Wednesday, May 23, 2018

WIsconsin Policy Forum notes explosion in wheel taxes under Walker

Jason Stein recently left the Milwaukee Journal-Sentinel to join the Wisconsin Policy Forum - a newly-merged organization consisting of the organizations that used to be known as the Wisconsin Taxpayers Alliance and the Public Policy Forum. Yesterday, Stein and the rest of the Policy Forum produced a brief on the increasing use of wheel taxes throughout the state, and it received quite a bit of media attention.

The policy brief notes that only 4 Wisconsin communities had wheel taxes in 2011 (when Scott Walker and the Wisconsin GOP came to power), but by the end of 2017, that number was up to 27, with local wheel tax revenues rising from $7.1 million to $20.7 million in that time.

Stein says one of the culprits is that state aids have failed to keep up with the costs for local communities to fix their roads. state funding for the two aids programs rose 15.5% from 2007-17, from $412.0 million to $475.7 million... When adjusted for inflation using the Consumer Price Index (CPI), however, spending for the two programs declined 2.3%, or $11.3 million in real dollars... (A recent legislative audit noted that, in general, state highway costs have tended to rise more rapidly than the CPI.)
What's not mentioned is that all of that funding increase was under Jim Doyle between 2007 and 2011. Since Walker took over, those local aids were $5.3 million lower in 2017 vs 2011, and $46.5 million less when adjusted for inflation (-9.25%).

The Policy Forum notes that one of the reasons for those cuts was because there were limited dollars to go around in the Transportation Fund, as the Walker Administration and WisGOP Legislature have refused to raise state gas taxes or most registration fees over their time in office. In addition, Stein adds that other state-imposed tax restrictions on local governments have meant that road spending often have had to take a back seat to public safety concerns.
Meanwhile, local governments in Wisconsin have few local revenue options other than the property tax, which has been tightly restricted since 2011. Though local governments are allowed to raise property tax levies only for new construction, there are exemptions for debt service and a few other circumstances.

One of the consequences of the tighter revenues appears to be less spending on local streets and roads. When we surveyed officials from nearly 500 cities and villages for our League of Wisconsin Municipalities report, The State of Wisconsin Cities and Villages 2017, many said they had shifted their spending priorities away from street maintenance to police and fire services since the start of the 2007-09 recession.
That led to a lot more of this across the state.

So local officials had few other options but to impose the wheel tax to fill in those needs. Stein ends the policy brief by noting that these wheel taxes may become even more common in future years, given the lack of revenue options that local governments have, along with the lack of money that they are getting from the state.
As wheel taxes become more common, policymakers may want to consider whether they are the ideal tax source to support local roads. It may be argued that by taxing vehicle owners, the wheel tax links the costs of local roads to users. Conversely, some might argue that road users also include commuters and visitors and a consumption tax (such as a sales tax) might be more appropriate. Such a debate cannot occur because state law does not permit municipalities to levy sales taxes, and most counties already have implemented the optional 0.5% sales tax.

As more local governments consider the wheel tax, some state officials have already suggested additional limits on it may be needed. In the meantime, however, its use may grow as long as local revenues are limited and demand for local road maintenance and improvements expands.
Note that Stein mentions that a local sales tax may be a way to make those who use the roads be more likely to pay towards those roads. What's interesting is that a few Wisconsin communities do get the chance to levy their own sales tax to pay for the extra services that come from tourism, in the form of a premier resort tax. This enables some communities to get around the tight revenue limits by using the proceeds of that sales tax to use for roads, police and other services that they otherwise would not have the tax base to support.

It seems timely to mention this as Memorial Day weekend and its related tourism looms, as the list of places with this premier resort tax are some of the first places you'd think of when it comes to "Wisconsin tourist towns."
The Village of Sister Bay: 0.5% (effective July 1, 2018)
The City of Rhinelander: 0.5%
The Village of Stockholm: 0.5%
The City of Eagle River: 0.5%
The City of Bayfield: 0.5%
The City of Wisconsin Dells: 1.25%
The Village of Lake Delton: 1.25%
My question is- why do only the small towns get the ability to raise taxes on tourists? If we're not going to give significant increases in state aids to make up for the cuts that have happened in the Age of Fitzwalkerstan, and we're not keen on seeing more potholes and more wheel taxes, then why don't we give local communities the freedom to impose their own sales taxes to make up the difference?

For example, Milwaukee County attracts the largest amount of tourism dollars in the state, with nearly $2 billion in direct spending last year. Wouldn't it be nice if they could use a part of that spending and not have to put in a $30 wheel tax on its residents (with another $20 paid by people who live in the City of Milwaukee)?

Maybe the voters of this state will be smart enough to elect a new governor that has a better plan than the deterioration we've seen during the Age of Fitzwalkerstan. But no matter the outcome in November's elections, something different needs to be done, because as Jason Stein's report for the Wisconsin Policy Forum reiterated, the current method of funding local roads isn't cutting it.

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