Municipalities welcome proposed sales tax option; state business association pushes back

MADISON, Wis. – While the City of Madison provides services residents need, Mayor Satya Rhodes-Conway said what the city needs are options.

That’s as the city faces tough budget cycles in the coming years, according to Rhodes-Conway.

“In part because of the coronavirus pandemic, in part because of the structural issue in how severely the state limits impact our budgets,” she said. “What we’ve seen is just a really precipitous decline in revenue.”

Rhodes-Conway said the city is cutting where it can.

“But at some point we’re starting to cut into core basic services we need to provide as a city,” she said, adding that she’s grateful Gov. Tony Evers is attempting to address municipalities’ concerns with a proposal in his 2021-23 biennial budget.

It would allow counties and Wisconsin’s 26 cities and one village (Menomonee Falls) with more than 30,000 people to add a .5% sales tax. For counties, that’s on top of a .5% sales tax already available and in place in 68 out of 72 counties, according to Evers’ office.

The League of Wisconsin Municipalities, which represents the interests of cities and villages in the state, signaled its support for the proposal Friday.

Executive director Jerry Deschane said rather than a bandage to address the pandemic’s financial impacts, the optional tax would be a step toward a long-term solution giving municipalities more financial options in general.

“There’s no other state in the country that uses a local sales tax option as little as Wisconsin does,” Deschane said. “Frankly, the governor’s proposal does nothing more than give citizens the option, ‘Hey would you prefer this over property taxes?’”

Wisconsin’s sales tax is at 5%, making it the lowest of its Midwest neighbors. Throughout most of the state, the sales tax is 5.5% because of the majority of counties opting for the additional .5% sales tax already allowed under current law.

“It’s one of the only taxes that Wisconsin has that’s actually low,” said Nick Novak, vice president of communications and marketing at Wisconsin Manufacturers & Commerce, the state’s chamber of commerce and largest business trade association. “Every other tax you look at, whether it’s property taxes, income taxes or corporate taxes, we have some of the highest in the country.”

Under the proposal, the sales tax could potentially increase to 6.5% for someone living in a city and county that both approved .5% increases. The national average is a little more than 7%.

From WMC’s standpoint, the focus should be on lowering taxes rather than raising sales taxes.

“That is just making it more costly to buy everyday items,” Novak said. “We don’t want to see that here in Wisconsin. Small businesses are struggling. Families are struggling.”

Instead, he suggests counties and municipalities make tough budget decisions.

“They maybe need to look at budgets to see what needs to be cut, just like Wisconsin families,” Novak said.

Ultimately, the sales tax increase would be in voters’ hands, requiring approval through a referendum vote.

While Satya-Rhodes Conway said the city would have to consider the sales tax as an option, analyzing how it would impact residents, a Dane County Executive’s Office spokesperson said that the county “has no plans to seek this even on the slim chance it survives the legislature.”