City-County Sales Tax Proposal Dead

Going back more than six years, Metropolitan Milwaukee Association of Commerce President Tim Sheehy has been working behind the scenes for state legislation allowing the city of Milwaukee to levy a sales tax and Milwaukee County to increase its sales tax. The MMAC is on record in support of such proposal. But while a bill to do this was being prepared by state Sen. Dale Kooyenga (R-Brookfield), the Legislature ended its session for the year before it could be introduced.

The basic rationale for such a bill was described by Sheehy: “State shared revenue has basically flatlined since 1993, while annual state income tax collections have risen from under $4 billion to over $8 billion.” And that doesn’t include the huge growth in state sales tax revenue.

A significant amount of that growth in state taxes was paid by Milwaukee County residents, yet none of it has come back in the form of shared revenue since 1993. Looking only since 2009, an analysis by Milwaukee County shows its residents paid $500 million more each year in income and sales taxes to the state, or about $5 billion over the last decade. Meanwhile, in real, un-inflated dollars state shared revenue to Milwaukee County dropped by a total of $455 million over the last decade and declined by $118 million per year to the city, probably a loss in excess of $1 billion over the last decade, as stories by Urban Milwaukee have reported. That’s a total loss of $1.5 billion to Milwaukee County even as its taxpayers contributed an additional $5 billion to the state.

And neither the city nor county can make up this massive loss in revenue, because the state bars the city from levying its own income or sales tax and has prohibited any increase in the tiny, 0.5% county sales tax (which the Legislature approved back in 1991). The state also caps the increase in property taxes the city and county can levy.

All of which is starving city and county government. The county faces financial disaster, as Urban Milwaukee has reported, and by 2027 100% of its revenue will go for state-mandated services, with not a dollar left to spend on local programs like parks, the bus system, senior services and public safety. The county may be forced to start selling its parks. The city is in just as much trouble, facing a looming revenue shortfall that could force it to lay off 25% of its workforce by 2025, as Urban Milwaukee reported.

“This is Priority #1 on our policy agenda,” says Sheehy of the MMAC’s push for state help. “We need to keep moving a sales tax increase from the politically impossible to the politically inevitable.”

It’s a given that Milwaukee’s legislative delegation would support the sales tax increase, but they have little say in the Republican-dominated Legislature, which has been deaf to pleas to help this county. Decades ago, a proposal from top business leaders in the state’s biggest chamber of commerce would have gotten quick attention from Republicans. But the party has changed markedly, and is now far more consumed with hard-edged social issues than business-oriented improvements.

The original proposal pushed by the MMAC, crafted with representatives of the city and county, along with a number of municipalities in the county, was a 1% sales tax for Milwaukee County, including a 0.33% sales tax for property tax relief for municipalities, 0.33% for Milwaukee County, and 0.33% for the City of Milwaukee. But “little traction was gained in the Legislature,” Sheehy says.

So the proposal was amended to sunset the tax hike after the mounting pension obligations were paid back by Milwaukee, after about 10 years for the county and 20 for the city. But the MMAC still needed a Republican to push the proposal.

Enter Kooyenga, who has a district with about one third in Milwaukee County and two thirds in Waukesha County. Kooyenga had served, along with Sheehy, on the Milwaukee County Pension Sustainability Task Force, which issued a report in November 2018 which detailed the fiscal difficulties faced by the county.

In September 2019 Kooyenga released a statement responding to the coalition of Milwaukee business leaders and political officials pushing the 1% sales tax hike, saying “I strongly believe Wisconsin’s overall tax burden is already too high. I will continue to listen to my constituents and to the parties that have worked on the proposal to see if there are opportunities to realize a win-win scenario for the Milwaukee area and all state taxpayers.”

“Sen. Kooyenga was instrumental in moving this along, drafting legislation, and potentially serving as lead sponsor,” Sheehy notes.

In December of last year the MMAC’s 160th All Member Meeting included a panel discussion with Milwaukee County Executive David Crowley, Milwaukee Common Council President Cavalier Johnson and Kooyenga, moderated by Sheehy. Kooyenga noted that Crowley and Johnson “have been great to work with,” and conceded that state shared revenue “is a problem,” but added, “the real reason that we’re in this situation is the pensions.”

Kooyenga also added that any solution must include a guarantee there is no cut in “protective services,” meaning the number of Milwaukee police officers. Given that the city could soon be forced to lay off 25% of its workforce, then-Mayor Tom Barrett said he could not guarantee the current number of police would be maintained.

Police and fire unions have tremendous clout with Republican legislators and they wanted a guarantee of no future cuts in personnel. The issue of this guarantee became “a sticking point,” as Chris Rochester, communications director for Kooyenga, told Urban Milwaukee. “We have been working on the bill draft with the County, City and protective services for much of the session,” he said, but it was never finished. And now the Legislature has shut down, and is not expected to reconvene until January of next year.

“Right now we have a ‘failure to communicate’ with the Legislature,” Sheehy says, quoting the 1960s movie Cool Hand Luke, “and that door will not open again until after the November elections.”

And that’s not all. Under the redistricting plan approved by the state Supreme Court, Kooyenga’s home is now in the district of Republican state Sen. Alberta Darling, and it’s not clear if or how Kooyenga could run for reelection. “It is a serious blow to the progress made to date,” Sheehy says.

And a huge blow to the taxpayers of Milwaukee County, who have by now been suffering from declining state shared revenue for more than a quarter century.