Over last 10 years, shell game on property taxes grows while UW, local govts get cut

Longtime Capitol reporter Steven Walters notes in his weekly article that Wisconsin has increasingly used a shell game where state tax dollars are used to cut the property taxes that homeowners pay.

Walters notes that a significant amount of the property taxes levied this year were actually bought back by the state through these moves.

That $11.5 billion was the “gross” – there’s an ironic term – property tax levy. But $1.4 billion in tax credits brought the “net” – or after credits – total property tax levy down to $10.1 billion.

That means, through tax credits, state government will pay almost 12 percent of all property taxes this year. If there were no tax credits, that tax bill on your home would have been much, much higher.

As part of the article, Walters talks with Jason Stein of the Wisconsin Policy Forum, who released a report last month noting that property taxes this year for schools had gone up by the most in 10 years. But at the same time, Stein points out that most homeowners didn’t get hit as hard last month because of these state tax write-offs that accompany their property tax bill. And those write-offs are something that lawmakers have made into a much bigger spending priority in recent years.

Jason Stein, research director of the Wisconsin Policy Forum, said state tax credits that offset property taxes have been steadily increasing.

“It’s important Wisconsinites know the basics about the size of these tax credits and what they do,” Stein said. “Property tax credits are now the third biggest state general-fund expenditure – more than the state tax dollars going into either the UW-System or into state prisons.”

In fact, the most recent Annual Fiscal Report shows that the UW System has dropped from 2nd to 5th in programs that have attracted the most state spending over the last 10 years (amazingly, state tax payers gave more to the UW than we did for Medicaid in 2008-09. By contrast, last year we spent nearly $1.9 billion more for Medical programs).

In addition, Corrections spending has generally gone up in that time, including each of the last 4 years, and state-funded property tax credits have more than doubled over those 10 years.

Priorities, you know.

What’s also noteworthy is that the GOP Legislature has decided to go around local governments to use this shell game of taxes to put the savings directly onto people’s property tax bills. This paragraph of Walters’ article sums it up quite well.

Todd Berry, who closely followed state and local spending for decades before he retired as president of the Wisconsin Taxpayers Alliance, said he knew why tax credits have ballooned: “The reason credits became more popular in the last 40 years is that a number of legislators and governors came to feel that state aid payments to local units of government were not achieving the goal of property tax relief.”

What those legislators and governors could have decided to do was to raise state aids while putting a ceiling on revenue limits for school districts and other local governments. This would be a way to cut property taxes while giving needed flexibility for the locals, and in fact, Governor Evers wanted to do a version of this in his first budget, which put more money in the General School Aids formula (giving more money to poorer school districts) and less into the School Levy Credit (which gives more aid to homeowners whose homes have more value).

It seems telling that Republicans did not go for that, and kept the School Levy Credit in its large amount. This arrangement has likely made disparities of outcomes based on economic status even worse in the state, because the benefits of government spending and tax cuts overwhelmingly go to the upper-middle and upper classes that pay the highest amount of property taxes.

At the same time, local governments continue to struggle, which explains the significant rise in wheel taxes and school referenda that have had to happen to keep Wisconsin communities functioning. And then as those taxes and fees rise, the GOP Legislature has continued to use more tax dollars to lower those property taxes.....instead of giving more state aids to keep the taxes from being raised in the first place!

Maybe a new approach is needed, and a better use of our state tax dollars should be considered. Just a thought.