Wisconsin Republicans try again to repeal personal property tax

Dec 22, 2023

Sens. Duey Stroebel and Dan Knodl and Rep. David Armstrong testify about a bill to repeal Wisconsin's personal property tax. (Screenshot | WisEye)

A Republican bill to ax a disliked and obscure portion of Wisconsin's tax code got a public hearing Thursday, with lawmakers hopeful that this attempt will successfully be passed into law after a similar bill was vetoed by Gov. Tony Evers in the last legislative session.

At a press conference Thursday, Republican legislative leaders said the personal property tax repeal is part of an agreement on shared revenue they struck Wednesday night with Evers.

The personal property tax has been a part of Wisconsin's code since the state's founding. While it initially covered all household and business property, the tax has been whittled away over the past 175 years. The application to households fell off the tax rolls with the introduction of the state income tax in 1911 and business exemptions have been continually added over the last century.

In 1974, manufacturing machinery and equipment were removed from the tax and in 1999, computers and electronic business equipment were exempted.

Under current law, only furniture, watercraft and a few other items remain covered by the tax while most of Wisconsin's neighboring states have already fully repealed their own versions of the tax.

Republican lawmakers said at the hearing that the tax adds an onerous and time-consuming administrative task to small business owners who remain liable for paying the tax, which often isn't that high for individual taxpayers, and for the municipal government staff responsible for assessing and collecting the taxes.

The bill to repeal the tax, AB 2, does not include an appropriation through which municipal governments will be reimbursed for that lost revenue, but Republicans said a provision in the state budget, and money that was set aside for this purpose in the last budget, would cover those costs.

"To small business it sometimes can be more of a time strain than financial strain, the time to catalog your inventory or personal property, so furnishings, fixtures, and the list goes on," Sen. Dan Knodl (R-Germantown) said. "But that time and effort is very time-consuming, and probably costs more than the final check that you’re writing to the local community or you’re paying your accountant to do work. You’re paying more money out that way than you are in the actual tax bill. The benefits to the local government, and I have met with all my local governments over the years, they’re to the point where, ‘please just make our compliance efforts go away, and we’d be thrilled just to take the check from the state and move along with our business.’"

A number of business lobbying groups testified in support of the bill, laying out the ways in which many types of business can be affected by the tax. Representatives of the Wisconsin Hotel and Lodging Association complained that because hotels frequently replace all of their furniture, they’re especially burdened by the remaining tax on furnishings.

Bill Smith, the Wisconsin director for the National Federation of Independent Businesses, said he believes the repeal will help businesses of all sizes while specifically encouraging small business creation and growth.

"To be competitive with our surrounding states, to promote economic development, and most importantly, to encourage small business creation and growth, we believe the elimination of the personal property tax is a key reform that will have a positive impact on the bottom line of small businesses throughout our state," Smith said. "The personal property tax created in colonial times is really a small business tax. And it's involved into a, really, a grab bag of exemptions and definitions that violate the basic principles of tax fairness; simple, cost-effective administration and low, efficient enforcement costs. Importantly, the elimination of the personal property tax would impact all Main Street businesses, regardless of economic status, number of employees, amount of revenue or type of business."

Opposition from Democrats hasn't focused on the repeal itself, but rather the mechanism through which the state makes up for the revenue the repeal will cost municipal governments.

When he vetoed the previous version of the bill, Evers criticized the "unusual and haphazard process by which the Legislature pursued the repeal of the personal property tax," and the "potential unintended consequences" the bill's enactment would have on the state's utility and railroad taxes.

Republican authors said at the hearing that they’d worked with the Department of Revenue to make sure the administration was happy with this version of the bill.

At the hearing on Thursday, Rep. Tod Ohnstad (D-Kenosha), questioned the bill's authors to make sure local communities will be covered for that lost revenue. He noted that last year, the city of Kenosha collected $4.8 million through the personal property tax and in 2022 collected $3 million — which is a significant amount of money for a local government.

"I’ve heard this before, and I think that everybody philosophically is in favor of eliminating this tax," Ohnstad said. "However, I don't think that we should not think that this is real money. This is real money. The promise is being made, ‘Don't worry, the municipalities are going to be made whole by a different body at a different time in a different bill in a different book.’ I think that we all need to make sure that that's the case before we sing hallelujah. Because $3 million is real money."

Republicans, including Sen. Duey Stroebel (R-Saukville) — who sits on the budget writing Joint Finance Committee — said that the municipal backfill will be included in the budget.

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by Henry Redman, Wisconsin Examiner June 8, 2023

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Henry Redman is a staff reporter for the Wisconsin Examiner who focuses on covering Wisconsin's towns and rural areas. He previously covered crime and courts at the Daily Jefferson County Union. A lifelong Midwesterner, he was born in Cleveland, Ohio and graduated from Loyola University Chicago with a degree in journalism in May 2019.