Is a County Wheel Tax Needed?
Abele says yes, board members are opposed. Who’s right?
Here is how things work at Milwaukee County. For years, board members have complained about County Executive Chris Abele’s fiscal conservatism, denigrating him as “Scott Walker Lite,” among other labels.
So this year Abele proposes a $60 “wheel tax” — meaning the state vehicle registration fee (VRF) for county residents would increase by that much. And what is the response of the county board?
“This is so out of character and so contrary to everything he has said during his past budgets,” Board Chairman Theo Lipscomb has complained of Abele. “For five years he has essentially been telling us that he could fix things, that we could cut our way to prosperity. Suddenly he has reversed course completely and suggested not only a levy increase but…the single largest tax increase we’ve had since a (county) sales tax was first implemented.”
Damned if you don’t. Damned if you do.
Not only is Abele proposing the $60 wheel tax, but a 1.5 percent increase in the county property tax. As to why he has suddenly embraced higher taxes after five years of fiscal conservatism the board has annually decried, an analysis of the proposed budget by the non-partisan Public Policy Forum is helpful:
What is most striking about the recommended budget is that despite the unprecedented injection of $27.1 million of VRF revenue and the first property tax increase proposed by a County Executive since 2002, most County programs and services would not look much different from previous budgets. The new funds are not directed toward expensive new initiatives… but instead are used primarily to maintain existing service levels… This… reflects the fact that the County’s long-time structural imbalance – while impressively reduced in recent years through benefit restructuring and workforce reductions – finally has caught up to it.
In short, Abele did a good job for years squeezing expenses and using federal stimulus money to maintain services and avoid big tax increases, but that’s no longer possible. Simply to keep county government going as is will require a major increase in revenue.
County Comptroller Scott Manske’s recent analysis of Abele’s budget concluded the $60 wheel tax is needed, given the county’s “significant operating structural deficit” and rising transportation costs. “Without major changes in passenger rates or route reductions in the next five-years, the… transit operating system will consume a majority of the VRF funding at the proposed $60 rate. At the same time, the transportation system has capital needs in the next five years of $82 million. These…include restoration of County highways and parkways, plus the replacement of 100 buses.”
“It is not my favorite tool,” Abele says of the wheel tax. “But it’s the only one we can do legally.”
Indeed, Wisconsin state law tightly controls taxes counties levy. An increase in the county sales tax would require approval from a Republican-controlled legislature, which is quite unlikely. (A prior attempt was passed by Democrats and vetoed by Democratic Gov. Jim Doyle in 2009.) But state law does allow an increase in the wheel tax by local municipalities or counties. It does not specify or limit the amount, but local governments must use all VRF revenue for transportation-related purposes.
The advantage for politicians is it’s collected by the state and doesn’t look like a local tax. (The City of Milwaukee jumped on this in 2008 and passed its own $20 add-on to the vehicle registration fee.) As Abele notes, “we’re charged by the state to do local transit and transportation and the state funding hasn’t kept up with costs.” A VRF fee could help plug the gap.
Indeed, one of the biggest shortfalls in the county budget is for transportation. Of the $27.1 million in annual VRF revenue, $15.6 million would go to the capital budget (for new buses and other capital needs) and $11.5 million for annual operations.
The one place for argument might be Abele’s plan for Bus Rapid Transit, which, while it has obvious advantages for Milwaukee, could be seen as a capital cost that could be cut from the budget. Its $43.8 million price tag in the 2017 budget sounds high, but $36 million of that would come from the federal government and a $7.8 million from a county match.
And as my colleague Jeramey Jannene has observed, the BRT plan actually has a little-discussed benefit, allowing the county to replace the federal Congestion Mitigation and Air Quality grant that was helping underwrite the operation of the Gold Line service in the Wisconsin Avenue corridor where the BRT will run. The BRT “could replace the Gold Line and gain different federal funding to replace that being lost,” Jannene explained.
Besides Lipscomb, supervisors Steve Taylor and Deanna Alexander have suggested they would oppose the wheel tax. To date not one board member has offered a positive word about it. “It’s frustrating,” says Sup. Sheldon Wasserman in describing the stance of board members. “They want the services but they won’t pay for them. Some of the no-sayers (on the wheel tax) are adding budget amendments to spend more money.”
Sup. Michael Mayo, chairman of the County Board’s transportation committee, has also announced opposition, saying that because his constituents already pay a city vehicle registration fee, they “would be hit the hardest” by a new county fee.
But we are talking here about any future tax increases, and whether it’s a wheel tax or higher property taxes, all county residents will pay equally. Some (including Wasserman) believe a wheel tax is regressive, falling harder on poor residents, but that question was studied by the UW-Madison’s LaFollette School of Public Affairs for the City of Milwaukee in 2008, which found the tax was not regressive.
The report, called the “Distributive Impacts of a Local Vehicle Registration Fee,” found the number of cars per household tended to rise with income of families in Wisconsin, so that “as the number of available vehicles increases, the percentage of household income that the $20 fee per vehicle would represent also increases.” As a result,” the study noted, the fee “would not impose a disparate economic burden on lower-income vehicle owners.”
That would suggest the tax is actually fairer than the moderately regressive property tax. Abele, meanwhile, has had discussions with state legislators about passing a law that would give municipalities the local control to index the wheel tax so the fee varies by the kind of car or some other approach to make it a progressive tax. The responses to the idea have so far been positive, he says.
It would take a book (and not a very enjoyable one) to analyze who was right in all the disagreements between the board and Abele, but it’s worth noting that Lipscomb and his colleagues have contributed to the ongoing budget shortfall by approving the GO Pass, a free bus pass for senior citizens and disabled riders that was never requested by them and that is now projected by run a $6.1 million shortfall in 2016. The problems with this program have been well documented in columns by me and by Jannene.
Abele’s budget proposes to limit GO Pass eligibility to only seniors who receive Medicaid and FoodShare benefits and to those riders who meet the disability criteria as defined by the Social Security and Medicaid programs. In addition, a new $5 annual fee and a 25-cent per ride fare would be charged both groups. Will the board balk at this?
Wasserman notes that there is no guarantee the county will win federal funding for the BRT and believes the board might vote to delay this for a year. But every year of delay may make it that much harder to get a federal grant.
As for the wheel tax, if the board does swallow it, they will likely slash the amount. Which will probably push more of the structural deficit into the future, making next year’s budget all the tougher. Meanwhile, there will be a public hearing on the budget at the Marcus Center on October 31, which will give citizens a chance to give their views. That could be interesting.