Bruce Murphy
Murphy’s Law

The GOP Sales Tax Hypocrisy

Favored Republican towns allowed to levy a local sales tax. But not Milwaukee.

By - Nov 7th, 2017 12:24 pm
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Stockholm, WI. Photo by Royalbroil (Own work) [CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0)], via Wikimedia Commons

Stockholm, WI. Photo by Royalbroil (Own work) [CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0)], via Wikimedia Commons

The tiny Village of Stockholm in western Wisconsin has just 82 residents, and enjoyed its “population peak of 280 in 1880,” the village website notes. But it is located on Lake Pepin, a naturally occurring widening of the Mississippi River just 60 miles from the Twin Cities and has in recent years promoted itself with modest success as an “Artfully Authentic” tourist town.

To capture tax revenue from those visitors, village officials requested the ability to levy a local sales tax, a notion abhorrent to Wisconsin state politicians for nearly a century. But some friendly legislator, no doubt a Republican, slipped enabling legislation into the massive 2013 state budget, which passed without a line item veto from Gov. Scott Walker, who typically does everything he can to cap local taxes. Voters in Stockholm then approved a referendum to adopt new 0.5 percent sales tax there.

Stockholm thus become one of just five municipalities, among 3,128 in Wisconsin, that can levy a local sales tax, the others then being the cities of Lake Delton, Wisconsin Dells, Bayfield and Eagle River. (Sister Bay and Ephraim also have gotten legislative approval, but have yet to ask local voters for permission to levy a tax.)

The theory behind these exceptions is that tourist-oriented towns need additional funding for infrastructure expenses to help serve their visitors. And yet legislators have so far been deaf to the pleas of Mayor Tom Barrett in Milwaukee, by far the state’s biggest tourist draw, to add a local sales tax to handle its infrastructure needs.

As measured by state statistics, Milwaukee County attracted $12.3 billion in visitor spending in 2016. That’s 12 times more tourism than Sauk County, where Lake Delton and most of Wisconsin Dells are located, and which had $1 billion in visitor spending in 2016.

And Milwaukee had 1,985 times more tourism than Pepin County (where Stockholm is located), which had $6.2 million in visitor spending in 2016.

What is the justification for allowing far smaller tourist areas to collect a local sales tax, but refusing the state’s leader? I contacted Gov. Walker, Republican Assembly Speaker Robin Vos and Republican Senate Majority Leader Scott Fitzgerald, asking for comment and whether they would support a sales tax for Milwaukee. None responded.

A recent Public Policy Forum study of 38 peer cities in America found that only Milwaukee lacked the ability to levy a local sales or income tax to supplement the property tax. The rationale for more taxing power, the study noted, is that “as cities increase in size, they become more cosmopolitan, and host greater numbers of non-residents who are engaged in business, employment, tourism, entertainment, etc.” A local sales tax enables them “to recoup the costs of services provided” to all these visitors.

No city in Wisconsin has a greater need to pay for the costs of tourism than Milwaukee, but it has been barred from levying a sales tax while this power was granted to tiny burgs like Bayfield, with its population of 487 residents.

in 2017 Rhinelander joined the list after legislation allowing it to levy a sales tax was championed by Republican state Sen. Tom Tiffany, whose district includes this city. In the Assembly the bill was championed by Rep. Michael Schraa (R-Oshkosh), who doesn’t even represent the area, yet felt the new tax was justified.

Barrett noted an obvious pattern at work here: “There’s something wrong when you’ve got Governor Walker, who has already approved sales tax increases for Republican communities, and the Republican Legislature that’s already approved sales tax referendums for Republican communities, not to allow us to have a sales tax referendum here.”

There was once a strong rationale for preventing cities in Wisconsin from levying their own tax. The policy goes back to when Wisconsin was the first to create an income tax, in 1911 (several years before the federal income tax). State leaders feared “balkanization” of the state — cities competing with each other based on taxes — so the legislature instead promised to funnel back most of the state income tax to municipalities in the form of state shared revenue.

This bargain lasted for eight decades, but there has been a bipartisan trend of lowering state shared revenue for more than two decades now and that has been killing the state’s biggest city and beneficiary of state aid. Over the last 20 years, state shared aid to Milwaukee has dropped by $151 million in real (un-inflated) dollars — a huge hole for a city whose current budget for basic services is $834 million.

The squeeze on shared revenue helps explain why places like Wisconsin Dells pushed for another local tax. In 1997 the legislature passed the law allowing an exception to the ban on local sales taxes for a “premier resort area” — defined as a municipality where 40 percent of its tax base is related to retail tourism — and Wisconsin Dells and Lake Delton met that requirement. But in the years since then exceptions to that 40 percent standard were made for Ephraim, Sister Bay, Bayfield, Eagle River, Stockholm and Rhinelander. All were allowed to levy a 0.5 percent sales tax if approved by local referendum.

And in 2013 the Republican-dominated legislature passed a law allowing Wisconsin Dells and Lake Delton to hike the local sales tax to 1.25 percent.

The State of Wisconsin is a great beneficiary of its top tourist town, as the $12.3 billion in visitor spending in Milwaukee generates a lot of sales taxes collected by the state. Meanwhile, Milwaukee must provide the services needed — police and fire protection, garbage collection, water etc. — for all these visitors with not even a 0.5 percent local sales tax to help pay for this, much less the 1.25 percent tax allowed to Wisconsin Dells.

Gov. Walker’s communications person Tom Evenson told the Journal Sentinel the governor opposed a sales tax for Milwaukee, and added this salvo: “Since the mayor once served as a state lawmaker, he surely knows the Legislature must approve a change to state law to allow him to do what he is requesting… As for the state, the governor proved you can fund your priorities without raising taxes.”

Actually, Milwaukee has been much more fiscally conservative than the state in the Walker years. Between 2010 and 2017, the city budget rose from $1.091 billion to $1.176.5 billion, an increase of 7.9 percent, while the state budget rose from $14.1 billion in 2010-11 to $17 billion in 2016-2017, an increase of 20.7 percent. The state increase came even as it reduced real dollar shared revenue to local governments during this period.

Evenson‘s comment, besides being completely misleading, suggests a hostility to Milwaukee that seems the only explanation for the Republicans’ unwillingness to allow a local sales tax here. Should Walker, Vos and Fitzgerald ever offer a rationale for their opposition, I’ll be happy to add an update.

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Categories: Murphy's Law, Politics

17 thoughts on “Murphy’s Law: The GOP Sales Tax Hypocrisy”

  1. dk mke says:

    “Actually, Milwaukee has been much more fiscally conservative than the state in the Walker years. Between 2010 and 2017, the city budget rose from $1.091 billion to $1.176.5 billion, an increase of 7.9 percent, while the state budget rose from $14.1 billion in 2010-11 to $17 billion in 2016-2017, an increase of 20.7 percent. The state increase came even as it reduced real dollar shared revenue to local governments during this period.”

    This seems like all you really need to know. R’s at the state level have no interest in making the tough choices behind their bold claims of fiscal prudence (same as we’re seeing at the national level right now). They take in more money and spend it themselves, and then have the gall to claim responsible fiscal leadership.

    Hypocrites of biblical proportions Titus 1:16
    They claim to know God, but by their actions they deny him. They are detestable, disobedient and unfit for doing anything good.

  2. Wisconsin Conservative Digest says:

    Milwaukee has to get its act together if it wants to levy more taxes. The white, liberal, male, racists that run the city managed to run a very popular Sheriff, got 80% of the vote, out of town, who was exposing their corruption, and incompetence.
    Kids cannot read, crime, car jackings, auto theft, way up,, Heroin epidemic, 11 overdose deaths in 6 days, human trafficking, bad roads, overpaid employees, corruption, MPS;national disgrace, Milwaukee county govt the states joke, unemployment for kids at 60%, and they want $15 min wage, high taxes, money spent to get votes, Need i go on??
    No plans to fix this things, then you put in a worthless trolley to nowhere and a new arena when the other was just fine.

  3. The United State Constitution allows a section of a state to break away and form a new state if the state permits. If Milwaukee is not to be treated equally with other municipalities in Wisconsin, perhaps we should be allowed to leave.

  4. Bruce Hall says:

    From each according to his ability; to each according to his need.

    Milwaukee is one of four counties where the per capita income is below the state average. On that basis, sales taxes should be lower in Milwaukee than most of the other counties. Why? Because sales taxes are highly regressive. Unless sales taxes can be eliminated for those either below the poverty line, it does the most damage to those people.

    Milwaukee should seek to enact an income tax such as Detroit’s (2.4% for residents; 1.2% for non-residents). There is a reduction of state income taxes for city income taxes paid. The city can determine the threshold below which no income taxes are due.

  5. Principles be dammed.

    Like the Republican tax plan that rewards the red states and penalizes the blue, to the victor belongs the spoils.

  6. Virginia says:

    So sad that Walker & Company refuse to see that cutting off Milwaukee’s nose in spite is rapidly destroying the state’s “face.”

  7. Wisconsin Conservative Digest says:

    Those of you from Milwaukee, why don’t you shape the place up instead of whining all the time?

    Left always has the quick answer; raise taxes, chase away jobs to Waukesha and where kids can learn to read.

  8. Joseph T Klein: which clause in the US Constitution has that?

  9. Found it:

    New States may be admitted by the Congress into this Union; but no new States shall be formed or erected within the Jurisdiction of any other State; nor any State be formed by the Junction of two or more States, or Parts of States, without the Consent of the Legislatures of the States concerned as well as of the Congress.
    Article IV, Section 3, Clause 1

  10. David says:

    The State Government deliberately handicaps Milwaukee because it is in their own political interest. They want the State’s biggest Democratic stronghold to do poorly so they can attack liberal ideas. They just hope nobody notices their own hand in the issues Milwaukee faces.

    Fortunately Milwaukee continues to thrive in spite of Walker’s sabotage. I personally wish Milwaukee could separate from the State. We would do much better without the Walker administration micromanaging everything we do.

  11. Wisconsin Conservative Digest says:

    Funny, Henry Maier and John Norquiest did just fine.
    It is the mismanagement of the white, liberal, male , racists that run Milwaukee that have caused the problems. As usual they want to throw more money at it instead of being leaders.
    David’s whining is standard.
    Incapable of solving problems just spend more money.

  12. eric j says:

    And Vos ( white male -not a “leader”) wanted a tax increase to fund D.O.T. roads . What’s wrong ? Can’t manage with the money you already have( Republican state government -Incapable of solving problems-just spend more money ) ??

  13. Rob K. says:

    Bruce:

    Is this city sales tax in place of the ever-increasing, non-water related fees on our city water bills and the city wheel tax or is it in addition to those? Thanks.

  14. Wisconsin Conservative Digest says:

    Milwaukee is consistently ranked amongst the top ten worst run cites, so you can expect that these increased taxes will go on forever.

  15. Eric S says:

    The state (particularly under governors Doyle and Walker) reduces shared revenues, essentially balancing its budget by forcing local governments to cut services and/or raise local taxes and fees. And the state significantly restricts which taxes local governments can enact to make up for state shared revenue reductions. Combine those factors with the fact that policies at all levels of government have concentrated the region’s poverty in the central city and it should not be a surprise that the city faces significant fiscal challenges – challenges for which the state shares a major part of the blame.

  16. Wisconsin Conservative Digest says:

    Reason poverty is concentrated, is cause of left wing programs. Doyle had done nothing to fix it, nor did Lucey, Reynolds, Earl, Barrett, Abele.
    Tommy worked hard with John Norquist, a good mayor, to fix things but Barrett and the other incompetents, in city, cannot fix anything.
    Inner city families need to kill the drug trade, get jobs and get educated. The left cannot do any of that. Left encourages the drug trade by backing use of Pot and recreational drugs and that is what is killing Milwaukee. David Clarke told us about that, and he was killed by the Left.
    They love the new guy, he hands out tickets does not worry out kids dying or overdosing.
    Inner city runs on welfare and drugs. Kids are being wasted.

  17. Thomas says:

    I wonder where wcd gets info on “white, male, liberal racists.” Is wcd a black female egalitarian?i

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