Get rid of it
Last week, the Legislature presented Gov. Tony Evers with a bill to once and for all eliminate Wisconsin’s personal property tax. We urge the governor to sign this legislation and put an end to this unpopular and heavily loopholed tax.
Since the tax was first put into place way back in 1849, it has been peeled back by so many exemptions that it now only applies to a limited number of items owned by businesses. It really should have been renamed the “Office Furniture and Miscellaneous Stuff Tax” at some point. It is so full of holes at this point, it doesn’t make sense to have the Wisconsin Department of Revenue keep pursuing the 2 percent of the state’s tax levy it represents, as of the 2019-2020 budget.
One big reason to repeal the tax is that it will provide relief to brick-and-mortar businesses that still need to inventory their non-exempted “personal property” just so they can write a larger check to the government. Small businesses could use a break, especially in the wake of a pandemic that drove millions of customers to larger online retailers for goods and services. These virtual behemoths, by the way, are not subject to the personal property tax, making it a unique burden for companies that choose to locate in the state of Wisconsin.
Any tax should ideally be spread among a wide base of payers so that it does not unfairly target one segment of society. If assessed fairly and equitably, this is how the real estate property tax works. Anyone who owns land and buildings in Wisconsin is subject to the tax based on a mil rate and assessment ratio. There are favorable adjustments made for farmland and other special uses, but for the most part, any landowner should expect to pay based on how much their land and buildings are worth.
That is not the case with the current version of the personal property tax, which has so many loopholes that it has accurately been described as “swiss cheese” by the Coalition to Repeal the Personal Property Tax. Oftentimes, the same exact items can fall in or out of exemption status based on seemingly arbitrary factors. For example, tools used by an auto mechanic are exempt from the tax, but tools used by a carpenter for home remodeling are not. This is the result of years of lobbying by special interest groups to carve out exemptions for their respective industries.
The problem is, this still leaves a lot of small businesses — those without the lobbying power of large manufacturers and other industries — to pay what is left of the personal property tax. This comes at a time when Main Street businesses are struggling on multiple fronts, from finding enough employees to paying higher gas prices and convincing customers to come back in the door after a prolonged pandemic.
Critics of the effort to eliminate the tax say it will starve local units of government of much-needed revenue. Fortunately, the bill before the governor includes $202 million in state money over the next two years to offset the money that would have been generated by the personal property tax. Of course, there is the lingering question of what will happen after those two years. Will future legislatures continue to fill the hole left by the personal property tax? That remains to be seen, but we believe now is the best time to make a decision like this.
According to the latest projections, state tax collections are expected to hit an unprecedented $4.4 billion through June of 2023. Undoubtedly, there will be a lot of proposals on how to spend this money, but let us suggest that compensating local governments for the loss of the personal property tax be one of them. The state may even want to reconsider its longstanding levy limits, which have been stifling for local governments and school districts.
We support providing sufficient funding for local and state government, but we don’t think it should come from the pockets of those least able to afford it. That is why the personal property tax must go.
The Tribune-Phonograph editorial board consists of publisher Kris O’Leary and editor Kevin O’Brien
