Why are Property Taxes so High?

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Jan 16, 2008 No Comments ›› admin

January 16, 2008

“Why are property taxes so high and what are you going to do about it?” The man was retired and on a fixed income. He simply could not afford any more expenses.

We have moved from the Christmas season to the property tax season. Christmas bills haunt us and the property tax bill is not a welcome addition.

Why are property taxes so high when the state caps property tax increases at a little under four percent? And what CAN we do about it?

The answer is to shift the dollars from local property taxes back to state dollars and find a different way to pay for vital local services. But to solve the problem, we first need to know why the bills are so high.

Property tax accounts for about 40% of all the dollars collected by state and local government. It is the major way we pay for schools, local government, and technical colleges.

Over time, property taxes have shifted from a 50/50 split between business (including agriculture) and residential, to a 70/30 split with a heavier burden falling on residential property.

Everything in state government seems to be intertwined. To understand property tax, we must also understand our problems paying for schools.

Most of our local schools are declining in enrollment. Partly this is because the baby boom generation is aging and our children are having fewer children of their own.

Fewer children in school means fewer state dollars for local schools. Through the convoluted school funding formula the lost state aid is made up in property taxes. That means when local schools have fewer students and local property values are rising, more and more of the price of educating students comes from local property taxes.

Even when the state caps the increase in local property taxes, the cap is only an average. Some property owners see more, some see less. Some districts see more, some less.

The increase on any individual property tax owner could be ten percent or more.

And the problem is not all related to schools. The state has not increased shared revenue – the money the state sends to local government – in twelve years. Of course, expenses for our local county and city increase every year.  The state has capped the amount that local government can raise but by not funding local government as needed the state forces local leaders to raise taxes under that cap.

Can this system be changed? Yes, if the political will exists to look at the details and figure out a fairer system.

When I say ‘fair’ I mean a system where people pay taxes based on their ability to pay.  One study showed that property taxes took up about eight percent of the income of the poorest twenty percent of people compared to about three percent of income for those in the top 1% income level. So poorer people are paying more of their income to fund the vital services we all share.

Moving away from our dependence on property tax is part of the answer.

To begin to solve the problem, the Senate Committee on Tax Fairness and Family Prosperity, of which I am a member, has begun a series of hearings to understand the problem.

This past week we heard from our state Secretary of Revenue, Roger Ervin. He shared with the committee ideas on how we may better monitor who is paying taxes and how much they are paying. These are details we need to know if we are going to improve the fairness of the system.

He also shared ideas from other states on how we may better collect taxes that are not being paid – for example sales tax on internet sales. The problems are not impossible to solve. And states close by, like Minnesota, are doing things from which we can learn. 

But it means rolling up our sleeves and getting to work.

Have ideas on how to solve our property tax problems? Let me know! Contact me at in Black River Falls at (715) 284-1730; or in Madison at (877) 763-6636 (toll free); or write: State Capitol; P.O. Box 7882 Madison, WI 53707-7882 or email Sen.Vinehout@legis.wisconsin.gov.

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