Wisconsin’s State-Local Tax Burden Edges Down in 2017

Wisconsin’s overall state-local tax burden again declined last year, though the drop was due mainly to two specific events, according to the Wisconsin Taxpayers Alliance (WISTAX). In a new report—“A Glass Half-Empty or Half-Full?”—WISTAX cites as primary reasons for the drop a 19% decline in unemployment insurance taxes due to a strengthening economy, and the elimination of the 0.5% Brown County sales tax that paid for renovations of Lambeau Field.

The combined state-local tax burden for 2017 was 10.7% of personal income, down 0.1 percentage points from 10.8% in 2016. State-local taxes relative to personal income have declined six consecutive years since reaching 11.9% of income in 2011.

State tax collections totaled $18.8 billion in 2017, a 1.7% increase over 2016. With state personal income increasing at a similar rate (1.9%), the state tax claim remained unchanged at 7.0% of income. The largest one-year change in state taxes during 2017 was an 18.6% decline in unemployment tax collections, from $922.6 million in 2016 to $751.3 million in 2017. This was the fifth consecutive decline and one to be expected in an expanding economy with little unemployment.

The largest state tax—the individual income tax—increased 3.9% last year, from $7.7 billion to $8.0 billion. Unlike those that fund unemployment compensation, income taxes increase during economic expansion and generally decline during contractions. State sales tax collections increased 3.1% in 2017, from $5.1 billion to $5.2 billion. Over the past five years, sales taxes increased 21.8%, more than any other major state tax.

While corporate income taxes typically rise with the economy, state collections have fallen over the past two years. They dropped 4.4%, from $963.0 million in 2016 to $920.9 million in 2017. The decline was partly due to the multi-year phase-in of an agricultural and manufacturing tax credit which, when fully implemented, would nearly eliminate corporate income taxes for manufacturers and farmers.

The state’s two main transportation revenues—the gas tax and vehicle registration fees—continued sluggish growth. Gas tax collections rose 0.7%, to $1.04 billion in 2017. Vehicle registration fees inched up 0.1% to $692.3 million.

Local tax collections totaled $10.2 billion in 2017, a 1.8% increase over 2016. The property tax is the main local funding source for local governments. Net collections (after accounting for state credits) increased 2.7% in 2017, from $9.5 billion to $9.6 billion. Since 2011, the state has essentially frozen municipal and county tax levies, except for increases tied to new construction and borrowing. It has restricted school revenue growth since 1994, initially allowing inflationary increases. That ended in 2010, and since 2012, increases have been small to none.