MADISON—From 2000 through 2005, property taxes on an "average" Wisconsin home rose 5.2% per year, while the average wage increased 3.8% annually. During this same period, the home’s value increased more, rising 6.1% per year. Wisconsin is currently in a period where property taxes are declining relative to average home values, but rising as a share of income. This is a key finding from a new study from the Wisconsin Taxpayers Alliance (WISTAX), "Wisconsin Property Tax: History and Reform."

The study contrasts the state’s current situation with two prior periods. It uses Wisconsin Department of Revenue data to track the changing value of the 1980 median (half lower/half higher) valued Wisconsin home and the property taxes on it.

• 1981 - 1994. During these years, the property tax rose faster than the average wage and the home’s value (6.5% per year vs. 4.5% for wages and 2.7% for home value). Thus, property taxes took an ever-increasing bite out of wages and increased relative to property value. Rising property taxes led to attempts to relieve property taxes through school district revenue limits, and increased school aids and property tax credits.

• 1994 - 2000. These relief efforts led to a property tax decline on this "average" home during these years. Estimated property taxes declined an average of 0.5% per year during the period, while wages rose 3.6% annually and the average home value climbed 5.7% per year.

Rising property taxes in the current period have increased pressure on lawmakers to find new ways to limit tax increases.

The WISTAX study is the first in a three-part series of reports on Wisconsin property taxes. This report takes a historical look at the state property tax and efforts at relief. The second and third studies will examine property tax burdens in local and national contexts. "The property tax remains the number one public issue in Wisconsin," WISTAX President Todd Berry said. "We hope these studies will contribute useful, factual information that will shed more light, and less heat, on the issue," he added. WISTAX is a nonprofit, nonpartisan organization dedicated to public-policy research and citizen education.

This first study tracks Wisconsin’s property tax burden from 1946 through 2005, showing the state’s property taxes as a share of income rising steadily from 3.6% in 1946 to 6.0% in 1972. This was a period of rising demand for schools and local services, due partly to the baby boom.

A series of property tax relief efforts, including large increases in state aids to schools and local governments, along with a strong economy helped reduce the tax burden over the ensuing nine years to 4.0% of personal income in 1981, WISTAX said. Since then, the property tax has risen to 4.8% (1994), declined to 3.8% (2000) and then climbed back to 4.3% of total personal income (2005).

Wisconsin has attempted to relieve local property taxes through property exemptions, property tax credits, aids to local governments and schools, limits on spending or revenues, and income tax credits. The WISTAX report points out that exempting property or limiting its taxable value does not generally relieve property taxes, but rather shifts the burden to owners of other properties. Property tax credits have helped reduce property taxes, but do little to affect long-term trends because they do not address spending.

Aids to local governments increased dramatically since 1955, according to the study. Local school aids rose 10.8% per year, while shared revenues to local governments increased 4.9% annually. However, WISTAX researchers point out that there are questions about the long-term effectiveness of local aids for reducing property taxes. Economic research in Wisconsin and elsewhere finds that state and federal aids to local governments only partially offset local property taxes, as a portion of that aid funds new spending.

The study finds that some limits on local governments have been effective at relieving property taxes and some have not. During the 1970’s, the state imposed cost controls on schools and levy limits on counties and municipalities. Due to an increasing number of "loopholes," they were deemed ineffective and eliminated in 1983. Recent revenue limits on schools have been more effective, because they do not have similar loopholes. Counties and technical colleges have limits on the tax rates they can impose. However, large increases in property values have limited their effectiveness.

The next WISTAX report in the three-part series on property taxes will examine how property taxes relative to income vary from community to community. It’s featured in the June 30 edition of WISTAX’s Focus newsletter.

For a free copy of "Wisconsin Property Tax: History and Reform," contained in the June issue of The Wisconsin Taxpayer: write WISTAX, 401 North Lawn Ave., Madison, WI 53704-5033; e-mail wistax@wistax.org; visit www.wistax.org; or phone 608.241.9789. o

Wisconsin Property Taxes Rise, Fall
Gross and Net Property Tax Levies Relative to Personal Income 1945/46 - 2004/05