Evers’ Budget Proposal Would Allow Milwaukee Sales Tax

With state shared revenue declining and property taxes capped, Mayor Tom Barrett has been advocating for a sales tax to bail out Milwaukee’s budget for more than a decade.

Governor Tony Evers‘ budget proposal would give him his wish, and possibly a path forward for the cash-strapped city.

Evers announced Friday that his budget, due to be released next week, would include an option for communities to enact a new 0.5% sales tax via referendum.

“The state should be setting the floor, not the ceiling, for local partners, and Wisconsin taxpayers should have a say in whether they want their communities to have more resources so their local government can keep providing critical services—that’s pretty simple stuff,” said Evers in a statement. “Our proposal puts the question back in the hands of the folks best positioned to make decisions for their community—local leaders and the people who live there.”

State law currently prevents cities and counties from levying additional sales taxes, beyond a 0.5% county tax and select resort area taxes.

The proposal would grant Milwaukee County the authority to add an additional 0.5% sales tax and the City of Milwaukee to add an additional 0.5%. The result would be a county rate of 6% and a city rate of 6.5%. But voters would need to approve each in a referendum.

Evers’ announcement drew immediate support from the Metropolitan Milwaukee Association of Commerce and the Wisconsin Counties Association.

Based on 2019 estimates, the proposal would generate $80 million revenue for Milwaukee County and $50 million for the City of Milwaukee in new, annual revenue.

Barrett, when a countywide 1% effort was announced in 2019, told Urban Milwaukee that his priorities were stabilizing the Milwaukee Police Department‘s personnel levels, purchasing new medical emergency response vehicles for the Milwaukee Fire Department, investing in street repair and providing property tax relief.

“Mathematically the numbers don’t work,” said Barrett of the city’s current financial situation. “This is not asking the state for additional funding, this is about allowing the state to give us the tools to help ourselves.”

State law caps the property tax levy Milwaukee can impose and a freeze of state shared revenue in 2003 now costs the city over $100 million per year when adjusted for inflation. Milwaukee County faces a similar budget crunch.

On Monday, speaking to members of the Greater Milwaukee Committee, Barrett reiterated his call for more resources from the state. He pointed out that the city has had to cut over 200 police positions in recent years because of budget constraints.

“These were not philosophical decisions,” he said.

Common Council President Cavalier Johnson had another way of saying the same thing.

“The state government has already taken up the mantle of defunding police,” he said.

The Republican-controlled Legislature will ultimately decide if the city and county can enact the referendum. The Assembly and Senate must approve the budget and, as they did in 2019, are likely to make significant changes to Evers’ proposal.

A 0.5% food and beverage sales tax also exists in Milwaukee to partially fund the Wisconsin Center District.

Under Evers’ proposal, any Wisconsin county and any municipality with over 30,000 residents could propose a 0.5% sales tax via binding referendum.

Funding Crunch

Barrett and Johnson, alongside Milwaukee County Executive David Crowley and County Board Chair Marcelia Nicholson, were participants in a panel moderated by Wisconsin Policy Forum leader Rob Henken during Monday’s GMC meeting.

Past WPF research has shown that Wisconsin’s structure of funding cities and counties almost entirely with property taxes and state shared revenue is almost entirely without peers.

Milwaukee’s peers, a group of 38 cities, derive approximately half of their local revenue from property tax revenue (median: 52%). Milwaukee generates 96% of its local revenue via property taxes.

“Not only is Milwaukee number one in its reliance out of the 39 on its reliance on the property tax, but it’s number one by a large margin,” said Henken.

When looking at the combination of state shared revenue, the city’s shrinking number two funding source, only Memphis and Las Vegas derive more of their revenue from a similar structure. Milwaukee relies on it for 48% of its tax revenue.