Thursday, February 9, 2017

Property tax giveaways will go mostly to rich, further hamper budget

A big part of Governor Walker’s budget continues his effort to reduce property taxes, no matter how much damage is done to every other part of the state’s economy in the process. This time, it’s being done with two large provisions that absolutely would lower what you would pay next winter (even after some of the upward adjustments that are set to hit, like the lower Lottery Tax Credit). But they’re going to come at a cost that I don’t find to be worth it.

Both provisions are at the top of the Shared Revenue and Tax Relief section in the Governor’s Budget Book, and the first measure is described as follows.
The Governor recommends repealing the state-levied portion of the property tax beginning with the 2017-18 property tax year. The Governor also recommends creating a GPR sum sufficient appropriation equal to 0.1697 mills multiplied by the total state equalized value that will be transferred to the forestry account in the conservation fund. The amount of this appropriation is projected to be $88,759,300 in FY18 and $91,695,600 in FY19.
Basically this is a straight cash trade, where most (if not all) of the state part of your property tax bill will go away, and it’ll be replaced by over $180 million in other tax dollars. On the surface, it sounds great to end this- we paid nearly $52 in this tax last year- and there is a legitimate point to be made that maybe using income, sales and corporate taxes are a better source to pay for forestry and conservation than a property tax.

But the problem is that there are no other taxes being raised to paid for this state funding of the Forestry Account, which means that much like the $406 million giveaway to technical colleges a couple of years, this is an unfunded mandate that will be crowding out other spending and driving up structural deficits in future years. And it doesn’t extend forestry or conservation duties in the meantime.

The same goes for the other major property tax relief item in Walker’s budget- the increase in the School Levy credit. Walker’s budget raises this offset of your school’s property taxes by another $87 million, which would bring the credit’s total to $940 million (conveniently, this will come off of your 2017 taxes, but the $87 mil won’t be paid until July 2018, meaning that only half of the spending increase required for the two years takes place in this budget). That means the School Levy credit goes up about 10.2% for the next round of property tax bills, which would be another $60 in our case.

Again, sounds good, but again there’s no tax to pay for this extra $87 million in spending, meaning that future budgets are further endangered (even before we get into Walker’s silly and unnecessary 0.1% income tax cut that’ll cost the state another $200 million in this budget). Honestly, I’d rather pay the extra $9 a month in property taxes if the $180 million a year it’ll cost for these two giveaways were redirected into shared revenues for local governments, who are still suffering under stagnant aids under this Walker budget. Giving the money to the local could still limit my property taxes AND I’d have a better chance of living in a community that could fix its roads and maintain its parks and police and fire protection in return!

There’s also another reason I think these property tax giveaways are the wrong way of going about doing things. These giveaways clearly favor owners of high-value properties over poorer ones, and don’t help renters much at all. The state property tax repeal is a flat rate based on the value of the home, so if you own a home that’s worth 5 times as much as someone else, you get 5 times the tax break. The school levy tax break is also related to property value, as well as the amount of school taxes your community levies. Communities with high property values generally have more of a property tax base and ability to tax than communities with poorer property values, so guess who gets more of a break if that school levy write-off goes up?

Of course, renters don’t have any property tax to write off, and I don’t think that property owners are going to give those renters a break because of the lower property taxes. That’s just extra profit going into the homeowner’s pockets, and it’ll likely encourage higher (bubble-like) property values, which probably explains why the pro-GOP Realtors Association likes these budget provisions so much.

So don’t be fooled by the shiny object of “lower property taxes” in these two budget provisions. Those two moves come with sizable costs to the rest of the state, and helps explain why the Walker 2017-19 budget has a baked-in deficit of $351 million, with a structural deficit of $745 million awaiting in the next budget. And that’s before we spend a dime to fix the roads or deal with any other factor of the $880 million deficit in Transportation. Seems like a bad trade to me, both now and especially for the future.


  1. I appreciate that you added real household numbers to the mix. When we get to talking about 200 million here and 600 million there, it's easy for people to lose track of what that means for them.

    When it's translated to "nine bucks a month for me" it's much more clear.

    The whole shell game here is also a strong point. It's easy to lose track of what the other hand is doing when you think the right hand is putting money in your pocket.

  2. Many lower-income taxpayers will also take a hit with a big reduction in the homestead tax credit. Right now, it is 80% of the property tax or the portion of the rent attributable to the property tax, up to a certain amount, and depending on income. Walker's budget proposes that the full credit be available only to disabled people and those over 62; others will have to have earned income to be able to claim the credit. Further, the credit will be limited to 18% of the individual's earned income, up to a certain level, or 18% of the property tax paid or portion of rent attributable to the property tax. The projected savings for this maneuver is $12.2 million in the second year of the biennium. That is real money to low income people.

    1. Good catch on that. I looked at that provision, and it does seem like a back-door tax increase on unemployed/ underemployed people, or people who are staying home to raise kids/grandkids.

      If poor people actually voted, you'd never see crap like this, or the desire to cut parents and kids off of food stamps.