Wisconsin homeowners could see property taxes increase $270 million a year under a Republican proposal to eliminate taxes on business equipment.
To keep their services level, municipalities and other taxing entities would have to raise levies $80 on the average Wisconsin home to make up for the lost tax base, but proponents say the bill could spur business growth and generate more tax revenue that would reduce the burden on homeowners.
Realtors and local government officials said the shift in the tax burden was unacceptable, while a sponsor of the bill maintained it was a small change that would help businesses create jobs.
Bill co-sponsor Rep. Robert Kulp, R-Stratford, said the equipment tax is a burden on some businesses in terms of cost and the need to keep an extra set of books to track taxable property.
An analysis by the bipartisan Legislative Fiscal Bureau indicates taxes on the average Wisconsin home would go up 2.7 percent, or $80 to $3,006, to make up for the reduced tax revenue without cutting services.
“The (equipment) tax is an onerous tax for businesses and administrative headache for those who administer it,” Wisconsin Realtors Association vice president Tom Larson said in a letter to legislators Monday. “However, eliminating this tax by increasing taxes on homeowners and other owners of real property is not the answer.”
The League of Wisconsin Municipalities and the Wisconsin Counties Association urged legislators not to shift more of the tax burden onto homeowners.
“The impact of eliminating the (equipment) tax will be greatest in cities and villages where most of the personal property tax base is located,” league assistant director Curt Witynski and the counties association government affairs director Kyle Christianson said in a letter to lawmakers Friday.
“Elimination of the (equipment) tax on businesses will result in even more of the property tax burden shifting to residential homeowners, who already pay (nearly) 70 (percent) of the statewide property tax levy,” they said. “How much more?”
They suggested a residential property tax increase could be avoided through an increase in state aid similar to the payments the state began making to local governments to offset their revenue losses after computer equipment was exempted from property taxes in 1999. The state already exempts manufacturing and agricultural business equipment from the tax.
Those payments making up for the loss of revenue on computer equipment, about $84 million annually, would be eliminated in a provision of the draft bill being circulated by Kulp and Sen. Tom Tiffany, R-Hazelhurst.
Compliance with the equipment tax costs more than complying with real estate taxes, but the data used is maintained by businesses anyway and computerization has made the task less expensive, the fiscal bureau said.
Kulp said restaurants, hotels, contractors, grocers, auto repair shops and other business groups like the bill and at least a dozen co-sponsors have signed on in the state Assembly and Senate. The bill would take effect in 2020.
“You could look at this as a shift in taxes or a change in taxes that helps the job creators and the people that drive the economic engine of the state,” Kulp said.
Tiffany couldn’t be reached Monday.
Wisconsin businesses owned nearly $11.8 trillion in machinery, equipment, furniture, watercraft and other portable property in 2014, the fiscal bureau said.
Real estate taxes for residential and business properties would need to increase statewide by about 3 percent to make up for elimination of the equipment tax, but the overall tax burden would decrease for businesses, the agency said.
The proportion of property taxes paid by homeowners would increase to 70.3 percent from 68.2 percent, according to the agency’s analysis.