Under the guise of correcting Wisconsin’s “over-reliance” on the property tax, a proposal to enact a half-percent Racine County sales tax is making the rounds for discussion at the county’s cities, towns and villages.
At a Mount Pleasant Village Board meeting this month, Village Administrator Maureen Murphy told the board: “In Wisconsin, we are unlike any of our sisters states around the Midwest in that we are almost completely reliant on property tax dollars to fund our operations. Clearly that has caused a lot of people to be concerned. Other states are doing better because they have a more diversified revenue stream.”
What Murphy, the City of Racine and other area leaders would like to do is get the County Board to approve a 0.5 percent sales tax — which under state law, it can do — and then split the money 50-50 with county cities, villages and towns out of the goodness of the county’s heart.
We’re not talking pocket change here; the 0.5 percent sales tax would raise an estimated $18 million a year in fresh revenue. Under the city/village/town proposal, Racine County would get $9 million a year and the rest would be apportioned to other municipalities: the City of Racine getting $3.5 million; a half-million dollars for the City of Burlington; a little over $1 million a year for Caledonia and Mount Pleasant; all the way down to North Bay which would get just under $11,000 per year.
“Diversification” of municipal budget revenues has a wonderful ring to it. No one wants to put all their eggs in one basket and we hear all the time that stock investments should be diversified. And, in truth, Wisconsin is highly reliant on the property tax – it ranks highest of 12 Midwest states and seventh in the country.
Nor are we unaware of the property tax increase limits that state government has imposed on municipalities and the sales tax gambit is likely fed by its attractiveness to municipal leaders who would like to slightly sidestep those strictures.
But a 0.5 percent sales tax isn’t going to change the taxing profile very much. And one of the strengths of tax revenue that relies on property values is that it doesn’t change much. Sales tax revenues can rise and fall sometimes quickly as the COVID-19 retail sales plummet showed us this year.
What is most bothersome about this debate is that there is little mention of what those sales tax dollars would be used for. And we have seen no pledge from any of the proponents that those dollars would be used 100 percent to offset property taxes.
Lacking that, the sales tax proposal is simply a tax increase which would cost county residents about $91 a year – although some of that would likely be paid for by out-of-county residents who make purchases here.
From what proponents have said, it would be up to each municipality to decide how to use that sales tax money. The city of Racine has been putting more of its operating budget into paying off debt service in recent years – and that would be a likely spot for more money to go. But it could also spend the new tax cash on a failed effort to encourage the operation of a grocery co-op or some other scheme. Nothing in the proposal would encumber any of the towns, villages and cities on where the money would go in future years. Our fear is that instead of offsetting property taxes to “diversify” municipal revenue sources these dollars would simply end up in little honey pots of extra money to be spent wherever municipal leaders want.
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