The Property Tax Revolt of 2010

Join me as I take a break from the Great Health Care Reform Battle of 2009 to glance down the road a piece.

You don’t need a crystal ball to predict yet another property tax rebellion is brewing here in Wisconsin and elsewhere.

As the Public Policy Forum points out in its newly-released study, after several years of actual decreases in property tax rates, local governments recently started to increase property tax rates and will face even greater pressure to raise property tax rates during the upcoming budget season.

Why? During the recent real estate boom, increases in property values had the potential of causing property tax revenue to skyrocket. This could have amounted to an overwhelming tax increase especially for people whose incomes were stagnant during this period.

Most local governments reduced property tax rates in order to mitigate the impact of the inflation in property values on tax levies.

That was then. Now the recession is hitting state and local governments hard, as it is families and businesses. Tax revenues are down across the board and public officials are facing the challenge of balancing cost reductions with revenue enhancements (yes, tax and fee increases).

At the same that other tax revenue is in a state of decline, property values have not only stopped increasing but, in many cases, have entered a state of free fall.

So increases in property tax rates would seem to be inevitable.

And if you think the health care reform debate is devolving into an out-of-control shouting match, just wait.

There is no surer way to unleash the furies among aggrieved anti-government types than to increase property taxes. And, frankly, they have a point.

In Wisconsin, local governments, school districts and other providers of public services over-reliance on the property tax is awfully unfair. Seniors and other people on fixed incomes often can not afford steep increases in their property taxes. And with an unemployment rate approaching double digits, many people find themselves with no income at all.

Everybody believes tax reform is necessary but good luck building support for that. The problem? To reduce the over-dependence on the property tax, you have to increase or create some other source of revenue and that’s about as popular as root canal.

Take a look at the current debate over the proposal to increase the sales tax in Milwaukee County to help pay for transit, parks and ambulance service. Gov. Doyle infuriated many in the county when he vetoed the proposal in the state budget though it was approved in a local referendum and agreed to by the legislature.

Most understand that Doyle in engaged in a dosey doe with Milwaukee County Executive Scott Walker, his likely opponent in 2010, over the proposed sales tax increase. Walker opposed the sales tax increase but supporters pushed it through locally first by referendum and then the County Board of Supervisors overrode Walker’s veto.

You can’t help but feel that Walker was eager for Doyle to sign a tax increase that would benefit Milwaukee so that he could campaign against the big tax and spend incumbent next year.

What makes this even more confounding is that the sales tax increase was packaged as, are you ready, property tax relief.

Nobody likes paying taxes; the only popular taxes are the ones paid by other people. But governments are going to have to deal with the revenue decline caused by the recession and the fizzled real estate boom.

Optimists might expect that this state of affairs will lead to a comprehensive revision of the state’s tax code. The rest of us can expect a bunch of loud, angry people complaining about how government has to stop reaching into their pockets.