Owners of small businesses in Wisconsin would no longer pay property taxes on machinery, tools and patterns not used for manufacturing under a tax package approved Wednesday by the Legislature's budget-writing committee.
Lawmakers on the Republican-led Joint Finance Committee voted on party lines to eliminate a portion of the personal property tax, which applies, in general, to furniture, equipment, machinery and watercraft owned by businesses. The state would make payments to local taxing jurisdictions to replace the revenue lost from the tax — an estimated $74.4 million per year.
Rep. Gordon Hintz, D-Oshkosh, argued the move will strain the state and local governments in future budgets, noting that payments will be set at 2017-18 levels and not adjusted for inflation.
A full repeal of the personal property tax would cost the state an estimated $261 million per year in funding for schools and local governments.
The co-chairs of the Legislature's Joint Finance Committee said the partial repeal of the tax took precedence over two proposals included in Gov. Scott Walker's budget: a $203 million income tax cut and a $17 million back-to-school sales tax holiday.
Co-chair Sen. Alberta Darling, R-River Hills, told reporters the proposed income tax cut "wasn't significant enough."
"While we want to continue cutting taxes, especially for the middle class, at this point we felt that a lot of middle class people are small business people," Darling said. "By reducing that personal property tax, we’re really helping small business as well as middle class families."
The sales tax holiday would have offered exemptions for two days in August 2017 and August 2018 covering certain school supplies, clothing under $75 and computers under $750. But students throughout the state will have returned to school for the 2017-18 academic year by the time the budget, now two months late, is passed.
Walker's proposed income tax cuts would have saved most taxpayers $44 this year. His plan called for cutting rates for the two lowest brackets by one-tenth of a percentage point.
Lawmakers asked themselves, "Being a modest income tax cut, is that the best bang for your buck for the investment?" said co-chair Rep. John Nygren, R-Marinette.
The Republican-led committee voted last month to approve the governor's proposal to eliminate the state's portion of the property tax. Ending the forestry mill tax will amount to a reduction of about $180 million over the two-year budget period.
Despite its delayed passage, both Darling and Nygren praised the 2017-19 spending plan, 40 percent of which Darling said is directed toward property tax relief.
Also under the measure passed on Wednesday, cities would be able to charge a local room tax on owners of short-term rentals and lodging marketplaces like Airbnb and VRBO.
Vacation and short-term rental companies would be required to register with the state Department of Revenue. Licensed companies would be charged with collecting the state's sales and use tax and municipalities' room taxes from occupants, then forwarding them to the proper agencies.
Under the measure, a local government would be barred from enacting an ordinance prohibiting the rental of a residential dwelling for more than a week. The measure allows for some more specific limits to be enacted.
Anyone operating a short-term rental for more than 10 nights per year would be required to register with the state Department of Agriculture, Trade and Consumer Protection and potentially with a municipal licensing body.
The policy comes after Airbnb struck a deal earlier this summer with the state, agreeing to pay state taxes on lodging. That agreement did not address local room taxes, nor did it cover other short-term rental companies like VRBO and HomeAway.
The committee is expected to finish its work on the budget Wednesday evening.