Gov. Tony Evers wants to allow counties to be able to double their existing sales taxes — from half a percentage point to a full point — and allow the state’s largest municipalities, such as Racine, to impose an additional half-percent sales tax if local voters approve.
It’s something that could alleviate some of the budget constraints that have become tighter in recent years for Racine County’s 17 municipalities. A 1% sales tax in Racine County would equal about $185 per year more in spending for the average Racine County consumer, according to a city estimate from last year, since the county doesn’t presently have its own 0.5% sales tax.
There is already a 5% state sales tax; counties are allowed to impose their own half-percent sales tax on top of that if the corresponding county board approves it. Racine County is one of four Wisconsin counties without such a tax. County Executive Jonathan Delagrave has long opposed the idea, although some municipal leaders support it so long as the revenues would be shared.
Cities can’t currently impose their own sales taxes. Evers’ proposal would allow certain cities — more than two dozen of them, including Racine, Kenosha, Milwaukee, Madison, Green Bay, Appleton, Eau Claire, Oshkosh and Janesville — to have a half-percent sales tax for themselves.
However, for such a tax to be imposed, it would need to be approved by a local referendum of either the county’s or city’s voters, respectively. By doing that, Evers said, those who live in a given area would be able to decide if they want to impose it on themselves.
At the moment, all Racine County taxpayers pay the state’s 5% sales tax. Should the county impose a full 1 percent sales tax, then overall sales tax countywide would be 6%. If Racine residents were to also approve a half-percent sales tax, purchases in the city would have a total sales tax of 6.5%, thus pushing $100 purchases to $106.50 instead of $105.
Governments in other states — particularly in the South, where sales taxes can comprise nearly 40% of total state and local tax collections — rely on sales taxes for revenue much more heavily than they do in Wisconsin, where sales taxes make up less than 20% of state and local revenues, according to an analysis from the D.C.-based Tax Foundation.
In times of subdued spending, as during the current COVID-19 pandemic, reliance on other revenue streams, such as property taxes, can be a benefit to local governments. But low sales taxes also limit avenues for revenue, something the budget-constrained City of Racine is continuously concerned with. A shared county sales tax could, if shared with county municipalities, also allow for other municipalities to afford more public goods.
“Personally, I am in favor of a county sales tax if shared with the local municipalities. So far, the Caledonia Board has not ‘signed on’ to the idea,” Tom Christensen, Village of Caledonia administrator, said in an email.
When the idea of Racine County instituting a 0.5% sales tax was floated last summer, it came from then-Racine City Administrator Jim Palenick, who has since left the job. He proposed it as a way for local municipalities to see year-over-year revenue increases thanks to inflation even if property tax revenues stagnate. Out of the gate, a half-percent sales tax in Racine County would generate a total of more than $18 million in tax revenue, Palenick estimated.
The City of Racine is an example of a municipality constrained by a Scott Walker-era state statute that prevents property taxes from being increased without new development within a municipality. Simply put: If you don’t build anything new, tax rates have to hold steady, with some exceptions.
While this keeps property taxes from quickly inflating, the city has had to make controversial, drastic and now legally contested decisions — such as sweeping changes to retirees’ health care benefits, approved narrowly in the fall of 2019 — to pass its yearly budgets since the city’s expenditures continue to rise without a corresponding increase in revenues.
Regarding the limits on taxation the state has placed on Wisconsin’s cities, towns and villages, Evers said in a statement “communities across Wisconsin have been under immense budgetary pressure, and they’ve been doing more with less for far too long.”
The proposal announced Friday drew support from the Wisconsin Counties Association and the League of Wisconsin Municipalities — Mount Pleasant Village Administrator Maureen Murphy is the second vice president of the latter group — which said allowing these small tax increases would lessen local reliance on property taxes.
“Wisconsin counties have very few options for funding local services,” said Wisconsin Counties Association leader Mark D. O’Connell. “This announcement has the potential to provide meaningful and long-term property tax relief to Wisconsinites.”
However, the idea divided the state’s business community. Wisconsin Manufacturers and Commerce, the state’s chamber of commerce, opposes the idea while Milwaukee economic development groups back it.
Evers said the state budget proposal will include the tax-increase option for local governments, which he said could generate additional money that could be put toward local roads, services, maintenance, public safety and public health.
The Democratic governor’s proposal is to be submitted Tuesday to the Republican-majority Legislature, which would have to approve of it before it could become law.
The Republican co-chairs of the Legislature’s budget committee, Rep. Mark Born and Sen. Howard Marklein, both declined to comment.
It will be Evers’ second budget proposal since being elected in November 2018.
Last time, Evers was lambasted by Republicans for presenting a budget they called “a liberal wish list.” With divisive proposals such as the legalization of marijuana for recreational and medicinal purposes already announced by the governor, another partisan budget battle is likely in 2021.
Watch now: The Great Divide | 10 stories about Act 10
The most seismic political story of the last decade in Wisconsin began on Feb. 7, 2011, when Republican Gov. Scott Walker informed a gathering of cabinet members of plans to unilaterally roll back the power of public sector unions in the state. He “dropped the bomb,” as Walker would describe it afterward, four days later.
The audacious proposal, to be known forever after as Act 10, required public employees to pay more for pension and health insurance benefits, but also banned most subjects of collective bargaining and placed obstacles to maintaining union membership.
The proposal laid bare the state's deep, at times intensely personal, political divisions as tens of thousands of protesters descended on the Capitol. The month-long, round-the-clock occupation drew international attention, but failed to stop the bill.
A decade later, the aftershocks of one of the biggest political earthquakes in Wisconsin history continue to be felt. Taxes have been held in check, and state finances have improved. But public unions are vastly diminished and the state is more politically divided than ever.
Here are 10 stories from people who experienced the historic events firsthand.
Former Sen. Mark Miller and Rep. Peter Barca tried to slow down passage of the legislation to force a compromise.
A decade later, former Gov. Scott Walker said he views Act 10 as one of the best things he's done for the state.
Susan Cohen wondered if the Capitol dome would come crumbling down from the cacophonous vibrations during the Act 10 protests.
Dale Schultz believes the state's ability to solve people's problems was greatly diminished by Act 10.
Longtime Madison Teachers Inc. leader John Matthews explains why collective bargaining still matters.
Former Capitol Police Chief Charles Tubbs said his mission was communicating with protesters and voluntary compliance.
During the peak of the Act 10 protests, Ian's Pizza was delivering 1,200 pizzas a day to protesters.
Sen. Joan Ballweg saw the recall elections that resulted from Act 10 as the people getting a chance to have their say.
Michele Ritt remembered her son Josef Rademacher wearing a hole in the soles of his snow boots during the protests.
Jason Stein was amazed to find himself in the midst of the No. 2 story on the New York Times home page.
The Associated Press contributed to this report.