Wisconsin residents concerned about federal taxes, survey finds

A version of this article by Ross Milton was originally published in the Milwaukee Journal Sentinel Ideas Lab.

Tax documents and a post-it note saying "tax time!"

Few people enjoy paying their property taxes or seeing the income taxes taken out of their hard-earned paycheck. Yet everyone relies upon the public services that those taxes fund, whether it is roads, schools, or our national defense. One reason that taxes are so loathed in the U.S., despite the fact that we rank toward the bottom globally in tax revenue as a share of GDP, may be that we generally do a poor job of communicating where our tax dollars go.

Through the representative WisconSays/La Follette Survey launched last year, we’ve been able to ask questions related to the issues on the minds of Wisconsin residents. Taxes are a big issue for many, but federal taxes are top of mind. Fifty-one percent of Wisconsinites viewed taxes at the national level as quite a problem or an extremely big problem while only 39% said that about taxes in Wisconsin. This may reflect the increasingly national focus of politics.

Portrait of Ross Milton
Ross Milton is an Assistant Professor of Public Affairs

However, state and local governments close to our homes provide the government services that people care about and interact with daily. Roads, schools, and police are all funded almost entirely by state and local governments. These are services that matter to Wisconsin residents. In our survey, 48% of people said that education was at least quite a problem in Wisconsin and 52% said the same thing for crime. Improved services are likely to cost money and that money is going to come from – you guessed it – taxes.

Through our Main Street Agenda collaboration with the Milwaukee Journal Sentinel, my La Follette School of Public Affairs colleagues and I are attempting to help the public better understand issues such as taxation – and how Wisconsinites feel about them – during this important election year. We’ve previously tackled personal finances and the high costs of parenting young children.

With a referendum on the ballot next month asking Milwaukee voters to raise property taxes to increase funding for Milwaukee Public Schools, it’s a good time to give a quick breakdown of how taxes work in Wisconsin.

How taxes work in Wisconsin

The three main sources of tax revenue for state and local governments across the U.S. are income taxes, sales taxes, and property taxes. That is true in Wisconsin too, where the state gets most of its revenue from income and sales taxes.

Local governments in Wisconsin can’t use income taxes at all and in most cases can’t use sales taxes either. The major exception is the new sales taxes in Milwaukee to alleviate the city and county’s pension crisis. This leaves one option to increase tax revenues for most counties, cities, and school districts in Wisconsin: property taxes. While they have their merits, property taxes are America’s “most hated tax.”

To decrease reliance on the property tax, the state shares some of its revenues with local governments. After languishing for many years, this ‘shared revenue’ system was revamped last year. And although the more than 1,800 cities, villages, and towns received a 30% increase overall in the shared revenue they receive from the state, this windfall was not evenly distributed.

Even with last year’s increase, the amount that the state gives to counties and cities in aid is smaller accounting for inflation than it did a decade ago for all but the smallest governments. That makes local governments more reliant on local property taxes.

Tax referendum

Even though local governments are run by elected officials, they can’t just set taxes at whatever level they think is best for their constituents. State law limits how much they can raise each year without having a public vote or referendum. Imagine if, after congress proposed a tax increase, it had to go to a nationwide vote!

School districts have long had limits on how high they could set taxes on a per-student basis and if they want to exceed theirs, they hold a public vote or referendum. Over that time, more than 80% of the state’s school districts have put more than 1,500 referenda on the ballot. Since 2005 counties, cities, and villages have had limits too. In recent years, with high inflation and no increase in their limits, these ‘levy limits’ are binding in an increasing number of places. As a result, these governments, once reluctant to go to referendum, have passed 74 referenda over the last five years. From 2006 to 2017, they had only passed 29.

In addition to Milwaukee’s upcoming referendum, it’s possible that Madison voters could see a rare double referendum in November if both the city of Madison and the Madison Metropolitan School District decide to ask for increased funding to address their shortfalls. Commenting on his think tank’s report released last year on school referenda, Forward Analytics director Dale Knapp said, “I don’t think the lawmakers who created this law envisioned referenda being relied on this much.”

Levy limits are intended to keep taxes down and promote responsible governance. Do frequent referenda mean that they are failing? That is a hard question to answer, but my research shows that if referenda become too frequent it means that, paradoxically, making the limit less stringent would result in lower taxes because referenda would become less common. Strict limits also encourage the use of accounting gimmicks and fees like wheel taxes. On the other hand, more lenient limits increase the importance of electing officials who will make decisions that reflect the best interest of their constituent.

Elected officials must make difficult decisions on behalf of a diverse public and it is often a thankless job. One of their most thankless jobs is working to find the right balance of taxation and services for their constituents. A good first step in appreciating this hard job is to participate in local elections and help identify the best person for the task. For many of us, the next opportunity is on April 2.

Logo for the Main Street Agenda with the text, "what matters to Wisconsin, policy perspectives, presented by the La Follette School of Public Affairs in partnership with the Milwaukee Journal Sentinel"What matters to Wisconsin

The La Follette School of Public Affairs and the Milwaukee Journal Sentinel are collaborating to share insights on how Wisconsinites feel about important policy topics through a yearlong project called the Main Street Agenda. Each month, the La Follette School and the Milwaukee Journal Sentinel will feature a different policy topic, analyzing new statewide survey data to highlight what matters to Wisconsin. The WisconSays/La Follette Survey being used for the Main Street Agenda is a subset of the new WisconSays opinion panel based out of the UW-Madison Survey Center. There are more than 3,500 Wisconsinites enrolled in this representative panel.

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