As Living Costs Soar, Tax Relief Shrinks for Low-Income Wisconsin Residents

Edith Butler is dealing with a real-world math problem: Her housing costs keep rising while a tax credit intended to help keeps shrinking.

The widow and retired nurse, 68, lives by herself in a two-bedroom Eau Claire home. She paid $9,000 in rent over the course of last year, eating up more than 60% of her Social Security paycheck — her primary source of income. Her utility costs are also expected to hike next year.

She received $708 last year from claiming a homestead tax credit, which is meant to help lower-income homeowners and renters recoup some property tax costs. That was down from the $900 credit she received five years ago after paying just $6,600 in rent.

In the past, the homestead credit has paid to fill her propane tank for about three months during winter and offset some other costs. But it’s dwindling each year because the state rarely updates eligibility guidelines and credit calculations for inflation. Butler’s credit shrinks whenever the federal government increases her Social Security payment to account for the rising costs of living.

She’s not alone. Statewide homestead credit claims dropped from an average of $523 per recipient in 2013 to $486 in 2025, with thousands fewer claimants as fewer people remained eligible.

“These things have never adjusted. But we’ve paid into these programs all our lives. I paid taxes for 50 years, (and) my Social Security is my benefit that I paid in,” Butler said. “You work hard and you pay into programs, and then when you need them in your older years like this, they’re not there for you.”

The Legislature has not substantially updated the homestead credit for 25 years, causing its value to erode. Recent Democratic proposals to update program guidelines have failed to gain Republican support.

A tax credit’s history

By the 1960s, many in Wisconsin acknowledged the regressive nature of property taxes — that lower-income residents pay higher shares of their income than richer households do, John Stark, then-Assistant Chief Counsel in the Legislative Reference Bureau, wrote in a 1991 history of property tax relief in Wisconsin. But the state Constitution’s “uniformity clause” restricted what type of tax relief lawmakers can enact.

Against that backdrop, a State Commission on Aging in 1962 held hearings around the state in which older adults expressed concerns about health care and property taxes. The Legislature responded in 1963 with the homestead credit. Residents 65 and older could claim up to $225 (the equivalent of $2,380 today), with the precise calculation based on income, property taxes paid through ownership or rent.

The Legislature expanded eligibility over the years, notably in 1973, when it lowered the age minimum to 18. That dramatically boosted total claimants and payouts. By 1988, more than 250,000 people received a collective $100 million (roughly $270 million today) in credits.

The trend has since reversed.

Fewer than 67,000 residents claimed a collective $32.6 million in credits last year — a precipitous plunge, Department of Revenue data show.

The program’s income cap today — $24,680 — has barely budged since 2000. The nearly identical cap of $24,500 in 2000 is the equivalent of $45,812 today when adjusted for inflation.

Meanwhile, the program’s “phaseout income” of $8,060, under which homeowners or renters can recoup the maximum 80% of property taxes paid, has increased by only $60 since the 1989 tax year.

Today’s maximum credit a household can claim ($1,168) is just $8 higher than the 1990 level.

Diane Hanson, Butler’s tax agent, said her clients are receiving smaller credits each year or becoming ineligible as inflation pushes wages or Social Security payments above the static income limit.

Still, Hanson suspects many who remain eligible don’t realize it.

The homestead credit helped Hanson through her most challenging times. After learning about it at her local library, she claimed the credit for several years while raising her two children during a divorce, one of them with disabilities.

After becoming a tax agent in 2019, she began to educate clients facing similar circumstances. They include Renata Braatz, who raises her 12-year-old son and spends about 30% of her monthly income on rent through the Section 8 voucher program. She claimed about $600 through the homestead program last year. She spent it on groceries and other expenses for her son.

“I never knew about it. I lived here for six years, and I just started doing it two years ago,” Braatz said.

But asking questions paid off.

“Renata was proactive, reaching out, phoning us, and asking if there could be any credits for her. I think that is more than some folks know to do,” Hanson said. “Before I was a tax professional, I myself didn’t know how much the federal earned income credit can help out parents.”

Democrats call for credit’s expansion

Senate and Assembly Democrats earlier this year introduced identical bills to expand the homestead credit — allowing households earning up to $35,000 to claim it and indexing the maximum annual income, phaseout income and maximum credit to inflation. The proposal would have reduced state revenue by an estimated $36.7 million, $43 million and $48.8 million over the next three fiscal years.

Democratic Gov. Tony Evers also proposed a homestead credit expansion in his last two-year budget.

Neither  proposal advanced in the Republican-controlled Legislature.

Sen. Mark Spreitzer, D-Beloit, authored the Senate version of the bill with colleagues. His district borders Illinois, which offers a range of more generous homestead tax incentives. Several constituents who previously lived in Illinois asked him why Wisconsin doesn’t offer what Illinois does, inspiring the legislation.

The Wisconsin Constitution’s uniformity clause prohibits lawmakers from enacting Illinois-like tax exemptions for older adults or other low-income residents, Spreitzer said, but the credit offers a legal work-around.

“There’s not really another credit that takes the place of this,” he said. “That’s why the homestead credit is so important.”

Spreitzer said he plans to reintroduce an expansion bill, and he encourages residents to share their perspectives with their representatives.

“If we want to do something about affordability, this is a very direct thing we can do,” Spreitzer said. “We’re not creating a new credit here. This already exists. We’re just talking about increasing who qualifies and how much money they would get back, and that’s money that they would directly be able to get back on their taxes and then spend to put food on the plate for their families.”

Hanson sees a path for bipartisan support for an update.

“The alternative is to see it dwindle,” Hanson said. “It hurts the segment of people that actually need it, the people who just don’t get much help anywhere. They’re still working hard to be independent.”

This article first appeared on Wisconsin Watch and is republished here under a Creative Commons Attribution-NoDerivatives 4.0 International License.