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Property taxes remain third-rail political issue

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Steven Walters
April 23, 2012

Republican Gov. Scott Walker took a political victory lap last week for policies that, he said, resulted in the first drop in last year’s property tax bill on a median-valued Wisconsin home in 12 years.


The Legislative Fiscal Bureau, which advises the Legislature on budget issues, agrees with that conclusion, reported in a memo to state Revenue Secretary Richard Chandler. It said the December tax bill on that median-valued home was $2,951—a drop of $11, or 0.4 percent, in a year. That was the net tax owed, after the subtraction of tax credits.


“Our reforms have reversed a decade of property tax increases from previous administrations,” Walker, who faces a recall vote June 5, said in a statement. “For the first time in over 10 years, the average property taxpayer will have more money in his or her pocket than the year before.”


Voters can expect Walker’s campaign to hammer that theme repeatedly in ads and speeches before his June 5 recall election. But, because studies say Wisconsin homeowners pay some of the highest property taxes in the nation, it can also be a third-rail campaign issue: Claim victory at your own peril.


The property tax is the biggest single tax collected by state or local governments. Last year, schools and local governments levied a record $9.35 billion, after tax credits were subtracted, according to the revenue department memo.


Contrast that with the personal income tax, which will bring in $6.82 billion this year, or sales tax collections that will total $4.2 billion.


And, because the property tax subsidizes public schools, technical colleges and local governments, no one can stop its steady annual growth. For example, in 2001 the property tax statewide levy was $6.4 billion, after tax credits but in 2011, the same levy was $9.35 billion—a 44 percent increase. Inflation over that decade was 25 percent.


Walker and Republican legislators controlled property taxes by putting spending by schools and other local governments in a chokehold, and by requiring public employees to pay more for pensions and health care benefits. Those changes caused the lowest one-year increase—0.2 percent—in the total net property tax levy in at least 14 years.


But the late Paul Harvey was right; there is always “the rest of the story.” And, when you talk about Wisconsin property taxes, remember this:


First, Wisconsin homeowners now pay about 70 percent of all property taxes, the fiscal bureau reports. The percentage paid by homeowners has been steadily rising. It was 59 percent in 1986.


That means owners of manufacturing and agriculture property have been paying smaller shares of the property tax load. Owners of commercial property have been consistently paying about 22 percent of all property taxes since 1995, the fiscal bureau reports.


Second, the recession caused that mythical median-valued home to drop in value. According to the revenue department report, that home was assessed for property tax purposes last year at $157,600—a 8.2 percent decrease in just three years.


But that average Wisconsin home fell 2.2 percent in value for property tax purposes in just one year, between 2010 and 2011, the revenue department reported. That 2.2 percent one-year drop in assessed value is five times more than the 0.4 percent fall in its property tax bill.


Third, $4 of that $11 one-year drop in the property tax bill on that average home was due to lottery sales.


The revenue department memo to Chandler explained that this way:


“In 2010, the lottery credit was applied to the first $8,700 of home value. In 2011, the lottery credit was applied to the first $9,000 of home value. Thus, the average (lottery) credit increased slightly from about $85 to $89.”


For all these reasons, one group that monitors taxes and spending issues, the nonprofit Wisconsin Taxpayers Alliance, refused to echo Walker’s claim that the property tax bill on that Wisconsin home actually dropped last year.


“We don’t tend to use ‘median’ home value stuff because we think it can be gamed, or at least not tell the whole story,” alliance President Todd Berry said last week.


The ability to “game” the median-value home numbers is why former Democratic Gov. Jim Doyle and Walker both used it, Berry added.


Steven Walters is a senior producer for WisconsinEye. This column reflects his personal perspective. Email stevenscwalters@gmail.com.

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