January 5, 2022
Wisconsin has seen its taxes as a share of income drop between 1999 and 2019, making the state one among those with the highest decline in tax revenue from tax-paying residents. Various factors have played into the overall decline in the tax burden, including the limits on property tax increases, school district revenues, and a reduction in the amount of money spent on pension and health care benefits for public employees. Economic growth and improvements in personal income also helped to reduce the overall tax rate.
State and local governments took in $17.4 billion from taxpayers in 1999, which accounted for 12.2% of total personal income, or $3,288 per person. When adjusting for inflation, the 1999 amount is about $5,045 in 2019 dollars. This was the fourth-highest percentage in the U.S. at the time. In 2019, the state collected $30.6 billion and accounted for 10.3% of total personal income or $5,275 per person. Even though the inflation-adjusted amount from 1999 is lower than the 2019 amount, the amount of per capita tax paid dropped 1.87% and makes it the biggest decrease in the nation across the 20-year period.
Contributing Factors to the Decline in Wisconsin’s Overall Tax Burden
The decline in the overall tax burden in Wisconsin comes down to several factors. The state legislature restricted municipal and county property tax percentage increases, as well as limited how much revenue school districts, can levy through property taxes. In 2011, Act 10 was passed and lowered the amount of money that state and local governments spent on health care and pension benefits for employees. Other contributing factors to the decline came in the form of increased economic growth from corporate taxes and improved wages for residents. Taxes from personal income declined 15.4% over 20 years and puts Wisconsin in third place behind Florida and in Michigan in terms of the reduced tax burden.
In the summer of 2021, Gov. Tony Evers signed the 2021-23 biennial budget which has over $2 billion in state income tax cuts and provides $408 million in direct aid to school districts. The budget included a cap on the amount districts can raise from the state and property taxes which should result in a property tax cut.
The reduction in taxes may not be felt evenly across the state, however. The restrictions on how much school districts can raise from property taxes have resulted in some school districts putting forth local referendums to exceed property tax increase restrictions and making use of levies to meet debt payments. The direct aid provided by the budget is intended to help school districts avoid the need to put up a referendum for extra funding.