Two studies of Wisconsin taxable sales during the height of the COVID-19 lockdown of schools, businesses and non-emergency industries reached intriguing conclusions:

  • The pandemic did not wreck all local economies equally, according to a report by Forward Analytics, the research arm of the Wisconsin Counties Association.

For example, while taxable sales fell 10% statewide in March and April compared to last year, Sauk County got hit hardest—a 31% drop—and sales in both Dane and Milwaukee counties fell by 16%. Rock County’s drop in taxable sales was 4%.

But three rural counties—Burnett, Polk and Marquette—saw their taxable sales grow by 7% in that same period.

  • The Wisconsin Policy Forum traced record sales tax payments from Amazon and other online retailers before and during the COVID-19 lockdown—payments that, under a unique state law, would force a cut in income taxes in any other year.

“Given the current trend, it is reasonable to think (online sales tax) collections could top $200 million for October 2019 through September 2020 and even come close to doubling the initial estimate” of $119 million, Wisconsin Policy Forum concluded.

Both reports document how the COVID-19 lockdown crippled industries that anchor Wisconsin’s economy in March and April.

Dale Knapp, director of Forward Analytics, noted that the mid-March safer-at-home order by Gov. Tony Evers “effectively shut down” most hotels and motels. As a result, taxable sales from those businesses fell 64% from the same two months in 2019.

And because restaurants and bars statewide were either closed or offering only curbside and takeout service, their taxable sales fell 42% in March and April.

That drop is especially significant because 10% of taxable sales statewide occur in restaurants and bars, Knapp noted.

“Several smaller industries were affected more from the pandemic and the state order due to temporarily closing or reduced consumer traffic,” he added. “Sales from clothing stores fell 57% year over year,” for example.

And, “Two other major industries saw sales fall at least 25%. Car dealers and automobile parts retailers typically account for more than 13% of March and April taxable sales. Their sales dropped 27% in the two months studied. Sales at furniture and home furnishing stores fell 25%.”

But, Knapp said, “What was most interesting was that the economic impacts varied widely by county ... Of counties with (local 0.5%) sales taxes in place in 2019 and 2020, 14 saw more economic activity this year compared to last year.”

“The sales data show there was an urban/rural component to the changes: As a group, urban counties saw a decline of 11.9% while rural counties experienced a drop of 6.5%,” Knapp added.

Besides the 16% fall in taxable sales in both Milwaukee and Dane counties, Brown County’s decline was 14.8%; Kenosha County was down 10.8%.

Two Wisconsin industries—groceries and lawn, garden and hardware sales—thrived during the COVID-19 lockdown. Customers stocking up on taxable household items pushed grocery sales up 23.4%; sales in lawn, garden and hardware stores were up 16%.

“These numbers show the complicated impact of the COVID-19 crisis across our state,” Knapp said.

Wisconsin appears to be the only state that requires sales taxes paid by online retailers to cut personal income taxes, said Jason Stein, WPF’s research director.

So if online retailers pay $200 million in taxes, “Some may welcome this unexpectedly large income tax cut,” Stein said.

But, he added, “The actual income tax cut generally will not benefit the consumers ... until they file their 2020 income tax returns in early 2021. By then, the state is likely to face a budget challenge—if not a crisis.”

Evers has said that general fund tax collections, which had been projected to total $18 billion in the budget year starting July 1, could be $2 billion less because of the pandemic. As a result, some K-12 school administrators already are drawing up contingency plans for what they fear could be a significant drop in state aid they had been promised.

To help avoid a difficult choice—raise taxes or cut spending on K-12 schools, Medicaid, the UW System, prisons and property tax relief—tapping a $200 million windfall from online sales taxes will tempt legislators and Evers this fall.

Steven Walters is a senior producer for the nonprofit public affairs channel WisconsinEye. Contact him at steven

scotwalters@gmail.com.

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