Wisconsin Taxpayer Magazine The Property Tax No One Knows

January 2016  •  Vol. 84 No. 1
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  • Summary
  • Press Release
  • Wisconsin’s personal property tax is unknown to most residents as it applies only to certain business property. The tax is riddled with exemptions, and the $287 million it now generates is about one-fourth the inflation-adjusted amount collected in 1971. The tax also raises questions about the consistent treatment of property; e.g., a chair owned by a business is taxed, but one owned by a homeowner is not.

  • Todd A. Berry or Dale Knapp

    “Hole-ly Swiss Cheese:” Wisconsin’s Personal Property Tax

    Fair or Unfair? Efficient, Cumbersome, or Just Outdated?

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    MADISON—What if a grocer’s manual meat department scale was taxed but its electronic one attached to a computerized cash register was not? What if a Main Street business owner paid tax on a desk in her gift shop but not on the same desk in her home? As surprising as it may seem, this is Wisconsin law, according to a new report, “The Property Tax No One Knows,” from researchers at the Wisconsin Taxpayers Alliance (WISTAX). Now celebrating its 85th year, WISTAX is a nonpartisan organization devoted to public policy research and citizen education.

    Wisconsin’s property tax is actually two taxes, WISTAX explains: a very familiar one that applies to “real” property, such as land, homes, and other buildings, and a little-known one that applies only to certain “personal property” almost entirely in businesses.

    While taxable personal property once included nearly all items owned by households and businesses, 170 years of exemptions have turned a broad tax into “swiss cheese.” Since 1950, taxable personal property has declined from 17.7% of all property taxed to just 2.6% in 2015. For all local governments in the state, the personal property tax now generates $287 million annually, or just over 1% of what all local governments and school districts spend. Adjusted for inflation, personal property tax collections are now less than one-fourth of the $1.2 billion collected in 1971.

    Today, most personal property falls into two categories: furniture, fixtures, and equipment valued at $5.0 billion in 2014, or 41% of the $12.2 billion total; and machinery, tools, and patterns valued at $4.7 billion, or 38% of the total. Boats, watercraft, and other personal property comprise the remainder.
    Where taxable personal property is located leaves the tax open to question. Due largely to exemptions enacted during the mid-20th century, manufacturing businesses house only 23% of taxable personal property, while commercial enterprises own the bulk. By geography, nearly two-thirds (64.8%) of taxable personal property is located in cities; the remainder is split evenly between villages (17.4%) and towns (17.8%).

    The personal property tax has other problems. It must be self-reported to municipalities, but some taxpayers fail or refuse to complete required forms. Some small businesses are unaware of the tax. This means assessors must use other costly and time-consuming methods to find taxable property.
    Valuing personal property for tax purposes is another problem. Unlike for homes, sale prices of used office furniture, grocery store shelving, or other personal property often are not available. Moreover, the state depreciates personal property based on type and age, but not condition, making values even more suspect. Assessors can audit the reports, but as with finding taxable property, this can, too, can be costly and time-consuming.

    In addition to municipal assessment costs, taxpayers face compliance costs, as well. Exemptions created over almost 200 years leave it unclear when personal property is or is not taxed. The state’s long list of exemptions means this cost is not trivial. In addition, taxpayers must keep detailed records of personal property to report prices by year of purchase.

    These difficulties for tax assessors and taxpayers alike raise an important question: Are the costs of discovering and valuing personal property—both for business taxpayers and municipal tax collectors—still worth the revenue the tax generates? State officials have been asking this question for 100 years.

    "Sound tax policy emphasizes similar treatment of like property or income, regardless of ownership or source,” WISTAX President Todd A. Berry points out. “Yet, Wisconsin’s personal property tax with its many exemptions leaves one wondering: Should identical chairs be taxed in a business but not in a home? Should charter fishing boats on Lake Michigan be tax-exempt, while other business vessels are taxed?”

    Such questions of cost and fairness led Wisconsin to consider eliminating the personal property tax as early as 1912. Legislators have revisited the question in the last year or two. “That’s why we prepared this report,” WISTAX’s Berry notes, “to give both lawmakers and citizens the history and information they need to evaluate Wisconsin’s oldest tax, the personal property tax.”

    More information about Wisconsin’s personal property tax can be found in the latest issue of The Wisconsin Taxpayer magazine, “The Property Tax No One Knows,” available by visiting www.wistax.org; emailing wistax@wistax.org; calling 608.241.9789; or writing WISTAX at 401 North Lawn Ave., Madison, WI 53704-5033.

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