way. Wisconsin has created a system that ensures an angry citizenry by overburdening homeowners. Meanwhile, we are arguably too light on user fees and sales and business taxes.
It’s ironic. We fixate on misleading, bumper-sticker comparisons of our state tax ranking while ignoring the lessons we might learn from other states. Our system isn’t hellish, but it badly needs reform, and change is long overdue. Just ask any homeowner.
