Since 2011, the state generally has restricted the percentage increase in municipal and county property taxes used for operations to a community’s rate of net new construction, which at the statewide level has been below 1.7% since 2008. The state has also limited revenues for school districts, including property taxes, and made cuts to property taxes for technical colleges and personal property while also repealing the state levy. In addition, the state passed a series of income tax cuts since 1999, including decreases in marginal rates, the elimination of one tax bracket, the exemption of Social Security income from taxation as well as most income from manufacturing and agricultural production, decreases in capital gains taxes, and numerous other changes.
Those reasons help explain why property and income taxes have dropped as a percentage of personal income. As we recently noted, however, a rise in both school referenda to exceed property tax limits and the growing use of levies for debt payments has put upward pressure on property taxes in recent years.
What’s Next?
After dropping far below the top 10 among states over the past two decades – a clear trend – Wisconsin’s tax burden may be more difficult to interpret in upcoming post-pandemic Census data. On the one hand, state corporate tax collections rose substantially the past three years because of factors such as changes in the federal tax code and expanded state auditing. Income and sales tax collections also have been boosted by several rounds of federal pandemic relief to individuals and businesses; particularly in fiscal 2021, that has led to an increase in state tax collections. However, it remains to be seen whether the actual tax burden will rise given the strong growth in personal income in both 2020 and 2021 due to the COVID relief measures.
Going forward, the 2021-23 budget signed by Governor Tony Evers in July included more than $1 billion in state income tax cuts in fiscal year 2022 alone. The budget also included substantial state funding increases for schools that should translate into lower K-12 property taxes.
Madison continues to grow spending, recently approving an 8.9% property tax increase.