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Capital City Sunday: Bucks fever renews debate over local taxing rights

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MADISON (WKOW) -- Crowds that have jammed the Deer District in Milwaukee during the Bucks run to the NBA Finals have generated big energy and big dollars - at least for the state.

As the beer flows and merchandise flies off racks at the team's pro shop at Fiserv Forum, the state collects its share of sales tax revenue. Milwaukee, however, does not have that same direct benefit even though it's using resources to secure the area and its streets absorb the increased traffic.

City officials have spoken up about being frozen out during the Finals but it's a concern that goes beyond Milwaukee and has been around long before the Bucks' run to the championship series.

Janesville City Manager Mark Freitag said in an interview the issue has been a source of frustration in his community, which sees plenty of visitors stop for services since it's right off a well-traveled stretch of interstate highway.

"You got a whole bunch of folks who are traveling I-39/90 heading to the Dells and the Northwoods each and every weekend," Freitag said. "And so they stop in Janesville, they drive on our roads, they use our police and fire and EMS services and they're not paying anything toward our costs."

Janesville's Legislative Agenda includes pushing state lawmakers to allow cities to have their own sales tax. Gov. Tony Evers proposed in his budget allowing cities to put the question before their residents; the Republican-controlled legislature took that provision out of the budget it passed and Evers signed earlier this month.

Rep. Amy Loudenbeck (R-Clinton) said she would be open to giving municipal governments the right to their own sales tax but it'd be in exchange for the state then providing less shared revenue.

"If we wanna talk about recalibrating our tax collection and distribution system in this state to something else, if there's an offset in shared revenue, perhaps that's something I would be open to," Loudenbeck said.

Freitag said if Janesville had to choose between the two options, he'd opt for the sales tax because the city has estimated a half-cent sales tax would net about $10 million per year compared to the shared state revenue, which has brought Janesville between $5 million and $6 million in recent years.

Feeling the Property Tax Squeeze

Freitag said under the current system, local governments are far too reliant on property taxes and shared revenue from the state; according to a presentation he gave the city council Monday, those two sources of revenue account for nearly 85 percent of the money Janesville collects.

The state also limits how much cities can raise their property taxes; cities' property tax increases are capped at the rate of new construction value. Over the last couple years, that rate for Janesville has been less than the rate of inflation.

"It's just not sustainable over the long-term," Freitag said. "We need to have some change and what we've offered to the legislature and the administration previously is place a limit on levy limits if you need to and make it at net new construction plus inflation."

Freitag acknowledged the odds of such a change coming any time soon were slim. Republicans just passed a budget defined by more than $3 billion in tax cuts and would almost certainly reject a shift in policy that allows for larger tax bills.

Alexandria Zhang, a research officer for Pew Charitable Trusts, recently finished a study exploring how different states limit how their local governments are allowed to raise revenue.

Zhang's research found Wisconsin was one of 14 states where local governments rely on property taxes for more than 80 percent of their revenue; for Wisconsin, that figure is 88 percent although some municipalities are more reliant on property taxes than others.

"This speaks to a structural, underlying problem where local leaders struggle to fund ongoing priorities with reliable revenue from year to year," Zhang said.

Zhang cited Madison as an example of a city whose ability to capitalize on a healthy local economy is choked off by state restrictions. She said the capital city's relatively low rate of new construction as a percentage of overall taxable property has limited how much new revenue it can generate.

"That still has left local leaders struggling to, you know, pay for infrastructure initiatives and wage increases for their public employees," Zhang said.

Loudenbeck said lawmakers were simply keeping with what has long been the standard for the state-local government relationship in Wisconsin.

"I understand that Wisconsin is kind of an outlier in not allowing local governments to raise their own funds," she said. "We're more of a collector/distributor and that's just how it has been traditionally in Wisconsin."

Back into the budget

Loudenbeck said she was disappointed in Evers's decision to use his partial veto power to move $550 million back into the state's general fund. The legislature had moved that money into the budget stabilization fund, known as the rainy-day fund.

"I would like to leave it in the checking account. I fundamentally think that was a mistake," Loudenbeck said. "I think if you were at home and you had a big surplus, you wouldn't leave it in your checking account, you would put it in your emergency account."

Speaker Robin Vos (R-Rochester) had previously said he liked the idea of using that money to fund more tax cuts. The budget included more than $3 billion in tax cuts, most of which coming from a reduction in the state income taxes of people making between $24,000 and $263,000 per year.

Loudenbeck said she was not opposed to tax cuts but her overall preference was to simply leave the money in the general fund. Loudenbeck serves on the powerful budget-writing Joint Finance Committee.

"If we have bills that come forward that spend money and we think they're a good idea, we can support them," she said. "If not, we're going to just leave those surplus funds where they are."

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A. J. Bayatpour

Capitol Bureau Chief

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